Dismissing Tory claims of "cash for favours", Tony Blair has challenged Conservatives to publish the names of those who donated funds to the party while they were in government.

Iain Duncan Smith was challenging the government over of the award of a £32 million Smallpox vaccine contract to PowderJect - a firm whose chief executive, Paul Drayson, is a Labour Party donor.

The Conservative leader asked why the US was able to conduct an open procurement process, while the UK was not.

The prime minister said the contract had been awarded "in line with national security" and had been done in accordance with proper rules.

"This is just the latest smear from the Conservative Party that has nothing to say about the issues of the day."

Duncan Smith responded that by "hiding behind national security" Blair was giving the impression that he had something to hide.

"Isn't the real solution that we need an open and transparent government?" asked Duncan Smith.

To Labour cheers from the backbenches, Blair replied: "Let me remind the house that for 18 years of Conservative government we had no openness, no transparency."

And he challenged the Tories to publish names of donors when the Conservative Party was in office.

Local elections

Returning for his second round of questioning, and with all the main parties now engaged in campaigning for the May 2 English local elections, the Conservative leader sought to turn the spotlight on Labour's performance in local government.

Highlighting the Conservative performance in the prime minister's own Sedgefield constituency, he said the Band D council tax rate had risen by six times the rate of inflation.

Should voters blame the Labour government or the Labour council, he asked.

Blair hit back at the cuts implied by the Conservative position. "If he doesn't want them to spend this money, what services does he want them to cut?"

Duncan Smith accused Blair of not answering the question, saying: "They're both to blame, the Labour council and the Labour government."

"Labour, and their Liberal Democrat friends, cost you more and deliver you less."

But Blair said the government had increased by 20 per cent spending on social services by councils.