Hain admits second blunder with campaign donations as sleaze crisis deepens

The Work and Pensions Secretary had already confessed last week that he failed to register £5,000 given him by Gordon Brown's chief fundraiser Jon Mendelsohn.

But last night he said he had discovered further donations to his unsuccessful deputy leadership campaign were "not registered as they should have been".

Mr Hain apologised and said he had informed election watchdogs of the "extremely regrettable" situation.

The Labour Party already faces the prospect of three separate police actions into its funding.

The Met has launched Operation Minerva, an inquiry into £668,975 given to the party by property developer David Abrahams via intermediaries.

Liberal Democrat leadership candidate Chris Huhne has also asked police to investigate whether planning restrictions for a business park were lifted as a result of those donations.

A third probe could focus on Scottish Labour leader Wendy Alexander's decision to accept money from a tax exile.

There are also questions over the funding of Mr Hain's deputy Labour leadership campaign, as well as that of Harriet Harman.

Mr Huhne said yesterday: "It is astonishing that Cabinet ministers seem to think that the laws they introduce do not apply to them.

"This appears to be the sort of sloppiness, or worse, that is spreading like a contagious disease through Labour's senior ranks."

The latest development will dismay backbenchers, who fear the party will struggle to shake off the growing impression of serial carelessness about money.

Their fears were underscored by a devastating ICM poll showing twice as many people think Mr Brown is "tainted by sleaze" as David Cameron.

It comes after the Prime Minister's close ally Miss Alexander faced calls to quit after it emerged she took money from tax exile Paul Green.

He should not have been allowed to donate because he lives in the Channel Islands and is not a UK voter.

She has rejected any suggestion of "intentional wrongdoing" and said she is confident of being cleared.

Mr Mendelsohn also came under fresh pressure over his role in the scandal.

Mr Cameron yesterday queried the fundraiser's behaviour, after he said he discovered proxy donations from property tycoon Mr Abrahams in September - but failed to alert senior officials or MPs.

"We are being asked to believe that Mendelsohn was hired by Gordon Brown, that he found out about these secret donations ... but told nobody," Mr Cameron said.

"Either this organisation is utterly dysfunctional or we are not being given the whole truth."

Mr Hain's aides insisted that the controversial donations had "no link whatsoever" to Mr Abrahams, but refused to give any further details.

Reforms of party funding will be introduced "quickly" following the current scandal, Gordon Brown has pledged.

But the negotiations have already hit the rocks over Tory attempts to limit the amount trade unions can donate.