As the Culture Secretary fiercely denied any suggestion of wrongdoing over allegations that she had signed a mortgage document allowing Mr Mills to bring an alleged bribe of £350,000 into the country, Sir Gus O’Donnell was understood to have concluded that there were issues that had to be ironed out.

It is believed that the key question is whether Ms Jowell had told her Permanent Secretary, the senior civil servant in her department, about the mortgage transaction.

Mr Mills has admitted that £350,000 was paid by an Italian into a hedge fund in 2000. The couple raised a loan on their house in North London for a similar amount and put this into a second fund. The loan on the house was paid off within weeks, using money from the first fund, which Italian prosecutors are alleging was a bribe.

Ms Jowell has insisted that she has not broken the ministerial code of conduct.

Downing Street was cautious yesterday over its verdict on whether the code had been breached. It merely repeated Ms Jowell’s statements that she had abided by it, adding that she had Tony Blair’s full support.

Ms Jowell yesterday met Sue Street, her current Permanent Secretary, to discuss the issue. Later Sir Gus met Ms Street. He is likely to give his judgment today.

The position was further complicated by allegations in Italy that Mr Mills may have received a sum close to £600,000 rather than the £350,000 reported so far. Yesterday La Repubblica newspaper published details of an investigation carried out by the audit firm KPMG for Milan prosecutors as part of their inquiries into Mr Mills. The newspaper claimed to have discovered a web of payments and concluded that about £230,000 was still unaccounted for. Mr Mills declined to comment on the new allegations. He told The Times: “This is a legal process which will take its due course in Italy. Issues cannot be tried in the press or on television. I’m confident in the outcome.”

Any inquiry into Ms Jowell’s conduct centres on the provision in the ministerial code that ministers should provide their permament secretaries with a full list of all interests that might be thought to give rise to conflict. It should cover not only a minister’s personal interests but also those of a spouse or partner. If the sum of money received by Mr Mills was a gift, paragraph 5.24 of the code might be relevant. It says that it is a well established rule that no minister should accept gifts that might appear to put them under an obligation and “the same principle applies if gifts etc are offered to a member of their family”.

The Culture Secretary told Women’s Hour on BBC Radio 4 that she had agreed to sign the document authorising the mortgage against their home for her husband. She said: “I knew that my husband pays the mortgage, so I was perfectly happy in the division of our finances to sign the charge. It simply wasn’t a problem. It wasn’t unusual, it wasn’t improper and it certainly wasn’t illegal.”

Asked if the money had come from Signor Berlusconi, Ms Jowell replied: “But it didn’t. It categorically didn’t. If I felt that either I or my husband were harbouring some guilty secret I would be very worried indeed. This is a very tough time and it would be a hell of a lot tougher if I felt that I had done something wrong.”

Last night Italian prosecutors claimed that Mr Mills had used the accounts of his other wealthy clients, such as Flavio Briatore, the Formula One owner, to “hide” money. They are still studying Mr Mills’s complex financial affairs, which they believe are designed to prevent payments being traced.

Initially they employed the accountants KPMG to audit Signor Berlusconi’s Fininvest companies. Their analysis suggested that Mr Mills received £350,000. But the prosecutors’ investigations now suggest that the figure could be almost double that, La Repubblica says.

According to a dossier deposited by prosecutors in a Milan court on February 16, Mr Mills hid money paid to him by “parking” it in bank accounts and companies he had created for clients.

They said: “[Mr Mills] constantly covered up the origin and ownership by using three of his clients who knew nothing about the operations. [He] deliberately created confusion between his own affairs and those of his clients.”

WHAT THE CODE OF CONDUCT SAYS

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