Mandelson under pressure to quit

The controversy looked sure to overshadow the latest developments in the peace talks when Mr Mandelson takes questions on Ulster in the Commons.

And Tory leader William Hague was expected to lead MPs in a withering onslaught as Mr Blair took to the dispatch box for their bruising weekly exchange.

Downing Street initially denied Mr Mandelson had raised the matter with then Immigration Minister Mike O’Brien while Cabinet Office Minister.

But Prime Minister Tony Blair’s official spokesman yesterday admitted he made the call on behalf of Srichand Hinduja.

The same month Mr Hinduja and his brother gave written confirmation they would underwrite the Dome’s Spirit Zone - later renamed the Faith Zone - the New Millennium Experience Company revealed.

Mr Mandelson added to the confusion by contradicting Downing Street suggestions he had forgotten the call, saying he simply had not been asked.

Conservatives and Liberal Democrats said the affair called into question Mr Mandelson’s fitness to serve in the Cabinet and Independent MP Martin Bell joined the attack.

He also faced scorn from his own party with a Labour MP warning of widespread unease among backbench colleagues.

However, Mr Mandelson insisted he had done nothing wrong - a view endorsed by the Prime Minister - and said he would act in the same way again.

Mr Hinduja and his brother had already suggested financing the Millennium Dome’s Faith Zone when Mr Mandelson intervened in June 1998.

But it was only that month the pair - facing possible arms deal corruption charges in India - gave a written commitment.

An earlier passport application from the Indian-born businessman had been rejected when he approached the Cabinet Minister and asked whether it would be reconsidered following a change in Government immigration policy.

Mr Mandelson stressed he had not endorsed the new application but simply asked Mr O’Brien whether it could be resubmitted under the new rules.

The Home Office Minister told him it would be considered in the usual way, he said.

Both the Northern Ireland Secretary and Downing Street denied there was any conflict of interest and dismissed suggestions he should resign.

There was never ‘‘any question’’ that the donation was linked to the application, according to Mr Mandelson.

"If I had been asked to use my influence to endorse or to support somebody’s passport application that would have been different," he said.

"‘Those circumstances never arose."

Downing Street said: "Peter Mandelson has done nothing wrong and nothing improper"

However, Tory chairman Michael Ancram piled the political pressure on Mr Mandelson, comparing the affair to the home loan scandal that forced him to resign as Trade and Industry Secretary.

"For the second time in three years, Peter Mandelson is revealed to have been less than candid in his explanation of his dealings with colleagues in relation to money or influence" Mr Ancram said.

"Once again there is a dark cloud hanging over Mandelson’s future. Once again he is exposed as less than candid. Once again his behaviour falls well below that expected of a senior minister," he said.

Liberal Democrat MP Norman Baker said the donation appeared to be linked to the application.

"If these allegations are true, I believe that it would be unwise for the Prime Minister to reappoint Peter Mandelson to the Cabinet if Labour are re-elected for a second term," he said.

Labour MP Bill Michie, who stands down from his Sheffield Heeley seat at the next election, also attacked Mr Mandelson.

"There are many, including myself, who are fed up with high-flying Labour politicians cocking up the good record of the Labour Government by not knowing what they said or whether they said it," he said.

Mr Blair’s spokesman said today: "Yesterday I repeated a line from Sunday that Peter’s sole involvement was a call from his private secretary to the Home

Office, which was Peter’s recollection.

"But yesterday with offices back up and running, Peter’s office was able to look at it in further detail and was able to recollect that he had a call with Home Office Minister Mike O’Brien in June 1998."

But the Northern Ireland Secretary appeared to contradict this, saying he had not been asked about making the phone call.

"There is no question of my forgetting about anything," Mr Mandelson said.

The Northern Ireland Secretary said his involvement in the talks meant he only noticed No 10’s original version of his intervention was wrong on Monday night.

"Nobody asked me about a phone call on Saturday, Sunday or Monday. Nobody asked me these questions," he said.