Fox faces a second inquiry as he turns his fire on media

Standards Commissioner will investigate whether fallen minister broke rules by letting Werritty stay rent-free in his flat

Liam Fox suffered another setback last night when it emerged that he faces a second inquiry into links with his friend and self-styled adviser Adam Werritty.

Shortly after the former Defence Secretary launched an attack in the Commons on the media in his resignation statement, John Lyon, the Parliamentary Standards Commissioner, announced he will investigate whether Mr Fox broke Commons rules by allowing Mr Werritty to stay rent-free in his London flat, for which Mr Fox received the MPs' second-homes allowance.

A complaint has been lodged by John Mann, a Labour MP, who cited reports that Mr Werritty also ran a business from the flat in 2002-03. He also asked the Commissioner to look into Mr Werritty's use of Mr Fox's Commons office to run Atlantic Bridge, an organisation which promoted Anglo-American links.

Mr Lyon's decision to launch a full investigation is also a blow for David Cameron, who had hoped a line had been drawn under the affair.

Mr Fox accused some newspapers of displaying "personal vindictiveness – even hatred" during the "media frenzy" which forced him to quit his Cabinet post last Friday. His parting shot raised eyebrows among MPs, some of whom pointed out that he would not have been forced to resign unless the media had investigated Mr Werritty's shadowy role.

Sir George Young, the Leader of the Commons, told MPs in a statement yesterday that Ursula Brennan, Permanent Secretary at the Ministry of Defence, was wrong not to have reported her concerns about Mr Werritty's role to Sir Gus O'Donnell, the Cabinet Secretary. He suggested the affair might have been avoided if she had.

Kevan Jones, a Labour defence spokesman, said: "Liam Fox is not a media victim. Investigative journalism revealed the facts he chose to omit from his public statements."

In an otherwise contrite resignation speech, Mr Fox said he was "very sorry" for his actions and accepted Sir Gus's inquiry verdict that he had broken the ministerial code. He did not mention Mr Werritty by name, but said: "I do not blame anyone else, and I believe that you do not turn your back on your friends or family in times of trouble. It is, however, unacceptable, that [those] who have nothing to do with the central issues should be hounded and intimidated by elements of the media, including in this case elderly relatives and children."

Mr Fox complained that "every bit of information – however irrelevant – is sensationalised" and said "opinions or even accusations are treated as fact". He said it was particularly concerning that Harvey Boulter, whom he and Mr Werritty met in Dubai "and subsequently the defendant in a blackmail case, was treated so unquestionably." However, Sir Gus said in his inquiry report that the former Defence Secretary's decision to meet Mr Boulter without civil servants present was "unwise and inappropriate". Mr Fox made no mention of giving up the £17,000 pay-off to which he is entitled, even though he was forced to resign. Labour MPs have called on him not to take it.

Although former Cabinet colleagues did not close the door to Mr Fox returning to frontline politics, some right-wing allies believe his hopes of leading his party have been shattered. Downing Street kept its options open about a Cabinet return but was noticeably less warm about the prospect than when David Laws, the Liberal Democrat MP, resigned after just 17 days as Chief Treasury Secretary last year. Labour complained that there were still 15 unanswered questions over the affair and is still pressing for a wider inquiry than the one carried out by Sir Gus.

At Prime Minister's Questions, Ed Miliband accused Mr Cameron of dodging the blame for the controversy. He said there was a "pattern of behaviour" in which "when anything goes wrong, it's nothing to do with him". When the Labour leader urged Mr Cameron to "show a bit of humility" over the affair, the Prime Minister attacked the record of Labour ministers. "We should have a little bit of humility from the people who gave us cabs for hire, passports for favours, mortgages for mates, dodgy dossiers, slurring opponents, good days to bury bad news," he retorted.

In quotes: Liam Fox's statement to the house

"The ministerial code has been found to be breached, and for this I am sorry. I accept that it's not only the substance but perception that matters, and that is why I chose to resign..."

"I accept the consequences for me without bitterness or rancour. I do not blame anyone else and I believe that you do not turn your back on your friends or family in times of trouble. It is, however, unacceptable that family and friends who have nothing to do with the central issues should be hounded... by the media..."

"I'd like to thank my family and friends for their love and support. It is not easy to watch somebody you care about being attacked in a very aggressive way. We choose this life. They do not. Of course, I'd like to thank above all my wife Jesme who has dealt with this ... with her usual dignity and unstinting support..."

Tory party drawn into donations row

The Conservative Party was drawn further into the Liam Fox affair last night when it admitted its treasurer had put donors in touch with Mr Fox's office.

Howard Leigh, the Tory treasurer, may have unwittingly played a part in helping to secure the £147,000 from donors which funded Adam Werritty so he could be at Mr Fox's side on official trips.

Mr Leigh denies soliciting funds for Pargav, the company set up by Mr Werritty. But a Tory official said: "Howard Leigh introduced donors to Liam Fox's office during the 2005 leadership campaign. Some of them maintained contact with Mr Fox's office. Mr Leigh had no knowledge of Pargav and has not introduced donors to Mr Fox's office for several years." The Tory treasurer is said to have been "astonished" to learn that the donations to Pargav had been used to fund Mr Werritty's overseas trips.

The Tories denied Lord Feldman, the party's co-chairman and a close friend of David Cameron, had been involved in raising donations for Mr Werritty's organisations as part of a wider fundraising operation in the Jewish community.

Andrew Grice

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