In a series of media interviews political lobbyist Derek Draper admitted his "big mouth had caused trouble".

Draper: admitted he has a "big mouth"

But he flatly denied ever arranging access into 10 Downing Street for clients with the help of Downing Street policy adviser Roger Liddle, as claimed by The Observer at the weekend.

Tony Blair has said he will take no action against Roger Liddle - a member of his Downing Street policy unit - unless there is proof of misconduct.

Mr Draper appeared on BBC2's Newsnight programme on Tuesday and insisted he had done nothing wrong. He claimed he had been misled by a journalist from the Observer newspaper posing as an American businessman.

Mr Draper is meeting his lawyer on Wednesday to consider whether to take action against the newspaper.

He was due to face Observer journalist Gregory Palast on Newsnight and said he was disappointed to discover that Mr Palast had been replaced by the Observer's Business Editor Ben Laurance.

'Publish' demand

The debate centres on what was said about access to government ministers

The Observer claimed at the weekend that Downing Street Policy Unit adviser Roger Liddle promised to put Mr Palast and a colleague, who were masquerading as US businessmen, in touch with ministers should they use the services of Mr Draper's firm.

Mr Draper re-issued his earlier demand for the newspaper to publish any tapes in full and said: "I also urge Mr Palast to come out and stand by his story."

A spokesman at The Observer said: "Gregory Palast has been on his feet and without sleep for 72 hours, he has done countless television and radio interviews.

"The Observer wished to answer the government and continue to press our allegations via our Business Editor Ben Laurance who has been involved with this story from the start."

Meanwhile a former Tory cabinet minister and a member of the Neill Committee investigating standards in public life, described the controversy as a "bonfire waiting to be lit."

John MacGregor, MP for Norfolk South, said he suspected over the last year that trouble was in store for the government because "of the entourage coming in with senior ministers."

"I was astonished to see the growth in Labour's special advisers, especially as they criticised us for practically nothing at all."

Mr MacGregor said now everyone could see what they had been up to. "I think it is very unpleasant and an unhealthy aspect for new Labour."