The crisis surrounding Iain Duncan Smith's leadership deepened with the prospect of an inquiry by Parliament's sleaze watchdog into payments from public funds to his wife, Betsy.
The Parliamentary Commissioner for Standards was asked today to investigate whether the Tory leader broke Commons rules when he paid his wife as his secretary out of his £72,000 office allowance.
As MPs return tomorrow, Tories will raise fresh questions about Mr Duncan Smith's judgement.
The prospect of an official inquiry into the Tory leader's financial arrangements will increase pressure on him and embolden MPs who believe he is not up to the job.
Investigative TV journalist Michael Crick today handed over to Sir Philip Mawer a dossier alleging that Mr Duncan Smith wrongly employed his wife as a secretary.
Mr Crick said: "A number of senior Tories have made serious allegations to Newsnight over the last few months about the way in which Iain Duncan Smith employed his wife Betsy on the parliamentary payroll from the period September 2001 to December of last year, a period of 15, 16 months.
"Given the nature of the sources and the allegations they are making, plus other evidence that we have gathered, and given Mr Duncan Smith's threats to sue, I felt the best course of action is to take this to the Parliamentary Standards Commissioner.
"It now seems that Mr Duncan Smith has decided the same thing and let's hope that he (Sir Philip) can resolve it."
Some Tory MPs are understood to have spent the weekend "clearing the lines" with their party chairman to pave the way to an official challenge to Mr Duncan Smith. Several have already written to Sir Michael Spicer, chairman of the backbench 1922 Committee, calling for a challenge to the embattled leader's authority.
The prospect of a drawn-out sleaze inquiry into his finances is seen by some as the trigger that could lead to his downfall. The Tory leader, who hoped he had survived the plotting behind the scenes at the Tory party conference after his more assertive conference speech, tried yesterday to quell fresh questions about his judgement by angrily denying any wrongdoing and threatening to sue the press.
The Tory leader took the unusual step of issuing a statement yesterday, which claimed the allegations were "without foundation and are malicious". He added: "I completely and absolutely rebut any allegation about wrong-doing. Because of this, I had already decided to take the issue to the Parliamentary Commissioner for Standards, so we can see the full facts and clear this matter up once and for all."
Mrl Crick spent five months investigating the claims but the BBC's Newsnight programme did not broadcast them after Mr Duncan Smith threatened to sue.
His files include an e-mail from Vanessa Gearson, deputy director of Conservative Central Office. She issued a statement through her solicitor saying she had sought independent legal advice to "protect her own integrity, and that of the party". Mrs Gearson, who until two months ago ran Mr Duncan Smith's office, is understood to have raised concerns about the employment of the leader's wife last autumn.
A friend of Mrs Gearson, who used to work for David Davis, the former Tory chairman, said the aide had felt under pressure to back Mr Duncan Smith after she raised concerns over the level of salary paid for the work Mrs Duncan Smith did. "She was put in a position where she had to agree to back up his version of events or resign," he said.
Yesterday senior Tories including Oliver Letwin, the shadow Home Secretary, predicted talk of a leadership bid would fizzle out. Mr Letwin thought dissident MPs should not, as has been suggested by some, be thrown out of the party. "It's time for the Conservative Party to realise our problem is not the leader," he said. "It's our willingness to be led."
Rebels will this week be dragged into the Tory whips' office for a dressing down by the Chief Whip, David Maclean.
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