Hain lands Labour with another police inquiry

last night.

He was also forced to reshuffle his Government - only seven months after becoming Prime Minister.

Mr Brown was immediately accused of dithering by allowing Mr Hain, who quit after undeclared donations of £103,000 were referred to Scotland Yard, to remain in office for so long.

And the Liberal Democrats claimed that his Government was dogged by "political sleaze", on top of incompetence and economic turmoil.

Mr Hain, the Work and Pensions Secretary, had clung to office for weeks, amid mounting criticism of his failure to properly declare the huge donations to his deputy leadership campaign.

But his fate was sealed when the Electoral Commission - instead of delivering a slap on the wrist as many had predicted - announced it was calling in the Metropolitan Police.

Almost immediately, at 11.30am, Mr Hain rang the Prime Minister. His resignation was accepted without hesitation.

The watchdog is thought to have been angered by Mr Hain's defence that he had inadvertently breached the rules because he was a busy Cabinet minister.

His career as a frontline politician almost certainly over, the 57-year-old former anti-apartheid campaigner is now facing the nightmare of a possible court appearance.

In a statement, Mr Hain said had no alternative but to quit, but insisted he was doing so to clear his name.

He added: "I severely and seriously regret the mistake in declaring donations late and I have co-op- By Robert Merrick Political Correspondent newsdesk@nne.co.uk erated as soon as I was able to with the Electoral Commission, providing all the details they have asked for.

"I will of course co-operate in the future with the police and with any other authorities that wish to ask questions about this."

In his resignation letter to the Prime Minister, Mr Hain wrote: "I made a mistake.

but it was an innocent mistake."

Mr Brown wrote to Mr Hain: "I recognise that, given the circumstances and your desire to clear your name, this is the right and honourable thing to do. I also recognise that in making this decision you have, as ever, put the country's interests before your own."

He moved swiftly to reshuffle his Cabinet, switching James Purnell from the Culture brief to Work and Pensions, to be replaced by Andy Burnham, the Chief Secretary to the Treasury. The Chief Secretary's post will be filled by housing minister Yvette Cooper, creating the first husband-and-wife team in the Cabinet.

She is married to Children's Secretary Ed Balls.

Mr Hain's other Cabinet job - as Welsh Secretary - is taken by Paul Murphy.

The reshuffle failed to deflect criticism from Mr Brown, with Tory leader David Cameron insisting: "The Prime Minister should not have allowed this to go on for so long."

The Lib Dems went further.

Danny Alexander, the party's work and pensions spokesman, said: "The transition from Blair to Brown feels increasingly like the transition from Thatcher to Major.

"We all remember John Major clinging on to ministerial colleagues, only to lose them in the end - and now Gordon Brown is doing the same."

Although Mr Brown branded Mr Hain's handling of the donations an "incompetence", he has backed his minister's insistence that it was an innocent mistake.

Worse, police are already probing proxy donations to Labour of more than £650,000 from North-East property developer David Abrahams.

In November, Mr Hain revealed he had declared 17 donations - totalling £103,000 - more than four months after the deputy leadership contest ended, in clear breach of electoral law.

The most damning revelation was that some of his gifts were channelled through a think-tank that had done no research. It appeared to exist only as a conduit for the cash.

There was widespread astonishment at the scale of Mr Hain's spending in his bid to become Labour's deputy leader - a race in which he finished fifth.

The Metropolitan Police confirmed that an investigation had begun by detectives from its Economic and Specialist Crimes Command.