Deputy leader quits Welsh Cabinet over police inquiry into business dealings

Deputy first Minister Michael German resigned from the cabinet of the Welsh Assembly last night after police launched an inquiry into his past business dealings.

The resignation comes after his former employers at the Welsh exams board asked police to look in to the European unit which he used to head.

In a letter to First Minister Rhodri Morgan, Mr German said the constant stream of allegations against him was harming the Assembly.

"The continuing drip, drip effect of unsubstantiated leaks, allegations and speculation regarding my former employment is now having an adverse impact upon the work of the Assembly," wrote Mr German.

Mr German said he fully expected to return to his position when the allegations were laid to rest. He remains leader of the Assembly's Liberal Democrats.

Mr Morgan accepted the decision as "an honourable course of action". In a reply letter to Mr German he said: "It was never my intention that you should have to consider stepping aside at this early stage of the police investigation.

"Nevertheless I accept that the public has now been persuaded that the status of the police investigation has moved on a stage. It is better therefore for the health of the partnership government and the National Assembly itself that you take this step now."

Mr German has been in the cabinet since the end of last year when Labour formed a coalition with the Liberal Democrats.

In May, Mr Morgan said Mr German would not have to stand down in the wake of a report into the European Unit of the exams board, the Welsh Joint Education Committee (WJEC). The exams board has now asked police to look into allegations about the use of a credit card and trips abroad.

An independent audit of the unit by accountants PricewaterhouseCoopers last year said that the WJEC could be forced to refund £430,000 of European funding.

But another independent review by auditors Bentley Jennison concluded it could have to pay back more than £1m. It pointed out discrepancies between comments made by Mr German and documentary evidence on file at the exam board.

Mr German has consistently accused his former employers of a witch-hunt, claming Labour local government leaders at the WJEC hatched the plot to destabilise the coalition because of its pledge to look at introducing proportional representation in local elections.