LONDON, Nov 27: The Labour government of Prime Minister Gordon Brown, already seriously bruised over the collapse of Northern Rock bank, the loss of two Revenue & Customs discs containing millions of families’ details and an attack by retired generals over military spending was battered this week by accusation of sleaze for accepting ‘irregular’ donations to the party from a business tycoon.

And in what appeared to be a rush job at damage control Prime Minister Gordon Brown on Tuesday tried to ward off the accusations by describing the donations as “unacceptable”.

The scandal has already cost the Labour Party its general secretary as Peter Watts who knew the party had accepted £600,000 in donations from businessman Abrahams via three intermediaries resigned on Monday.

The Prime Minister told his monthly Downing Street press conference that he did not know about this particular donation until Saturday evening.

“The money was not lawfully declared so it will be returned,” he remarked.

Brown admitted to reporters that he had met Abrahams, a wealthy property tycoon who was briefly a Labour parliamentary candidate in the past but said he could not remember ever discussing the issue of donations.

The prime minister said his “moral compass” told him that what had happened with the donations was “completely unacceptable”.

“That’s why, the minute I knew that this was happening, I have taken action. That is why the resignation of the general secretary of the Labour party was a necessary first step. It is not enough,” he said.

He told reporters Labour would take advice on future safeguards on receiving donations and that he had appointed the retired judge Lord McCluskey and the former Bishop of Oxford, Lord Harries, to advise Labour’s deputy leader Harriet Harman, who is also party chairman, on the changes that needed to be made.

“Mistakes have been made. There will have to be changes. I will take all steps to achieve these changes. We must insist on our party imposing the highest standards in future,” he said.

Asked if he would welcome a criminal investigation by the police into the donations, he said: “The Electoral Commission are looking at this ... it is for them to decide what happens next. I would welcome any investigation that takes place into this. It is necessary that this matter be cleared up once and for all.”

The Crown Prosecution Service is said to have confirmed that it had had “some initial contact” from the Electoral Commission but would not discuss the detail.

Brown said a number of options were being looked at for the reform of party funding, including increased state funding.