No 10 conceded the furore over the £103,000 had become "an issue", adding that was "why he said sorry".

Mr Hain endured hours of sniping in the Commons chamber as he faced first Welsh Questions and then a hastily-arranged Tory-inspired debate about national insurance numbers given to illegal immigrants.

Prime Minister Gordon Brown again tried to ride to Mr Hain's aid, telling MPs "unemployment is down, employment is up" and insisting he had "confidence" in the Secretary for Work.

However Tory MP Philip Dunne had taunted Mr Brown: "You have made clear that the Secretary of State for Work and Pensions is a dead man walking."

Mr Brown's spokesman only this morning (Wednesday) revealed the Cabinet table apology made by Mr Hain on Tuesday. The spokesman said: "When Peter Hain intervened elsewhere in Cabinet he apologised for the kerfuffle and said this was an issue that was affecting all parties."

The spokesman also insisted Mr Brown was talking of the management of Mr Hain's campaign when he spoke on Tuesday of "an incompetence" in failing to declare £103,000 to the Electoral Commission. Mr Hain finally declared the donations last week.

Mr Brown's spokesman said: "This is clearly a reference to mistakes that were made in his campaign, in the management organisation of his campaign."

The Electoral Commission - the official elections watchdog - is investigating Mr Hain's failure to inform it of his deputy leadership campaign donations under party funding laws.

Meanwhile, Parliamentary Standards Commissioner John Lyon has launched an inquiry into whether he broke House of Commons rules by failing to declare the gifts in the Register of Members' Interests.