Westminster's standards commissioner has decided to launch an investigation into allegations that Scottish Secretary Dr John Reid used public money to help fund Labour's Scottish election campaign

The Parliamentary Commissioner for Standards, Elizabeth Filkin, said she would act on a complaint against Dr Reid and Glasgow Labour MP John Maxton.

The Observer newspaper had filed the complaint and, following a "preliminary inquiry", the commissioner said she would seek to conduct a full and speedy investigation, given the intense media interest.

Announcing her decision, she said: "Of course in this case the complaint has already been run in the newspapers so it is particularly important that I give the members of parliament every opportunity immediately to give their side of the story and to provide me with evidence as to what did or did not occur.

"When that's happened I have to decide whether I should take the matter further or whether I have no need to.

"If I need to take it further I will, of course, have to call witnesses and call for further evidence from the complainant."

The newspaper alleged that at least three full-time election campaigners were paid as part-time researchers by Dr Reid and Mr Maxton, the MP for Glasgow Cathcart.

Senior Labour sources were reported to have said that the "donations in kind" were one of a number of payments concealed to keep Labour's election spending in last summer's election within the permitted �1.5m limit.

They reportedly began in May 1998 when Labour was neck and neck with the Scottish National Party for the prize of running Scotland's parliament.

Ms Filkin revealed that she had spoken to Dr Reid to ask his response.

'Fullest cooperation'

She said: "I informed the MP immediately and he has assured me of his fullest cooperation."

Dr Reid said: "The parliamentary commissioner has received a complaint from The Observer. She has written to me to ask me to respond.

"I shall be happy to do so and will cooperate fully with her in this matter. I will robustly refute the allegations made by The Observer.

"Since this matter is now in the hands of the Parliamentary authorities, it would be inappropriate for me to comment further, other than to the parliamentary commissioner, until this matter is closed."