DTI inspectors are believed to be concentrating on three people, including Lord Archer and a foreign national, in their investigation into transactions ahead of an agreed bid for Anglia Television.
The Prime Minister said yesterday that the allegations must be investigated. Lord Archer has strongly denied any wrongdoing.
The initial inspectors' report on whether there is a prima facie case for prosecution for insider dealing has yet to be completed. But the affair has left Lord Archer, former Tory party deputy chairman, a friend of John Major and one of the most popular figures with the Conservative rank and file, twisting in the political wind after his unprecedented naming by the Government at such an early stage of the inquiry.
In a fresh outbreak of unwelcome publicity for the Government, angry MPs and peers demanded to know why Michael Heseltine, President of the Board of Trade, sanctioned the break with long-standing practice by allowing his department to identify Lord Archer.
The inspectors are looking into the purchase of 30,000 shares in Anglia shortly before its takeover earlier this year by MAI, the media conglomerate controlled by Lord Hollick, a Labour peer. Shares in Anglia rose from 180p to 664p on the news of the bid.
The Anglia share register, held at Barclays Registrars in Beckenham, south-east London, shows that at the time of the takeover Lord Archer's wife, Mary, a non-executive director of Anglia, held 10,350 shares in the company, purchased on 13 July 1990. These were sold on 22 March this year, after the MAI bid had been completed.
Lord Archer is not listed in the register, the computer printout of which is 18 inches thick.
The mere existence of the inspectors' inquiry, known to the Prime Minister for some months in his capacity as First Lord of the Treasury, all but rules out advancement for the best-selling novelist in the coming government reshuffle.
But Westminster colleagues were clearly unhappy over what some feared might be pre-reshuffle justification for denying him a job that many activists felt he had earned for his tireless campaigning.
Mr Major declined to be drawn on the controversy on his arrival for the Group of Seven world economic summit in Naples. He said: 'One always feels for an old friend but I am not going to comment.
'There is an investigation going on. The investigation should proceed and it will be quite wrong for me to say anything beyond that.'
Although Lord Archer's popularity in the country is not matched at Westminster, where his political judgement is more in doubt, he entertained a strong desire to become Conservative Party chairman. He had also been canvassed as a possible Minister for Sport in charge of the National Lottery. His longer-term future is in the hands of Mr Heseltine, who will decide what action to take when he receives the inspectors' report.
Lord Archer yesterday found an unlikely ally in Labour's Lord Clinton-Davis, who called the DTI's decision to disclose the existence of the investigation without giving Lord Archer a chance to comment a 'rank injustice'.
John Watts, the Tory chairman of the Commons Treasury and Civil Service Committee, said: 'I think it would be right for the DTI to explain how and why it came to name an individual it is investigating.'
In an apparent move to avoid allegations of a cover-up, Mr Heseltine was advised by officials that he had no choice but to sanction Thursday's DTI statement because Anglia had named Lord Archer. He declined to comment yesterday. Anglia, however, denied it had named the peer.
Lord Archer, 54, was believed to have spent yesterday at his London flat and was not taking calls.
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