The banker who accused George Osborne of seeking an illegal donation from a Russian billionaire warned he will return to the attack if Conservatives seek to throw further doubt on his account of their meetings this summer, it has been reported.
Nathaniel Rothschild offered a truce to the Tories after two days in which he has been at loggerheads with the party, but insisted he was not running up "a white flag of surrender".
Mr Rothschild's sensational claim has put intense pressure on the shadow chancellor, culminating in a call from Prime Minister Gordon Brown for "the authorities" to look into Mr Osborne's relationship with aluminium tycoon Oleg Deripaska.
The affair was kick-started on Tuesday with a letter in The Times from the banking heir claiming that Mr Osborne and Tory fundraiser Andrew Feldman sought to solicit a £50,000 donation when they visited Mr Deripaska's yacht in Corfu with him.
When the Conservatives denied the claim, an apparently furious Mr Rothschild - an Oxford friend of Mr Osborne - stoked up the row by announcing he had an independent witness who could corroborate his story.
Sources close to Mr Rothschild suggested he had initially intended his letter to be no more than a "slap on the wrist" for Mr Osborne, who he blamed for leaking details of a private conversation with Business Secretary Lord Mandelson at a dinner he hosted during the Corfu holiday.
The source told The Guardian that Mr Rothschild did not want to escalate the dispute further, but added: "This is not a white flag of surrender. He dropped his bombshell because he was angry. This is not a campaign to get George."
Mr Rothschild has written witness statements from two friends, including James Goodwin, a former adviser to President Bill Clinton, said the source, adding: "If anything is put out that in any way contradicts what he has said, Nat will come back."
Former Labour minister Denis MacShane on Wednesday night issued a list of questions for Mr Osborne to answer, including whether Mr Deripaska or the Tories had finally decided it would not be appropriate to "channel" a donation through one of the oligarch's British companies, Leyland Daf.
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Mr MacShane warned he was ready to take the matter to the Electoral Commission or Parliamentary Standards Commissioner John Lyon unless there were satisfactory replies. But the Tories accused him of a "desperate attempt" to keep the story in the headlines, insisting that all his questions had already been answered in a statement issued by Mr Osborne and Mr Feldman on Tuesday.
