Tories are demanding answers

But the order was issued at the Sheffield office without ministers or managers knowing, Beverley Hughes said.

A "whistleblower" revealed the policy on Sunday, saying he suspected it was designed to avoid an embarrassing surge in immigration when the EU expands.

Shadow home secretary David Davis said Ms Hughes should resign.

'No deliberate policy'

The immigration minister was called to the Commons by Mr Davis after Steve Moxon, from the Immigration and Nationality Directorate, said processes were changed in an attempt to massage figures on East European migrants.

I refute, categorically, the suggestion that this was a deliberate policy to reduce the impact of the accession on 1 May Beverley Hughes Immigration Minister

He believes the aim was to rush as many applications as possible through now to make the numbers coming to Britain seem less dramatic when the EU expands on 1 May.

Ms Hughes said the Home Office was investigating the claims, which she claimed she only discovered on Sunday, and denied any special scheme had been authorised.

"I refute, categorically, the suggestion that this was a deliberate policy to reduce the impact of the accession on 1 May," she told MPs.

Illegals 'refused'

Research for the government suggests about 13,000 people will come to the UK from the 10 new EU member states to look for work, but critics have warned that the figure could be much higher.

Mr Moxon, who has now been suspended from his job, alleged normal background checks, which included proof of tax payments and bank statements, were waived.

And people with business plans - sometimes just scribbled on a sheet of A4 - had their applications passed.

I find it inconceivable that the home secretary does not know this is going on under his nose. David Davis Shadow home secretary

Ms Hughes said the guidance was issued locally to staff "without any authorisation from any minister or senior manager".

This was to the effect that "in straightforward cases, mostly involving people who already had leave to remain, the applications should be granted without further inquiries being made, provided a business plan had been submitted".

"There was no question of staff being instructed to grant leave to those they believed to be fraudulent," said Ms Hughes.

"The guidance made it explicit that applications from those here illegally were to be refused in the normal way."

Ms Hughes said she had ordered a full investigation into events, to be conducted by a senior civil servant.

But Mr Moxon said this was "unacceptable" and called for the probe to be carried out by a QC.

"I don't think you can trust the Home Office to do an impartial investigation," he told BBC's PM programme.

'Do not relish position'

Ms Hughes's explanations also failed to impress Mr Davis who called for her to quit.

"After her poor performance in the House today, laying blame on her staff and pleading ignorance, Beverley Hughes clearly shows she cannot control her own department. She is not up to the job and should resign," he said.

But Ms Hughes dismissed the request, insisting: "I genuinely believe I've done all I can, not just on this issue, but throughout my period as immigration minister."

In the chamber, Mr Davis called for assurances that the "whistleblower" would not be punished and asked if there were other "secret immigration policies".

"Collusion, cover-up or simple incompetence, the responsibility for this disgrace firmly rests with you and the home secretary," he told Ms Hughes.

The minister admitted: "I certainly don't relish being in this position," adding that what had happened was "quite, quite unacceptable".

David Heath, for the Liberal Democrats, said the inquiry should be independent of the Home Office, which was "clearly at fault" for allowing an "undisclosed" policy to be operated.

Home Secretary David Blunkett is currently away in America.