Culture secretary Tessa Jowell has become the second cabinet minister to criticise a financial donation to the Labour Party by soft porn publisher and owner of Express newspapers Richard Desmond.

The move will further embarrass Tony Blair, who has previously defended the donation from the publisher of magazines such as Asian Babes and Horny Housewives.

Jowell suggested that the decision to accept the donation had undermined the party's stance on equality.

"I don't feel comfortable that the party accepts a donation from somebody who earns certainly part of his income from pornography...the world's got to move on; you either talk equality or you act equality," she said in an interview with the FT on Friday.

Her criticism follows that of international development secretary Clare Short, while rural affairs secretary Margaret Beckett is also thought to disapprove of the £100,000 gift.

However, the prime minister has defended Labour's acceptance of it, arguing that "if someone is fit and proper to own one of the major newspaper groups in the country, there is no reason why we shouldn't accept donations from them".

As well objections the objections to the source of the cash, there has also been criticism of the timing of the donation, which came shortly before then-trade and industry secretary Stephen Byers approved Desmond's takeover of the Express newspaper group.

Jowell indicated that the controversy had put the question of state funding back on the political agenda.

"It's opened up the whole question of the state funding of political parties," she said.

The Liberal Democrats said it was time for Labour to return the controversial donation and backed calls to examine the state funding of political parties.

"Tessa Jowell is absolutely right to say that this donation represents a deplorable lack of judgement on the part of the Labour Party," said trade and industry spokesman Dr Vincent Cable.

"Liberal Democrats support those Labour ministers and backbenchers who have said that the money should be given back.

"This episode further illustrates the need for a radical overhaul of the way political parties are funded. Clearly we need to look at moving from individual and corporate donations to state funding."