Labour's general secretary was yesterday forced to deny that he knew of plans to spread false rumours about senior Tory politicians, dashing Gordon Brown's hopes of ending the smears scandal engulfing the Government.
Ray Collins admitted attending a meeting to discuss how Labour should use the internet with the two men at the centre of the scandal, but said he had no knowledge of a plan to smear figures including David Cameron using a new gossip blog called Red Rag.
The meeting included the disgraced special adviser, Damian McBride, who has now left No 10, and Derek Draper, a former aide to Peter Mandelson who runs the website Labour list. The meeting, which took place in December, was also attended by Charlie Whelan, Mr Brown's former press secretary. "I spoke to the Prime Minister this morning and we reiterated that we both feel there is absolutely no place for personal smears in politics," Mr Collins said. "Neither I, nor the Prime Minister or anyone else in the Labour Party have any time for this type of activity."
Schools Secretary, Ed Balls, was also forced to deny allegations that he was responsible for running a "smear unit", including Mr McBride, from No 10. A spokesman for Mr Balls, one of the Prime Minister's closest allies, called the accusation "malevolent nonsense".
Downing Street said the "strategy group", jointly chaired by Mr Balls and Cabinet minister, Liam Byrne, was also attended by senior civil servants, while its agenda was set by the Cabinet Office rather than by Mr Balls.
Despite the controversy, the Wednesday afternoon meetings will carry on with Mr Balls remaining as its chairman alongside Mr Byrne.
Mr Byrne said that the idea that the meeting constituted a "black ops" unit as "inaccurate, nonsensical and pretty offensive". He added: "In the all the months I've worked closely with Ed, I've only ever seen him totally, professionally, focused on helping build a better country," he said.
Senior Labour figures were out in force yesterday attempting to limit the damage. One poll released by The Sunday Telegraph suggested that Labour now trail the Tories by 19 points, four points more than just three weeks ago.
Lord Mandelson, the Business Secretary, said speculation over who else knew about the potential smears would lead "precisely nowhere". "We don't need to go into the past actions of Mr McBride because as far as the Government is concerned he is no more," he said. Lord Kinnock said it was not possible for the Prime Minister to keep tabs on the activities of all his advisers.
Opposition MPs seized on the ongoing controversy, with one saying that Mr Brown's Government was less ethical than John Major's administration, which was defeated in 1997 after a series of sleaze allegations.
The shadow Business Secretary, Ken Clarke, who was chancellor in the Major government, said Mr Brown's administration was failing to meet "decent ethical standards".
"New Labour is a very long way from where we were," he said. "John Major's government was not a successful government by the end, but his government had better ethical standards."
George Osborne, the shadow Chancellor, pledged to change the culture within government should the Tories win the next election. He blamed the possible smear campaign on a culture created by the Prime Minister going "far beyond Damian McBride".
Labour troubles: The architect's daughter
Labour found itself hit by yet another high-profile controversy over the weekend: the election of a candidate for one of its safe seats had to be postponed when it was discovered a ballot box had been tampered with. The race to become Labour's candidate for Erith and Thamesmead, south-east London, had already provoked anger among local party activists, amid claims that the daughter of one of Tony Blair's close friends was being parachuted into the seat. Georgia Gould, 22, is daughter of Philip Gould, one of the architects of New Labour, and had been the favourite to win the selection. The constituency's outgoing MP, John Austin, complained she was receiving "inappropriate" support from prominent Blairites. Now Ray Collins, the party's general secretary, has begun an investigation into the damaged ballot box, and the selection process may drag on weeks. The Olympics minister, Tessa Jowell, said the row had been "blown up in the heat of an election campaign" for the seat.