An official investigation is underway into claims that the engineering company, TransTec, made false applications for grants while the former paymaster general, Geoffrey Robinson, was its chairman.

The Department of Trade and Industry, which is carrying out the investigation, has invited those alleging irregularities to put forward their claims as evidence.

The government has already ordered an inquiry into the collapse of the Midlands-based company at the end of last year amid revelations of irregularities in its accounts.

The chairman of the House of Commons Trade and Industry Committee, Martin O'Neill, has called for the matter to be resolved as quickly as possible.

He has warned that any delay could seriously damage the government.

'Success story'

Mr O'Neill, a Labour MP, told the BBC: "We can't allow this to linger on.

"It would be bad for the company, bad for Geoffrey and bad for the Labour government as well as the reputation of a company which until fairly recently was regarded as one of the success stories of British manufacturing."

On Monday TransTec's former chief accountant, Max Ayriss, told the BBC that a five-figure sum had been involved in several different applications for DTI grants by Mr Robinson's businesses.

He said if a claim came below the amount that TransTec could get, "Geoffrey indicated how to maximise it".

Mr Ayriss added that the Labour MP also obtained a £30,000 grant from the DTI to buy a factory building which he was not planning to occupy but simply wanted to let.

Mr O'Neill said he believed a number of such grants were conducted in this way in business generally.

But he continued: "On a matter of principle, we shouldn't have people claiming grants, claiming government support and assistance over and beyond that to which they are entitled.

"So I think these matters have to be the subject of a quick and rigorous examination and be part of the whole examination of the affairs of TransTec."

He denied the current government had attempted to drawn a veil over Mr Robinson's business dealings.

'Pass judgement'

It had been up to the previous government to instigate any inquiry, he said.

Mr O'Neill said: "It's very difficult for a party in opposition in the middle of a general election to have a clear view of these matters because at that time it wasn't the subject of speculation.

"Geoffrey was considered to be a successful businessman who also happened to be a Labour candidate and a strong supporter of the Blair leadership.

"I think at that time the then Labour leadership wasn't in a position to pass judgement one way or the other."

Mr Robinson, whose business affairs have long been the subject of controversy, founded TransTec in the early 1980s but resigned as chairman when he joined the government in 1997.

The former minister has said he has no knowledge of the poor accounting practices.

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