Gordon Brown backed Lord Mandelson and again called for an inquiry into the "illegal" approach by Mr Osborne.
The Prime Minister told BBC Scotland: "This was an issue where someone had tried to get a donation from a foreign citizen and that is unlawful. It is clearly unlawful. It's in the legislation of Parliament that it's unlawful to take, or solicit, or even to further the objective of acquiring foreign donations.
"That is the issue and that is what has got to be investigated and I know that the Electoral Commission has been asked to do it, the Parliamentary authorities. It's a matter for these authorities, it's not a matter for me."
On the accusation levelled at Lord Mandelson, who he brought back into the Cabinet earlier this month, he said: "What I actually think is that when these things are investigated by the authorities and the authorities say there's nothing, there's nothing to look at, there's nothing that's causing a problem, that unless people have any other evidence, it should be left as having been dealt with."
Either the Prime Minister doesn't read the newspapers, or he is stupid enough to directly contradict himself in the most flagrant way from one paragraph to the next, or - and this is the sinister bit - he believes that what is lawful and what isn't depends on whether you are a member of his cabinet.