Reporting on the meeting yesterday, the Guardian newspaper revealed that not only did the Inland Revenue claim that the deal had been arranged with Mapely Ltd, the UK registered counterpart of Mapely Steps, but it also effectively underwrote the entire deal, meaning that taxpayers could be liable if the company defaults on its obligations.

In his statement, Sir Nicholas announced that the IR had not been informed that the company was based offshore until a few days before the contract was signed in March 2001, and that the deal went ahead because UK law only forbids doing business with companies engaged in tax evasion, not legally permissible tax avoidance.

However, the Select Committee was not impressed. Speaking to the Guardian on Wednesday, David Laws, Liberal Democrat member of the cross-party body observed that:

'This is the most extraordinary catalogue of cock-ups and cover-ups. It is clear that the Inland Revenue and Customs and Excise accidentally put themselves in a position where they allowed the taxpayer to underwrite the financial risks taken by a company based in an offshore tax haven.'

'This sorry tale raises serious questions about the credibility and competence of the Inland Revenue and Customs and Excise.'