Gordon Brown has launched a furious attack on attempts to link him to the cash-for-honours affair as "unfounded allegations and smears".
The Chancellor hit out amid claims that he proposed giving peerages to two close political allies who have given money to the Labour party.
It has been suggested that honours for high-profile Labour donor Sir Ronald Cohen and Wilf Stevenson, director of think-tank the Smith Institute, which has close links with the Treasury, were eventually blocked by Downing Street because they were considered "unsuitable".
But a spokesman for the Chancellor repeated his denial of having "any knowledge" of loans to the Labour party before their existence became public, and insisted he had always considered it "inappropriate" to be involved in fundraising. Mr Brown had no "formal position" in nominating working peers, the spokesman added.
"The Chancellor has never made any such submissions nominating an individual or individuals in letters or statements.
"When asked to give his opinions informally about potential working peers to be nominated by the party, the Chancellor has, of course, been happy to give them on the basis that eligibility should naturally be based on service to the community and country, present and in the future."
The spokesman said Mr Brown would have "no hesitation" in saying the two men would have made "valuable working peers".
"But the fact is that no nomination has been made for either individual to the political honours committee, nor has the Chancellor ever submitted any letter or statement of nomination," he added.
Earlier this week the Cabinet Office insisted Sir Ronald's nomination for a knighthood had been handled "in the normal way" after claims the Treasury pushed it through. Channel 4 News reported that officials opposed the title, which was bestowed for "services to the venture capital industry" in 2000.
The Chancellor's spokesman said neither Mr Stevenson nor Sir Ronald had ever made loans to the Labour party, and all donations were "a matter of public record". No such donations had ever been discussed with the Chancellor, and nor had the men given cash to his political office, he added. Mr Brown denied having any "financial or formal" relationship with the Smith Institute.
