The Conservatives are facing fresh embarrassment over their past funding with an allegation that the party received a £1m donation from a south-east Asian man charged with drug trafficking.

The accusation that Ma Sik-chun channelled the money to the party in June 1994 was reported in the Hong Kong-based Oriental Daily News, which the Ma family owns.

John Major invited Ma Ching-kwan to Downing Street says Hong Kong report

According to the report, the payment was made in an effort to smooth Ma's return to Hong Kong from Taiwan, where he has lived as a fugitive since 1978.

The Conservative Party has said that they would not accept donations with any strings attached but has not denied receiving the payment.

A Conservative spokesperson declined to comment in detail on past donations, but emphasised that Mr Hague had pledged to refuse future offers of donations from abroad.

Labour twists the knife

Labour seized on the allegations. A senior party source challenged Tory leader William Hague to act decisively, adding: "This is gravely embarrassing for the Tories."

"They must make a full public statement answering every key question about how they got the money, what they promised in return and what they are now going to do."

The Labour source said his party had long suspected that disclosure of the Conservatives' funding sources might prove embarrassing.

Labour's own funding has been a source of embarrassment recently when it emerged that the party received - and later returned - a £1m donation from motor racing boss Bernie Ecclestone.

The Government later gave a temporary exemption to Formula 1 from a proposed tobacco advertising ban.

Downing Street menu published

The Hong Kong report said three months after the donation was made, Ma Ching-kwan, Mr Ma's son, was invited to dine with then Prime Minister John Major at Downing Street. The Oriental Daily News published a copy of the invitation and menu.

Ma Sik-chun fled to Taiwan after being charged in connection with one of Asia's largest drug-trafficking operations.

A year earlier, in 1977, his brother Ma Sik-yu - known in Hong Kong as "White Powder Ma" - took the same route after being tipped off that the police were about to arrest him on similar charges.

The Ma family denies both charges.

In the Oriental Daily News, the family said they had asked for the return of the money last April and they reproduced a numbered receipt from Tory Central Office in Westminster acknowledging receipt of the donation.

The allegation will stir memories of the embarrassment the Conservatives had to endure when it emerged that they had accepted a £440,000 donation from Asil Nadir, the fugitive Polly Peck tycoon.

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