Mr Goodwill has confirmed he was given £8,821.08 by Lord Ashcroft's company to help him oust Labour's Lawrie Quinn in 2005, but has not received any donation from his company Bearwood Corporate Services since.

The scandal over the peer's avoidance of UK taxes since he became a member of the House of Lords more than 10 years ago has become one of the hottest political potatoes in the run-up to the election.

Lord Ashcroft, by his own admission, has given millions to the Conservatives and may be the largest single donor of all time.

Most of his funding has been targeted to help win marginal seats.

In 1999, when then-Conservative leader William Hague first recommended Lord Ashcroft for a peerage, he was rejected.

It was only in 2000, after he promised to return to live in Britain and pay tax here, that the House of Lords allowed him to become a member.

This week it was revealed he never kept that promise.

Bearwood Corporate Services is at the centre of an Electoral Commission investigation.

Now the Scarborough and Whitby Labour Party is demanding Mr Goodwill returns the money to the treasury in lieu of Lord Ashcroft's unpaid taxes.

Labour's parliamentary candidate Annajoy David said: "Lord Ashcroft has paid for Robert Goodwill's election campaign instead of paying tax.

"I'm asking local Tories to do their patriotic duty and pay the money back.

"Instead of paying tens of millions of pounds in tax – money that could have helped pay for schools and hospitals – Lord Ashcroft has chosen to spend the money on Robert Goodwill's and other Conservatives' campaigns.

"Robert got in with only a very slim majority and now we have proof it wasn't a fair fight.

"I can't rely on the millions of Lord Ashcroft's money, but I can promise you I will fight this election honestly, openly and on the issues that matter."

Lib Dem parliamentary candidate Tanya Exley Moore said: "This single donation of nearly £9,000 is more than I'll be spending on my entire campaign for this election.

"The Lib Dem's money in Scarborough comes from the grass roots, donations from party members and money raised from raffles and cake bakes.

"If you look at what's donated to us it's peanuts compared to the other two main parties and if you look at what they spend on campaigning it seems tasteless during a recession."

Mr Goodwill confirmed he had received money from Bearwood to help him fight the 2005 poll.

He said: "We have not had any money from Lord Ashcroft for more than five years. Fund-raising by the local Conservative Association has been very buoyant and we haven't needed to go to him, or to anyone, for this campaign.

"We're very grateful for his help – in 2005 we had to put forward a business plan to show how the money would be spent."