Labour has demanded a probe after Jacob Rees-Mogg's former business partner was quietly made a peer and a Trade Minister.
Critics accused the Tories of "cronyism" after Dominic Johnson, who set up Somerset Capital Management with the now-Business Secretary in 2007, was named as an International Trade Minister on Sunday.
In a blistering letter to Cabinet Secretary Simon Case, Labour Deputy Leader Angela Rayner and Shadow International Trade secretary Nick Thomas-Symonds said: "The appointment of a City Financier and business partner of the Secretary of State for Business, Energy and Industrial Strategy, Jacob Rees-Mogg MP, raises serious questions about the priorities and processes at the top of Government.
"This is a particular concern as it comes in a week when the Government has crashed the economy by handing out enormous, unfunded tax cuts to the wealthiest while working people face higher prices and higher mortgage rates for years to come."
Mr Johnson is a substantial Tory donor, who has given more than £250,000 to the party in recent years.
It is understood that he has now stood down from Somerset Capital Management and relinquished his shares. He will not have any involvement in any commercial activity.
Mr Johnson was also a non-executive board member at the Department for International Trade between 2020 and his appointment as a minister. He is understood to have been well regarded by Liz Truss when she was Trade Secretary.
Labour demanded to know whether the donations were discussed in relation to Mr Johnson's appointment.
The party also sought reassurance that there is no conflict of interest between the Minister's new job and his financial interests.
Ms Rayner said: "They’re not even bothering to hide the naked cronyism any more, with a major Tory donor who just happens to be Jacob Rees-Mogg’s business partner handed a peerage and a job as a senior minister.
"An unelected asset-manager pouring money into the coffers of the Tory party is now wielding influence at the heart of Government while the British voters are denied a say or any reassurance that due process has been followed.
"This is a Government that is acting for vested interests rather than in the public interest."
The letter, seen by The Mirror, adds: "The appointment of Mr Johnson comes after a long history of this Government behaving in a manner that seeks to give advantage to their political donors and allies.
"At every twist and turn, the Government has prioritised vested interest over public interest, and left working people carrying the can for this Government’s mistakes."
In a statement, Oliver Crawley, Partner at Somerset Capital Management LLP, said: “In respect to Dominic Johnson’s new role, we have key person succession plans in all areas of the business, so were well prepared for Robert Diggle to become CEO.
"As two founders are no longer involved in the day-to-day running of Somerset, we are looking at re-organising our capital structure to allow an ownership that is focused on incentivising the next generation of talent in the business.
"Ultimately any steps we take will be driven by what is in the best interests of our clients.”
A statement on the Government's website said: “Dominic Johnson CBE was appointed a minister of state jointly in the Department for International Trade and the Cabinet Office on 2 October 2022.”
Confirming his peerage, the Government said: "His Majesty has also been pleased to signify His intention of conferring a peerage of the United Kingdom for Life on Dominic Johnson CBE."
Mr Johnson has previously been outspoken in his opposition to the bonus cap for bankers - which was lifted by Chancellor Kwasi Kwarteng in his controversial mini-budget last month.
A Government spokesperson said: “The Ministerial Code sets out the process by which Ministers, following their appointment to a new role, should declare and manage their interests, working with their Permanent Secretary.
“This safeguards our procurement and commercial processes."
