Peter Hain 'cleared' of breaking Ministerial Code of Conduct

It emerged that top civil servant Sir Gus O'Donnell ruled that the donations scandal engulfing the Work and Pensions Secretary did not involve a breach of his ministerial duties.

The disclosure is a boost in Mr Hain's fight to survive allegations of hidden gifts to his deputy leadership bid - although he still faces up to three other investigations for failure to disclose funds.

There was surprise, however, that the case was not referred to the external adjudicator that Prime Minister Gordon Brown said would act as an independent referee on the Ministerial Code.

Opposition MPs are bound to ask why the affair was handled by members of Mr Brown's inner circle instead of being passed to referee Sir Philip Mawer.

Mr Hain's ministerial conduct was under question because he endorsed in his official capacity a loan firm and a construction company that were, unknown to the public, bankrolling his campaign.

He also took sums from the GMB union which he failed to declare properly, at a time he was deciding the future of Remploy factories that provide jobs for disabled people - a major campaign issue for the trade union.

Mr Hain was able to show that he followed advice from his officials in all his dealings with the two companies and the unions.

A senior source told the Evening Standard: "There is no need to call in the adjudicator if it is a clear-cut case. It was clear that Peter Hain was asked by his officials to praise the companies concerned.

"Sir Gus made the judgment that there was no breach."