Sleaze watchdog to investigate Osborne

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Donations by a hedge fund manager to George Osborne, the shadow Chancellor, are to be investigated by Parliament's sleaze watchdog.

The Standards Commissioner, John Lyon, announced he would carry out an investigation into a complaint from the Labour MPs John Mann and Kevan Jones over allegations that the Tory party failed to declare the names of the donors who contributed £500,000 to Mr Osborne's private office in the register of members' interests.

The money – which was paid through the Conservative Party – had been declared to the Electoral Commission, the official elections watchdog, but was not included in Mr Osborne's personal entry in the Register of Members' Interests. The donors included the hedge fund entrepreneur Hugh Sloane, who reportedly gave £125,000, and the banking heiress Lady Serena Rothschild, believed to have donated £190,000. Labour claimed the donations by a City financier could lead to a conflict of interests over Mr Osborne's economic portfolio.

In a statement, Mr Lyon said: "The Parliamentary Commissioner for Standards has received a formal complaint alleging a failure by Mr George Osborne MP to record financial donations to his office in the Register of Members' Interests.

"The commissioner is making inquiries in respect of this complaint."

The Tories accused Labour of a smear campaign designed to draw attention away from the row engulfing the Work and Pensions Secretary, Peter Hain.

Mr Osborne's spokesman said: "As we understand it, this is absolutely routine. The commissioner has received a complaint from two Labour MPs and has asked for our response.

"He has not launched a full inquiry. We have ourselves asked the Standards Committee to provide clarification on whether these donations should be registered twice, having already been declared to the Electoral Commission."

David Cameron, the Tory leader, says Mr Osborne's case cannot be compared with that of Mr Hain, who admitted failing to declare £103,00 raised for his Labour deputy leadership campaign.

The Electoral Commission is to consider referring Mr Hain's case to the police for investigation, which could undermine his cabinet position.