A new row over party funding has been sparked by a £100,000 donation to Labour from the "porn baron" owner of the Express newspapers group, Richard Desmond.

The gift came on the eve of legislation which would have forced disclosure of the payment and as Stephen Byers, then trade and industry secretary, decided not to transfer Desmond's bid for the Express group to the Competition Commission.

Conservatives have accused the government of "hypocrisy".

"The prime minister has a lot of explaining to do," said party chairman, David Davis.

Ministers have claimed that the donation was legitimate, and that Byers' decision was not linked to it.

The merger was "100 per cent by the book", the Department for Trade and Industry said in a statement.

Labour also faces criticism over its willingness to accept a donation from a publisher of pornography.

Northern Ireland secretary John Reid yesterday insited that Millbank need not apply any moral or political tests on donors.