A story in The Sunday Times says Mr Mandelson has been closely associating with two Indian billionaires, the Hinduja brothers, who have promised to underwrite the "spirit zone" of the Dome by £3m.

It is alleged Mr Mandelson "encouraged" the brothers to put money into The Dome despite a promise to the Commons that he would not be involved in fundraising.

Mandelson: "I have consistently championed the Dome"

MPs received the promise after fears there could be a conflict between his role as Minister for the Dome and Secretary of State for Trade and Industry with a key role making government policy affecting large companies.

Conservative spokesman on Trade and Industry Christopher Chope accused Mr Mandelson of misleading the House of Commons.

"As recently as ninth of November, Peter Mandelson told the House of Commons 'I have never been and do not intend to be involved in procuring or negotiating sponsorship deals so no conflict arises'.

"It appears from reports in today's papers that this is not the case.

"He must make an immediate statement to the House of Commons regarding his joint activities as Secretary of State for Trade and Industry and Dome Minister and explain why he has misled the House."

Mr Mandelson responded by describing the accusation as "ridiculous".

"Of course I consistently champion The Dome to the private sector at every opportunity because the alternative is to finance it through from taxpayers' money.

"The government has set an ambitious sponsorship target and we are on course to achieve it.

"However, as I have always made clear, I do not procure or negotiate individual sponsorship contracts and this has been formalised since my appointment as secretary of state for trade and industry.