Dr Jack Cunningham: Peter Mandelson himself recognises that registration would have been better

Cabinet "enforcer" Dr Jack Cunningham has re-stated the prime minister's belief that Mr Mandelson is not guilty of any breach of the code.

It emerged on Monday evening that Mr Mandelson had failed to declare a £373,000 loan given to him by the controversial Paymaster General, Geoffrey Robinson.

Loan was used to buy house in exclusive Notting Hill Gate

Mr Mandelson used the loan to buy a house in west London's Notting Hill while Labour were in opposition.

The row gained impetus because the trade secretary's department is now investigating alleged irregularities in Mr Robinson's business dealings.

Conservative leader William Hague has written to Prime Minister Tony Blair, saying Mr Mandelson is clearly in breach of the parliamentary rules on conflict of interest.

Peter Lilley: "There was an obvious conflict of interest"

Dr Cunningham denied this, though he expressed reservations about his Cabinet colleague's conduct.

"Peter Mandelson, in retrospect, may well have been better advised to tell the permanent secretary at the Department of Trade and Industry when he took up this appointment about this arrangement," he told BBC Radio 4's Today programme.

"Perhaps this thing could have been handled much better."

He insisted there was no question of the ministerial code having been flouted, as Mr Mandelson was playing no part in the inquiry into the paymaster general.

The BBC's Paul Rowley: "Mr Mandelson insists that he has behaved correctly"

In his letter, Mr Hague challenged Mr Blair to take action to "restore public confidence".

"Or is it going to be a case of one rule for friends of the prime minister, and another rule for everyone else?" he asked.

Tory deputy leader Peter Lilley demanded "honesty and complete candour about what happened".

He said: "There was an obvious conflict of interest between taking a massive and unsustainable loan from someone being investigated by his department.

"I am not prematurely calling for a sacking, I think first of all one should hear the truth from these people."

Robinson: Business affairs under investigation

Shadow Trade Secretary John Redwood has demanded details of Mr Mandelson's £150,000 mortgage application to the Britannia Building Society after the trade secretary told newspapers he could not recall whether he had informed it he was also getting help from Mr Robinson to buy the house.

The Financial Times says the Britannia requires details of other loans on the security of a property.

The paper said Mr Mandelson issued a statement saying he could not "recall details of an application form filled in two years ago" although he was sure "he would have sought to answer the question properly".

Some Labour MPs are questioning Mr Mandelson's conduct.

Diane Abbott said: "The prime minister has made it clear he's going to stick with Peter Mandelson to the last hour of the last day.

Diane Abbott: Peter has not shown the best judgement

"All I can say is, he's going to have some very long days ahead with Peter."

Earlier, Mr Mandelson wrote to the parliamentary standards watchdog to explain why he had not declared the loan.

Mr Mandelson told Elizabeth Filkin - the next Parliamentary Commissioner for Standards who takes up her new job in February - the loan from Mr Robinson was "not a gift or gained through being an MP".

Mr Mandelson set out the terms of the loan and sought Ms Filkin's advice.

Political Correspondent Carole Walker looks at the allegations surrounding Peter Mandelson

He stressed that as soon as he knew his department was examining the affairs of Mr Robinson, he distanced himself from any inquiry.

But he did not tell the DTI about the loan from Mr Robinson, which was made when the two men were ordinary MPs.