Shadow Chancellor George Osborne was embroiled in a new row last night over claims that multi-millionaire playboy and financier Nat Rothschild was responsible for bankrolling him with nearly £200,000 of funding.
Authoritative sources close to Mr Rothschild, a friend and ally of Peter Mandelson, say a £190,000 donation to Mr Osborne's office last year - declared as coming from Lady Serena Rothschild - was paid because she was urged to do so by her son, Nat.
Depending on where the money came from, this allegation could have serious consequences. It is illegal to make secret gifts to a political party using proxy donors.
The claim, made by an individual with direct access to Mr Rothschild, could hold the key to the extraordinary row involving Mr Rothschild, Mr Osborne, Lord Mandelson and Russian oligarch Oleg Deripaska.
Mr Rothschild, who works for Mr Deripaska, caused a sensation last week by accusing his Oxford University friend Mr Osborne of asking Mr Deripaska to give £50,000 to the Tory Party.
Mr Osborne denies soliciting a donation, or suggesting a method by which it could be paid.
Mr Rothschild's accusation was said to be his revenge on the Shadow Chancellor for revealing how Lord Mandelson criticised Gordon Brown in front of Mr Osborne at a party at Mr Rothschild's home in Corfu in the summer.
Mr Rothschild also arranged for both Mr Osborne and Mr Mandelson to visit Mr Deripaska on his yacht, the Queen K, which was moored nearby.
Until now, it has been speculated that Mr Rothschild's prime motive for publicly denouncing Mr Osborne was to teach him a lesson for breaking a private confidence.
But it now seems that Mr Rothschild might not only believe Mr Osborne has betrayed his trust, but his generosity too.
Asked whether Lady Rothschild would carry on supporting Mr Osborne's office, the source close to Mr Rothschild scoffed with contempt and said: 'It was Nat's money.'
Emphasising why Mr Rothschild attacked Mr Osborne in such a fierce manner, the source added: 'Nat felt, "I have given you the money, I have regarded you as a friend but you have attacked another of my friends [Lord Mandelson] while you were staying with me. I don't like this and I'm going to set the record straight. You need to realise the consequences of what you are doing."'
Pressed to say why Mr Rothschild had not given the money in his own name, the source said he was unable to do so because he lived in Switzerland.
£190,000 to George Osborne's office
In fact, Mr Rothschild is on the electoral roll at his parents' country home in Marlborough, Wiltshire, qualifying him to make donations to political parties even though he spends much of his time abroad.
In a later clarification, the source said that the money paid by Lady Rothschild was not given directly to her by her son.
She had donated the £190,000 to Mr Osborne because she was persuaded to do so by her son, who told her that he was a friend and deserved such support.
The source said there was another reason for Mr Rothschild's ire. Mr Osborne had ignored a warning from him not to spill the beans about what Lord Mandelson had said about Gordon Brown.
'Nat got to hear that George was telling people what Mandelson had said and told George to stop it,' said the source.
Mr Rothschild was said to be furious when, despite his personal plea to Mr Osborne, the story made front-page news earlier this month.
It sparked the sequence of events that exposed Lord Mandelson's stay on Mr Deripaska's yacht, followed by claims over whether or not Mr Osborne asked Mr Deripaska to give money to the Conservatives.
Friends of Mr Osborne pointed out last night that his remark about Lord Mandelson 'dripping poison' into his ear about Mr Brown was made two or three weeks before Lord Mandelson's surprise Cabinet recall.
'It may have been indiscreet, but when George made the comment, no one imagined Mandelson would soon be back in the Cabinet so it was of no real news interest,' said a friend of Mr Osborne.
'Unfortunately, by the time Mandelson did come back, it was too late for George to do anything about it. The Press already had the story.'
The Mail on Sunday disclosed in January how Mr Osborne secretly received £500,000 of funding last year from rich donors who channelled the money to him via Conservative head office.
The donations were declared by the Conservatives to the Electoral Commission, but were not declared by Mr Osborne in the Commons Register of Interests.
Wealthy Tories gave money to the party, making it clear they wished it to go towards paying for Mr Osborne's staff. The biggest donation was from Lady Rothschild.
Under the Political Parties, Elections and Referendum Act 2000, parties must declare donations of more than £5,000.
A donor can give money through an agent, but the name and details of the original donor must be registered publicly.
Last year it was disclosed that David Abrahams, a North-East businessman, had donated £630,000 to Labour through proxies to keep his identity secret.
The police launched an investigation and a file was handed to the Crown Prosecution Service earlier this year, but it has so far not announced whether anyone will be prosecuted over the affair.
The Mail on Sunday was unable to contact Lady Rothschild yesterday at her home in Wiltshire.
A Conservative Party spokesman said: 'Serena Rothschild's donation, paid directly by her to the Conservative Party, was legal and permissible.'