George Osborne warned: 'stop rubbishing' Rothschild or you're finished

George Osborne and the Conservative Party should halt their attempts to "rubbish" Nat Rothschild, or risk the Shadow Chancellor being brought down, friends of the financier warned.

In a sign that the dispute involving the two old friends is far from over, Mr Rothschild's allies also indicated that Oleg Deripaska, the Russian billionaire at the centre of the donations row, would consider signing an affidavit backing Mr Rothschild's version of events.

Gordon Brown also increased the pressure on Mr Osborne by calling for an investigation into the shadow chancellor's dealings with the oligarch.

Mr Osborne and Andrew Feldman, the Tory party chief executive, have admitted meeting Mr Deripaska on his yacht off Corfu this summer. Subsequently, Mr Rothschild told the two that Mr Deripaska was willing to donate £50,000 to the Conservative Party through Leyland Daf, the UK company he owns.

Mr Rothschild said that Mr Osborne initiated the discussion about donations, but the Shadow Chancellor vehemently denies this and said in a statement that he did not ask for the money or take any.

The Conservatives last night were hoping that matter will now rest but such is the animosity that surrounds the feud, with claim and counter claim, that appears unlikely.

Friends of Nat Rothschild told The Telegraph that two witnesses have both written down what they recall from the meetings involving Mr Deripaska, Mr Rothschild and Mr Osborne.

It is understood that Mr Deripaska has also indicated that he would, if pushed, sign an affidavit backing Mr Rothschild's version of events.

One friend said: "Nat does not want to finish George off but it is really down to the Tories - if they carry on rubbishing him, his hedge fund and his friendship with Peter Mandelson then he will have no option but to act."

It was reported last night that Lord Mandelson knew the shadow chancellor had discussed a donation from Mr Deripaska. He is said to have sent a warning to David Cameron's office that Mr Osborne needed to "be careful" after Mr Osborne leaked details of their conversations in Corfu, where Lord Mandelson allegedly "dripped pure poison" about Mr Brown.

Mr Brown's intervention came in a surprise statement. The Prime Minister told a packed Commons that the "authorities" should look into the "very serious matter" of the discussions between Mr Osborne and Oleg Deripaska in Corfu during the summer.

Mr Deripaska, a billionaire who is banned from the US, is alleged to have offered to make a donation to the Tories despite not being eligible to vote in this country after four meetings with Mr Osborne, including a drinks party on the aluminium tycoon's £60million yacht.

The Prime Minister's intervention came as Conservative MPs privately voiced their disquiet that Mr Osborne had made the ill-judged move to get so close to such a controversial figure as Mr Deripaska and Tory grandee Lord Tebbit warned him: "Those who sleep with dogs will get fleas."

Mr Osborne believes he has no case to answer and has done nothing wrong as the donation was turned down.

But the Prime Minister said: "This is a very serious matter and I hope it is investigated by the authorities."

That was followed up by Denis MacShane, a Labour MP, detailing part of the funding legislation which he believes Mr Osborne could have breached in his contact with Mr Deripaska.

Mr said: "We passed a law in the year 2000 which says, and I read, "a person commits an offence" and as I say he's committed a crime, "if he does

any act likely to facilitate the making of a donation to a registered party by any person other than a permissible donor" and this Russian gentleman is not a permissible donor."

However, last night it seemed unlikely that any "authority" would be prepared to look at the matter.

The Electoral Commission maintained that they would not be ordering an investigation into whether there had been a breach of the Political Parties, Elections and Referendums Act.

Mr MacShane also issued a series of questions he wanted Mr Osborne to answer before deciding whether to call for a full investigation. However, a Tory spokesman dismissed those questions saying they had all been answered in Mr Osborne's full statement on Tuesday.

Tony Wright, the Labour MP who was chairman of the Public Administration Committee that examined the cash-for-peerages scandal, claimed he was baffled by Mr Brown's intervention.

He said: "We are not talking about corruption here, we are not talking about law-breaking. What there is, as someone said, is a twerp and a massive misjudgement.

"I'm not sure which authorities Gordon thought he was talking about."

A Tory spokesman attacked Mr Brown for making "a desperate attempt to keep the story going."

Mr Osborne met Mr Deripaska four times during a holiday trip to Corfu this summer. A donation was discussed although Mr Osborne claimed that he did not initiate the discussion.

It is legal to take money from a British company but not from an individual who does not appear on the UK electoral roll.

Lord Tebbit's intervention reflected some unease among Tory MPs about Mr Osborne's judgement.

The former party chairman said: "I find it very hard to believe that he could have been so foolish as to solicit a financial contribution from such a man, knowing that it would risk being an unlawful contribution.

"On the other hand, one has to say that George Osborne should remember that those who sleep with dogs will get fleas."

Friends of Mr Osborne admit that he knows that he has been foolish, but Mr Cameron is standing fully behind his friend and closest colleague. The Tory leader, with Mr Osborne beside him, withstood a barrage of Labour jeers at Prime Minister's Questions when he stood to ask Mr Brown about Britain's rising "borrowing" figures.

http://www.telegraph.co.uk/news/newstopics/politics/conservative/georgeosborne/3244297/George-Osborne-warned-stop-rubbishing-Rothschild-or-youre-finished.html