Tory leader Iain Duncan Smith has challenged the prime minister over the on-going claims surrounding transport secretary Stephen Byers.

Following reports that Byers misled parliament over the alleged resignation of Martin Sixsmith, Duncan Smith demanded to know why Blair had not sacked the minister.

Said Duncan Smith: "In February, the transport secretary made a statement to the House, and I remind him it was entitled the 'resignation of Martin Sixsmith'. But only yesterday the transport secretary's own department issued a statement saying: 'The department accepts that Martin Sixsmith did not resign'."

"Why is the transport secretary still, therefore, in his job?" asked the opposition leader.

The prime minister defended Byers, saying he had acted in "good faith".

"I don't accept that people were misled at all," he said. "The facts were set out in Sir Richard Mottram's statement."

"It was clear that the secretary of state had been told Mr Sixsmith had agreed to resign. It was equally clear that Mr Sixsmith disputed that he had resigned.

"Therefore the parties were not in agreement, therefore there had to be a negotiation.

"All of that was set out in Sir Richard's statement of February 25 - repeated by the secretary of state on February 26."

But Duncan Smith was not convinced.

"Let me remind the prime minister what the transport secretary actually said. He said: 'The statement I have made reflects accurately the sequence of events'. He went on to say, 'I will be held to account for the comments I make to the House'.

"Now we learn that Mr Sixsmith didn't resign. He remained a salaried employee in the department of transport and the taxpayer is going to have to pay £200,000 to secure his release.

"Before the election the prime minister said 'no more lies'. Why hasn't he dismissed his transport secretary?"

Charles Kennedy also mounted a broadside against the transport secretary.

"The reason for the statement was to correct the misleading impression he had given in an earlier television interview," he said.

"How many goes does the transport secretary get? The prime minister is very keen on three strikes and he's out - shouldn't he be out?"