Last night, Mr Aitken refused to comment on details sent to him of a second board meeting that he attended. At that meeting, the monthly board report, mentioning Project Lisi, the code-name for the contract to send naval guns to Iran via Singapore, was discussed by the board of BMARC, the Lincolnshire-based arms firm.
The Prime Minister was standing by his Treasury minister last night, but Mr Aitken was fighting for his Cabinet career after Gerald James, the former chairman of the company involved in the deal, said Mr Aitken must have been "blind and deaf" not to have known about the exports.
Labour MPs, scenting blood, are preparing for a fresh Commons onslaught over Mr Aitken. There are likely to be renewed demands for him to make a statement to the Commons, and a senior Labour source said: "There will be calls for his resignation. That is certain."
Jack Cunningham, the shadow Trade and Industry Secretary, wrote to the Prime Minister demanding an inquiry into the allegations made in the Independent. He said: "It seems to me inconceivable that a director recruited specifically to promote and secure contracts in the Middle East would not have been told of existing contracts in the area."
The Liberal Democrats also went on the attack. Menzies Campbell, party foreign affairs and defence spokesman, said Mr Aitken's position was "untenable". Mr Campbell added: "It is hard to see how Mr Aitken can survive in the Government in the teeth of these serious allegations. As a non-executive director of the company involved, he cannot evade legal and moral responsibility for its actions.... As the Government waits for the Scott Inquiry [into arms to Iraq], this is a gravely acute, damaging and embarrassing revelation."
In two statements yesterday, Mr Aitken based his defence on his own degree of knowledge, maintaining that despite being a non-executive director of the company, he did not know about one of its biggest contracts. He said this despite documentary evidence that board members were given written information about the £15m Lisi contract.
After issuing a statement denying knowledge of the exports, Mr Aitken issued a second one specifically denying the allegations made by Mr James on BBC radio that Mr Aitken was at the crucial board meeting of BMARC, and must have known about the deal.
Mr James dismissed as "rubbish" Mr Aitken's assertion that he did not attend the meeting when the contract was discussed. "His name is on the minutes... it was the third item. It was in the third item that it was discussed, which was `matters arising' and he was clearly there."
In a detailed statement, Mr Aitken said he did not know about the contract for the export of guns to Iraq via Singapore, "and three other directors at that time confirm that I am right.
"Secondly he [Mr James] claims that the Lisi contract was discussed at board meetings that I attended. This is not my recollection nor is it that of three other directors of BMARC."
Mr Aitken's denials were backed by Major-General Donald Isles, another director, who was in charge of Project Lisi at the time BMARC was taken over by a company called Astra.
General Isles, a former director general of weapons at the Ministry of Defence, said: "I am sure that Jonathan Aitken would just know Project Lisi, if he could remember it at all, as a project which delivered weapons to Singapore...I have seen photographs in the Independent which clearly show one of our guns on an Iranian ship. All I can say is that this was a legitimate contract with Singapore. What Singapore did with them after that isn't really our business."
The Prime Minister's office said last night that Mr Major continued to have confidence in the Treasury Chief Secretary. However, senior ministers were not ruling out the possibility that he could be forced to resign.
Number 10 refused to elaborate on Mr Aitken's first statement. "Mr Aitken has made the situation very clear and I have nothing to add to it," a government source said. Two hours later, the Treasury issued the second statement rebutting Mr James's second account. Mr Aitken said: "I am not aware of and have never been involved in any wrong doing in relation to this or any other contract."
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