Michael Howard has attacked the government's plans to deregulate gambling, claiming officials have been involved in secret negotiations to relax the rules on money laundering.

Referring to an email between an official at the culture department and a senior employees at major US casino firms, the Tory leader questioned what contacts civil servants and foreign operators had over the impact of gaming deregulation on the money laundering rules.

Tony Blair hit back claiming that any allegation of "corrupt conversations" between government and foreign betting bosses was "utterly absurd".

Howard, however, insisted that "discussions had taken place on money laundering" between officials and casino operators despite attempts at a "cover up" from culture secretary Tessa Jowell.

"What we know is that the government has been offering concessions on money laundering to the operators of those casinos and the secretary of state tried to cover it up," he said.

But the prime minister insisted that "to try and mount an allegation of such seriousness on the basis of some email he has picked up is absurd".

Speaking in the Commons, Blair also denied that ministers had yielded to intense lobbying by US firms.

And in a sign that the government could be open to further compromise on the legislation, Blair went on to say that the government would "listen to all sides on this bill".

Blair said the Tories' decision to reverse their support for the gaming legislation amounted to "lame opportunism".