George Galloway has said that he will sue the Telegraph over its claim that he received payments of at least £375,000 a year from Saddam Hussein's regime.

The MP says the newspaper's report may be based on forged documents.

A confidential memo sent to Saddam by his spy chief and discovered by the paper in Baghdad claimed that the Labour backbencher wanted a greater cut of Iraq's exports under the oil for food programme.

In the documents, which were located in the headquarters of Iraq's foreign minister, the Iraqi intelligence officer highlights the need for secrecy about the alleged business links between the MP and the regime.

One memo says that payments to him must be made under "commercial cover".

Another document outlined alleged talks between Galloway and an Iraqi spy.

When asked by the Telegraph about the papers, the backbencher said: "Maybe it is the product of the same forgers who forged so many other things in this whole Iraq picture. Maybe The Daily Telegraph forged it. Who knows?"

He added: "The truth is I have never met, to the best of my knowledge, any member of Iraqi intelligence. I have never in my life seen a barrel of oil, let alone owned, bought or sold one."