Police are now looking into allegations relating to the TransTec company set up by former paymaster general Geoffrey Robinson.

West Midlands police acted after receiving a formal complaint from Conservative MP John Taylor.

In a letter to Edward Crew, Chief Constable of the force, the MP wrote: "I write to request that a criminal investigation be commenced into most serious allegations of fraudulent receipt of government grants at a company called TransTec Plc of Coleshill, near Birmingham."

The complaint relates to suggestions made by TransTec's ex-chief accountant, Max Ayriss, that DTI grants had been applied for improperly.

Mr Taylor added: "I am very concerned about the effect of the TransTec collapse upon component suppliers in my constituency and the surrounding area, and upon the former employees of TransTec.

"I know others in the local business community are equally alarmed.

"I am aware that separate matters are already the subject of a DTI inquiry, but these new allegations are matters of substantial public interest too, which I think should be thoroughly investigated by a competent police team, skilled in matters of alleged fraud."

In a statement, West Midlands police said: "We will be liaising with the Department of Trade and Industry, who are already investigating this matter, before we decide what action to take."

Company collapse

Mr Ayriss's claims are already being investigated by the DTI.

Mr Robinson 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.

A DTI spokesman said that if anyone had new information relevant to its inquiry into TransTec, they should bring it to the department's attention.

A friend of millionaire Mr Robinson hit back at the latest allegations.

"Every allegation the Tories have thrown at Geoffrey over the past two years has been investigated and proven to be without foundation," the friend said.

He added that Mr Robinson was "very pleased" that the DTI had launched an independent inquiry into the latest allegations, and that Mr Robinson was "confident" the department's investigations would clear his name.