Minister could be suspended over undisclosed gifts

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Some of the people who gave money to Peter Hain's campaign for Labour's deputy leadership were originally turned down as donors because they wanted to remain anonymous.

The disclosure to The Independent will fuel suspicions that £51,000 was channelled through a previously unknown think-tank, the Progressive Policies Forum (PPF), in the hope that the donors' names could remain secret.

Yesterday the Work and Pensions Secretary faced calls to resign as his position in the Cabinet appeared to be increasingly at risk. The Commons anti-sleaze watchdog is to investigate a complaint that he failed to disclose £103,000 of donations in the MPs' register of interests. One possible penalty is a temporary suspension from the Commons, which would inevitably force him to resign from the Cabinet.

Mr Hain published the full list of his backers on Thursday, when he released £103,000 of donations on top of the £82,000 he had disclosed previously. They included £26,000 in donations by five people and a £25,000 interest-free loan through PPF to help Mr Hain clear outstanding debts after the election.

Some of those whose money went through PPF had offered to back the Hain campaign directly during the election. But when they asked for their names to remain secret, they were turned down – only for their money to be accepted later through PPF.

The use of third parties is not illegal if the original donor is disclosed but carries unwelcome echoes of the £600,000 of secret donations given to Labour by the property developer David Abrahams, which is now being investigated by Scotland Yard.

Yesterday Hain allies denied reports that two of the donors were not told that the money they had given to PPF would be switched to the Hain campaign. But it emerged that the minister had endorsed a second company whose boss donated money to it –Mike Cuddy, managing director of the South Wales-based Cuddy Group.

Mr Hain denied any wrongdoing as he battled to save his career. He wrote to John Lyon, the Parliamentary Standards Commissioner, apologising for the delay in including the £103,000 in the MPs' register. It has now been added to it. Gordon Brown is standing by Mr Hain until after inquiries by Mr Lyon and the Electoral Commission are completed. The Prime Minister's spokesman said that he had "full confidence" in the Work and Pensions Secretary.

David Davies, a Tory backbencher, who has made a formal complaint to the Standards Commissioner, said: "I think ... it does raise questions about his continued career."

Elfyn Llwyd, leader of Plaid Cymru at Westminster, said: "The whole thing, I think, is a total circumvention of all the rules appertaining to elections and I think that, as a cabinet minister, it will be very difficult for him to stay in office."

The solicitors Ashurst LLP, acting for Willie Nagel, a diamond dealer who gave £5,000 and an interest-free loan of £25,000 through PPF, said: "Mr Nagel donated and loaned money to PPF and had no objection that this money be used to support Peter Hain's campaign."

Jon Cruddas, the only backbencher in the deputy leadership contest, insisted that there was no question about Mr Hain's integrity, describing him as "a very straight bloke". While he said his campaign team had taken a "hard-line" approach to donations, he told GMTV's Sunday programme: "I can understand how it was difficult for him to juggle both the cabinet job and the candidate's job."

The think-tank

The surprise element in Peter Hain's disclosure is that £51,000 was channelled through a hitherto unknown think-tank, the Progressive Policies Forum (PPF). It was set up in December 2006 but has no website and there is no record of any publications or seminars. One theory among Labour MPs is that it may have been a front set up to support Hain's deputy leadership campaign.

Some £26,000 in donations and an interest-free loan of £25,000 that had been made to PPF were switched to the Hain campaign to meet unpaid bills after the contest, when Mr Hain asked PPF for help. This was done with the permission of the donors, according to Mr Hain, but at least one disputes that.

The Hain camp insists the arrangement is allowed under the Political Parties, Elections and Referendums Act 2000, which says third party donations are acceptable providing that the donor (PPF) tells the recipient (Mr Hain) it was on someone else's behalf. A PPF spokesman said: "We were supportive of Peter Hain's campaign, and we believe that had he been elected he would have advanced progressive policies."