The British cabinet minister, Mr Peter Mandelson, is involved in a secret financial arrangement with his beleaguered Government colleague, Mr Geoffrey Robinson, concerning a loan of stg£373,000 to buy his London home, a Guardian investigation has revealed.
The deal was kept secret for more than two years from the Prime Minister, Mr Tony Blair, despite the crucial political relationship and close personal friendship between Mr Mandelson and Mr Blair. Key Whitehall officials were also kept in the dark until a few days ago.
Mr Mandelson last night insisted that there was no question of his resigning over the allegations. "There is no conflict of interest, therefore the matter does not arise," he told BBC2's Newsnight.
He said that, in retrospect, he wished he had reported the matter earlier.
"If I had known allegations like this were going to be made, with the benefit of hindsight I think I would have preferred, and ideally from my own point of view it would have been better, if all the facts of this matter had been got out then the opportunity wouldn't be there for the Guardian or anyone else to throw around this sort of mud. I rather regret in that sense that the facts weren't out."
He defended the fact that he did not inform Mr Blair of the loan until last week. "I didn't feel that I needed to disclose something which was a personal arrangement made between myself and Geoffrey Robinson two years ago, before the election had taken place."
The cash, which enabled Mr Mandelson to buy his £475,000 home in fashionable Notting Hill in London, raises a question over whether he breached the rules of ministerial conduct. Although the deal was done in 1996, Mr Mandelson did not tell Mr Blair or the permanent secretary at the Department of Trade and Industry, Mr Michael Scholar, until last Thursday.
Both Mr Mandelson and Mr Robinson issued statements to the Guardian last night confirming the loan. Its disclosure will intensify pressure on Mr Robinson, the Paymaster General, who has been at the centre of a string of revelations about his tax and business affairs.
Disclosure of the loan clears up a long-running mystery over how Mr Mandelson, as a backbench MP earning just over £40,000 a year, was able to afford the £475,000 fourstorey house.
Mr Robinson said: "Peter Mandelson, a friend of long standing, asked me for help in 1996. I was in a position to help through a loan and did so with the understanding that it would be repaid in full in due course. That is all there was and there is to it."
Mr Mandelson faces accusations of at least two possible areas of conflict of interest.
The first involves allegations made in September that Mr Robinson breached company law, a matter which would result in investigation by the DTI and mean one minister sitting in judgment on another. However, Mr Mandelson attempted to put himself in the clear by telling the permanent secretary at the time that he would rule himself out of involvement in any investigation.
The second area of potential conflict involves a DTI independent inspectors' report into the Maxwell empire, to which Mr Robinson was linked. Mr Mandelson will have to decide whether to publish the report, which is not yet completed.
Mr Mandelson is also likely to face complaints over his decision not to disclose the loan in the register of MPs' interests.
The disclosure is an embarrassment for Mr Robinson, Mr Mandelson and Mr Blair, who took two holidays in Mr Robinson's Tuscan villa, and the Chancellor, Mr Gordon Brown, who stayed at his home in Cannes. Mr Robinson has been generous in support of his colleagues since just before the general election, also helping to fund a research body linked to Mr Brown.
He also bailed out the flagship Labour modernisers' magazine, the New Statesmen.
Mr Mandelson and Mr Brown have been engaged in a damaging feud since 1994, one that now threatens to engulf not only Mr Robinson and Mr Mandelson but the Chancellor's press aide, Mr Charlie Whelan, who in the past has been blamed for anti-Mandelson leaks.
Last night, Mr Whelan denied being behind the latest disclosures.