Gerald Kaufman, the Labour chairman of the committee, said last night: "We have decided to consider holding an inquiry later in the year into the structure and policy for making grants from the lottery.
"We'd be looking at the whole structure of distributing grants. We decided this morning there was subject for inquiry."
As the Government faced mounting criticism, John Major defended the sale in the Commons and strongly denied that any lottery money had been spent to buy state papers.
The Prime Minister said personal papers had been bought to keep the archive intact. The state papers had been transferred by the Government at the same time to Churchill College, where the archive is kept.
The controversy deepened last night when officials at the National Heritage Memorial Fund confirmed that the sale did not include the papers' copyright, allowing the family to profit further from them.
Churchill family trustee Ian Montrose said some copyrights were still with the family, some with the Crown and some with other parties. Mark Fisher, Labour arts spokesman, said this raised even more urgent questions about the valuation.
"Most people will have understood that the £12.5m was to purchase outright this important collection of documents," he added.
Winston Churchill, the Tory MP for Davyhulme and the wartime leader's principal heir, dismissed the furore as unjustified. "My grandfather was quite clear in his mind when he established his archive settlement in 1946 that these were his papers and it was his wish to leave them as the one asset in the world he had at that time to his heirs.''
Mr Churchill said he was "not in the least" hurt by the criticism. "One expects brickbats to fly in politics," he added.
He said he entered into negotiations with the Government five years ago to see if it would be interested in buying the archive. "It was always understood that our prime intention was to keep these papers unified and in this country. There would have been no shortage of foreign purchasers, from the University of Texas and no doubt the University of Yokohama. But as a family we feel very strongly that these papers should remain for ever in Britain and I am sure that would have been my grandfather's wish as well."
Mr Churchill said he had decided to spend a six-figure sum on renovating the family graveyard at Bladon, Oxfordshire. He did not know how much of the £12.5m paid to the family would benefit him personally.
Sir Ron Dearing, 64, resigned yesterday as chairman of Camelot, the company that runs the lottery, because of ill health.
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been giving up one business commitment after another," he said yesterday.
He said suggestions that he was retreating in the face of controversies over the lottery - including the revelation earlier this week that retailers were tampering with lottery scratch cards in order to identify the winning ones - were unfounded because he had been planning to leave for months.
He will continue, however, with his educational duties, chairing the School Curriculum and Assessment Authority and heading a review into academic and vocational qualifications for 16 to 19-year-olds to be finished next year.
Sir Ron will be succeeded by Sir George Russell, 59, who has had a long career in industrial management and will remain chairman of the Independent Television Commission until the end of next year.Reuse content