An internal army investigation has begun into how a private video of Prince Harry referring to a fellow Sandhurst cadet as “our little Paki friend” was leaked to a national newspaper.

One senior defence source said that it looked as if a member of the Prince's platoon at Sandhurst may have handed over his copy of the video after finishing a three-year short-term commission with the Army. If the military academy had been made aware of the video at the time that it was made, action would have been taken immediately over the Prince's comments and all copies of the tape would have been destroyed, the source said.

A spokesman for Sandhurst said yesterday that there were no restrictions on the making of videos. “Everyone these days has cameras on their mobile phones, but they [the Sandhurst officer cadets] soon go off on operations in charge of troops and they have to be trusted to use their common sense,” he said.

The Times has learnt that just before the Prince started his course at Sandhurst, one of the senior instructors was removed after it emerged that he had racist views, underlining the hard line adopted by the academy towards any hint of racism or bullying. Officers when Prince Harry was attending said that there had never been any reported incident in which he or other officer cadets had used such language.

The student Prince Harry referred to had been an exceptionally high-quality cadet, sources said. Junior Officer Ahmed Raza Khan, now a captain in the Pakistani Army, not only won the Overseas Sword of Honour for being the best foreign student of his intake but also appeared high on the overall order of merit.

As part of the repercussions over the leaking of the video, Prince Harry is to be interviewed this week by Lieutenant-Colonel Harry Fullerton, the commanding officer of the Household Cavalry. Prince Harry is still an officer with The Blues and Royals of the Household Cavalry, although he is seconded to the Army Air Corps to train as a helicopter pilot.

Gordon Brown said it was up to the Army to decide whether to discipline him. “I think the sincerity of his apology cannot be doubted. It was a mistake, he has made the admission of that and once he has made his apology, I think the British people are good enough to give someone who has actually been a role model for young people and has done well fighting for our country, gone into very difficult situations with bravery ... the benefit of the doubt,” he told GMTV.

John Hutton, the Defence Secretary, told the Commons: “The use of that kind of language has no place at all [but] Prince Harry has made a very genuine apology and I also believe that no individual offence was intended by his remarks.”

Colonel Paul Farrar, deputy head of army recruiting, told the London Evening Standard: “None of this helps the Army and whatever we do to try and encourage people from diverse backgrounds to join. Any sort of throwaway line of this nature is to be regretted.”

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