The government has asked the police to investigate fraud allegations against a company founded by the former Labour minister Geoffrey Robinson.

A spokesman for the Department of Trade and Industry said it had requested West Midlands Police to investigate allegations that TransTec had improperly applied for DTI grants.

The move comes after former employees of Mr Robinson were interviewed by the department and amid Tory calls for a wider investigation.

TransTec's former chief accountant Max Ayriss has said his one-time employer had instructed him to "maximise" grant applications.

Mr Robinson denies all wrong-doing.

DTI statement

In a statement, the DTI said: "Following allegations that fraud had been committed against the DTI, officials have interviewed Mr Max Ayriss about the circumstances surrounding grants made to the TransTec group of companies.

"In the light of this interview, and following consultation with the West Midlands Police, the DTI has handed over to the West Midlands Police information relating to grant payments made by the department to subsidiaries of TransTec plc and the information revealed by the department's inquiries into these matters.

"On the advice of the West Midlands Police, they [the police] will now conduct any further interviews which may be necessary and decide what action they intend to take."

'Better late then never'

Welcoming the move, the Conservative's Treasury spokesman David Heathcoat-Amory told BBC News Online he was glad the government were now taking the issue seriously.

"I think it is a bit cheeky for the government to say they are asking for a police inquiry after Tory MP John Taylor has already called for one," he said.

"But it is better late than never. I think the government have been reluctant to look into these matters simply because it is embarrassing for them to examine an ex-minister's business.

"But they have had no alternative, the evidence is so compelling."

Mr Heathcoat-Amory added: "We will now see the police interview all the former employees making allegations against Mr Robinson - and there are many of them."

Mr Heathcoat-Amory predicted that Mr Robinson would have no alternative but to stand down as an MP if he were linked to any part of the investigation.

Millionaire MP

M Robinson, a millionaire businessman, and his financial dealings have long been a source of controversy.

The former minister founded TransTec in the early 1980s, but resigned as chairman when he joined the government in 1997.

The company collapsed just before Christmas, going into receivership amid claims of accounting irregularities.

Trade Secretary Stephen Byers appointed independent inspectors to investigate the TransTec collapse last month after it admitted concealing from shareholders an £11m claim for payment by the Ford Motor Company.

DTI officials said the police inquiry would consider only the claims made in relation to the allegedly fraudulent grant applications and that this would not affect the independent investigation into TransTec's collapse.