Baroness' Income Error Puts PM Under Pressure

Conservative Party chairman Baroness Warsi has admitted she failed to declare thousands of pounds in rental income.

Baroness Warsi, who is a Cabinet Office minister, said she did not tell officials in the House of Lords of the money she received after renting out a London flat.

She said the omission was due to an "oversight", adding that she had since reported the letting of her Wembley flat in the Register of Ministers' Interests.

The arrangement had also been declared to the Cabinet Office and tax officials at HM Revenue and Customs, she said.

Although she denies any impropriety, the Tory peer is now also facing calls for an investigation into her expenses over claims she claimed for overnight allowances when staying a house rent-free.

The owner of the townhouse in Acton, west London, Dr Wafik Moustafa told Sky News: "She came and stayed at the end of 2007 several weeks after she was elevated to the House of Lords."

He added: "Rent has never been discussed and I have never received money or asked for money from Baroness Warsi or Naweed Khan."

Mr Khan was an adviser to Baroness Warsi who was already staying as a guest in another room at Dr Moustafa's home.

Baroness Warsi insists that she made an "appropriate payment" for the nights she stayed at a property occupied by Tory official Naweed Khan.

The Tory peer was at the time claiming Lords subsistence of £165.50 a night.

Naweed Khan released a statement confirming that: "In the early part of 2008, for a short period, Baroness Warsi stayed with me.

"I confirm she made a financial payment on each occasion, which compensated for the inconvenience caused and additional costs incurred by me as a result of her being there."

But Dr Moustafa was baffled as to why one guest at his house would be collecting payment from another.

He said: "It doesn't add up."

Asked if there was any circumstance in which Mr Khan could have been sub-letting the room to Baroness Warsi, Dr Moustafa said: "I don't think so."

Labour MP John Mann said he would be asking the Lords commissioner for standards to investigate and called on Mr Khan to publish his financial records.

"If you are paying no rent where you are staying, you can't possibly be claiming subsistence for staying there," he said.

"It all seems very murky. We need a full investigation into the matter."

The revelations are the latest in a series of crises in the wake of Mr Cameron's pledge to maintain high levels of transparency in Government.

Last week, the PM deflected criticism over Culture Secretary Jeremy Hunt , who is to be questioned at the Leveson Inquiry about News Corporation's failed bid for full control of BSkyB.