Housing Secretary Robert Jenrick has been accused of unlawfully approving a bid by a Tory donor to build a development of 1,500 homes that was said to be worth £1 billion.
The Westferry Printworks redevelopment scheme in east London was approved controversially in January by Mr Jenrick against the recommendation of a planning inspector.
The decision has since been reversed after legal action by Tower Hamlets Council, which had voiced concerns over the size of the development when the plans were first submitted in 2018.
In a statement in May, the local authority said the “timing of the decision appeared to show bias” by the Cabinet minister as it was made a day before new infrastructure charges came into force, allowing the developer – former Daily Express owner Richard Desmond’s Northern and Shell firm – to avoid paying between £30-£50 million extra to the council.
Mr Jenrick has "rejected the suggestion there was any bias" a Downing Street spokesman said, adding how the prime minister has full confidence in the housing secretary.
The spokesman also said he was not aware of any plans to investigate the issue.
Labour had requested Mr Jenrick attend the House of Commons on Thursday morning to face a grilling over his decision to "force through" the redevelopment scheme in east London, but he avoided questions by sending junior Housing Minister Christopher Pincher.
Labour has previously accused Mr Jenrick of making the decision after he dined with Mr Desmond “at a glitzy fundraising dinner”.
Two weeks after the Cabinet minister stepped in to approve the housing scheme, Electoral Commission records show that Mr Desmond personally gave £12,000 to the Conservatives.
In the Commons, Labour shadow communities minister Steve Reed, asked: "Did he know he was helping Mr Desmond dodge a potential £50 million tax bill?"
He added: "By an astonishing coincidence, just two weeks after the Secretary of State took his decision Mr Desmond made a generous donation of £12,000 to the Conservative party.
"This sequence of events raises grave concerns about cash for favours."
To ensure transparency and restore trust, he said Mr Jenrick must "immediately publish all documents and all correspondence related to this decision.
“The public needs reassurance that the integrity of the planning process cannot be auctioned off at Conservative Party fundraising dinners.”
Former Channel 5 owner Mr Desmond has donated to both the Tories and Ukip in the past.
Mr Reed asked why the development had been approved "despite the objections of the local council and the independent planning inspector appointed by his own department".
The frontbencher also asked whether Mr Jenrick declared his dinner conversation with Mr Desmond to the permanent secretary, the most senior civil servant at the Ministry of Housing, Communities and Local Government, and why he “did not recuse himself from decision making in this case given his relationship with the developer”.
Answering on behalf of Mr Jenrick, housing minister Pincher said the housing secretary acted properly and with propriety over the Westferry development.
He told MPs: “He (Mr Reed) also asks, has he acted properly and with propriety in making clear to the department all the discussions he has had with applicants? Yes he did.
“At all times he has disclosed any conversations that he has had with applicants.”
He added: “Mr Jenrick has no relationship with the applicant so I think that question is irrelevant."
Liberal Democrat acting leader Ed Davey has written a letter to the Cabinet Secretary Mark Sedwill, asking him to investigate whether Mr Jenrick, broke the Ministerial Code.
"There are serious questions for the government to answer about what Robert Jenrick knew and when he knew it.
"The information that is now in the public domain suggests that there may have been a breach of the Ministerial Code, which is why I am asking the Cabinet Secretary to launch an immediate investigation.
"If this investigation finds that Mr Jenrick has broken the Code, then he must resign immediately."
Mr Pincher, defending his boss, said in the Commons that “ministers have no knowledge of funds which are provided to political parties through donations or through payment for tickets – these are spendings made by donors which go to parties of all persuasions.
"They are declared in the proper and usual way.
“None of this is known to ministers, none of it is discussed by ministers, it certainly wasn’t discussed on this occasion.”
Labour also wants more information about the level of contact his department had with the developer over the application and specifically about the tens of millions of pounds that it would have been “liable for after January 14 if he hadn’t intervened”.
Mr Reed said: "It’s time for Mr Jenrick to come clean and answer these crucial questions about why he overruled his own inspector to grant planning permission for a billionaire Conservative Party donor to build a luxury development and dodge a £50 million tax bill shortly after they dined together at a glitzy fundraising dinner – Mr Jenrick must prove it’s not one rule for the Conservatives and their wealthy donors but another rule for everyone else.”