But he insisted it was the result of an honest mistake, adding: ìThe notion that there was some attempt by me to hide anything is absurd.î

Mr Hain said he would co-operate with investigations launched by the Electoral Commission and the Parliamentary standards watchdog,†

John Lyon, which could see him suspended from the Commons.

But he failed to clear up the mystery surrounding the Progressive Policies Forum ñ a ìthink tankî which channelled £26,000 in donations and a £25,000 interest-free loan into Mr Hainís campaign.†

The group, launched around the time of Mr Hainís deputy leadership bid, has no staff and produced no reports. Some donors to the PPF said they did not know their cash was being used to bail out Mr Hain, although none have objected so far.

Mr Hain said last night that the PPF had been ìprepared and able to assist in making donations to the campaign and did soî. He said he would be returning the loan to the group.

Downing Street last night said Gordon Brown continued to have ìfull confidenceî in Mr Hain. But the statement failed to ease the pressure on the man now widely tipped for the sack in Mr Brownís first reshuffle, expected in the early summer.†

Elfyn Llwyd, Parliamentary leader of Welsh nationalists Plaid Cymru, said: ìI think we need to know precisely what was the purpose of the PPF. Was it a vehicle for siphoning funds through? On a cursory view, that appears the case. If so, thereís something dodgy going on.

ìTo the best of my knowledge nobody has explained who they are and Peter Hainís statement has not answered that at all.†

ìUnless thatís answered I donít think that the investigation will stop and I still think Peter Hain is in a precarious position. His behaviour has been totally unacceptable.î†

The Tories also said Mr Hain was not in the clear. Shadow work and pensions secretary Chris Grayling said: ìPeter Hainís statement leaves many important questions unanswered.†

ìUnless and until he can provide a proper explanation of these issues his future will remain in real doubt.î

As Mr Hain clung to his job, the blame game continued within his campaign team, with the finger now pointing at campaign treasurer John Underwood.†

Campaign insiders suggest Mr Underwood, who masterminded donations through the PPF, had not kept Mr Hainís campaign office in London informed.