Peter Mandelson has been cleared of acting improperly in the Hinduja passport affair by the inquiry set up by the prime minister into the "passports for favours" scandal.

Whilst the report suggests that Mandelson may have misled colleagues over a phone call to the Home Office, Sir Anthony says this was not done with any ill intent. "I do not believe that Mr Mandelson has tried to deceive anybody," the report says.

Peter Mandelson praised the report, saying it was "thorough and comprehensive". He said he read the report with "gratitude and relief".

But the former Northern Ireland secretary said he was not seeking a return to government but repeated his claim of innocence. "I did not lie, I did not deceive, I did not set out to mislead. I'm grateful to Sir Anthony for clearing my name and restoring my reputation. I feel I can now draw a line under these events," he told reporters in his Hartlepool constituency on Friday.

Downing Street said that the report would now allow "Peter to rebuild his life without any stain on his character".

The report is also expected to reveal that Tony Blair sacked Peter Mandelson against the advice of the cabinet secretary, Sir Richard Wilson, it is claimed that today's report by Sir Anthony Hammond QC will say.

The report is thought to say that Wilson told the prime minister that he should either call an inquiry or allow Mandelson to ride out the crisis - although he made no reference to dismissing the former Northern Ireland secretary.

The revelation will increase speculation that the prime minister acted in haste, spurned on by his press secretary Alastair Campbell. Sources close to Mandelson say he now expects the prime minister to "be generous in his comments" about the affair.

However, government insiders have claimed there is no way back into frontline politics for Mandelson.

The report says that the Hindujas' passports applications were processed in a normal and above board manner and that Mandelson and ministers acted "perfectly properly" in relation to dome sponsorship deals.