Pressure on Hague over his role in Ashcroft's peerage

Mandelson fails in bid for official investigation into peer's non-dom tax status but row continues to rage

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William Hague has come under pressure to explain why he stretched his powers as Tory leader "to the very limits" in 2000 by begging Tony Blair to ensure that Lord Ashcroft was granted a peerage.

David Cameron insisted yesterday that the Tory deputy chairman, who has donated millions of pounds to the party in its battle to win marginal seats at the election, had answered a decade of speculation by admitting he did not pay tax on some of his vast overseas income.

However, his hopes that the admission would put an end to the controversy were dashed as he refused to answer further questions about the peer's tax affairs and Labour continued to push for an official inquiry into his "non-dom" (non-domicile) status. Attention also turned on Mr Hague's role in securing a peerage for Lord Ashcroft during his time as Conservative leader.

Lord Ashcroft has admitted that he owes his peerage to Mr Hague's intervention. In his autobiography, Dirty Politics, Dirty Times, he revealed how Mr Hague had phoned Mr Blair, then Prime Minister, while he was at a meeting of European leaders in Lisbon. He states that during the call, Mr Hague begged Mr Blair to intervene and clear Lord Ashcroft's peerage. "I am deeply indebted to William that he pursued the issue of my peerage so vigorously," Lord Ashcroft wrote.

Mr Hague, now the shadow Foreign Secretary, said in one recent interview that Lord Ashcroft had "fulfilled the obligations that were imposed on him at the time". He added that he "imagined" that meant he paid taxes in the UK.

The Labour MP Denis MacShane is to write to Mr Hague, demanding that he should "come clean" on why he applied such pressure to secure the peerage and whether he was aware then that the peer was a non-dom. "At times William Hague seems joined to Lord Ashcroft like a Siamese twin. He importuned Tony Blair obsessively to get a peerage for Ashcroft," Mr MacShane said. "This is not now just about Ashcroft – it is about Hague's judgement, too. He has dissembled for 10 years about Ashcroft's tax status. What we need is a clear statement from Hague on why he stretched his privileges as Leader of the Opposition to the very limits to secure the peerage and how long he has known about Lord Ashcroft's tax status."

A spokesman for the shadow Foreign Secretary said that Mr Hague had said all he wanted to on Lord Ashcroft's tax status. The attack came as Labour focused all its attention on keeping the damaging story in the headlines. The party has instructed its election candidates to use the issue on the doorsteps. However, Lord Mandelson, the Business Secretary, failed to trigger an official investigation into the peer's tax status.

He had demanded to know whether Lord Ashcroft had broken a promise made in 2000 that he would become a permanent British resident in order to take his seat in the House of Lords. The Appointments Commission said it could not take retrospective action against the allocation of peerages, but Lord Mandelson attacked its conclusion as "unacceptable".

"It's not acceptable for the authorities simply to say, 'Well, we're an independent commission now, we don't have the papers'," he said. "Now we know that Ashcroft has dodged the basis on which he was given his peerage in the first place, and both he and the Conservative leadership have dodged the truth about that for 10 years."

A spokesman for Mr Ashcroft maintained that the peer had fulfilled his promises to become resident in the UK.

Mr Cameron refused to answer further questions about how long he had been aware of Lord Ashcroft's tax arrangements, telling journalists that they were flogging "a dead horse". He said that it was "thoroughly good" that people had now been given details of the peer's non-dom status. However, he added that "the full details" of the tax arrangements were between Lord Ashcroft and the taxman. "People wanted to know what his tax status is," he said. "People now know what his tax status is."

Meanwhile, it was claimed last night that the chairman of the body responsible for approving Lord Ashcroft's title did not believe the Tory donor was suitable for a peerage. Lord Thomson, who died in 2008, had concerns because Lord Ashcroft did not live full-time in Britain nor paid full UK taxes, his widow told Channel 4 News.

Lady Thomson said that her husband had "imposed restrictions" on the peer. "I know George was rather furious afterwards," she said. "He felt he had been promised a certain code of behaviour and that had not worked out. I would say that George felt this was not a suitable man to be a peer."

In the spotlight: Labour's non-doms

Lord Paul

The steel magnate has donated £69,250 to Labour, which included a £45,000 gift to Gordon Brown's campaign to become Labour leader. The Conservatives have demanded to know why Mr Brown saw fit to raise the peer to the Privy Council. Mr Brown's official spokesman said last night that Lord Paul had been given the honour for his "distinguished record of public service".

Lakshmi Mittal

The head of steel firm, ArcelorMittal, has also been named by the Tories as a non-dom and has handed Labour £4.125m in donations.

Mahmoud Khayami

Though born in Iran, the industrialist has French nationality. He has made £985,000 in donations to Labour, making him one of its biggest single donors. The Tories said he had also backed two schools under Labour, with Tony Blair personally thanking him for the gifts.

Bruno Sanglé-Ferrière

The Tories have said that the French-born businessman, who has donated £354,000 to the Liberal Democrats through his company since the last election, is "reportedly" a non-dom. He set up the investment fund Carrousel Capital.