A whistleblower has claimed Margaret Thatcher's Conservative administration, which took over in 1979, may have provided funding for PIE.

A vile paedophile group with links to senior Labour politicians was funded with huge amounts of taxpayers' money, it has emerged.

The Paedophile Information Exchange was allegedly given £70,000 by the Home Office between 1977 and 1980 - the equivalent today of about £400,000.

The astonishing claims made by a whistleblower are now being investigated by the police and the government.

They come after the Mail exposed shocking links between the paedophile group and the National Council for Civil Liberties, a pressure group run at the time by former Health Secretary Patricia Hewitt and Labour's deputy leader Harriet Harman.

After months of revelations, Miss Hewitt apologised on Thursday, saying the NCCL was 'naive and wrong' in allowing itself to become affiliated with PIE, which campaigned for the age of consent to be dropped to just four.

'As General Secretary then, I take responsibility for the mistakes we made. I got it wrong on PIE and I apologise for having done so,' she said.

Miss Harman, who was the NCCL's legal officer, has also expressed 'regret' but has refused to apologise, claiming the Mail's stories were a 'politically-motivated smear campaign'.

Yesterday, a former Home Office worker revealed that Jim Callaghan's Labour government and Margaret Thatcher's Conservative administration, which took over in 1979, may have provided funding for PIE.

The whistleblower said senior civil servant Clifford Hindley, who was head of the Home Office's voluntary services unit, signed off a three year grant for £35,000 in 1980.

He has told police he saw the paperwork and the grant was a renewal - suggesting a similar amount had been given to the group in 1977 under the previous Labour government.

Mr Hindley, a classics, philosophy and theology graduate who studied at Oxford and Cambridge, apparently had an obsessive academic interest in gay relationships between men and boys.

He was an assistant secretary at the Home Office, where he oversaw 'co-ordination of government action in relation to voluntary services and funding of certain voluntary organisations'.

The VSU was in the section responsible for 'community programmes'.

A colleague at the VSU, based at the Home Office's former headquarters at Queen Anne's Gate, was shocked to discover a re-application to the department for funds made by PIE among a list of applications for taxpayer money.

The whistleblower, who did not want to be named, claims he raised concerns with Mr Hindley about why the Home Office should be funding such a vile organisation.

He told Exaro investigative website that Mr Hindley, who was his boss, took the paperwork away from him and told him to drop the matter, saying he would 'deal' with it.

The documents are now thought to have been legally destroyed along with all Home Office files about PIE since 1979.

The whistleblower approached Labour politician Tom Watson last year.

The MP has now raised the claims with home secretary Theresa May, who has ordered an investigation.

PIE members have been accused of abusing children 'on an industrial scale' during the late 1970s and early 1980s.

The group was formed in 1974 to campaign for sex with children to be legalised and formed an alliance with the NCCL, officially affiliating with the left wing pressure group.

PIE leader Tom O'Carroll was on the NCCL's gay rights sub-committee and the group was described in glowing terms by then general secretary Miss Hewitt.

The NCCL lobbied parliament for the age of sexual consent to be cut to ten as long as the child 'understood the nature of the act' and apparently consented.

The group also wanted incest to be legalised.

A memo from 1978 showed Miss Hewitt said the NCCL would be prepared to offer legal advice to adults who wanted to have sex with 14-year- olds.

The NCCL also placed a recruitment advert for new members in PIE's magazine and Miss Hewitt shared a conference platform with O'Carroll in 1977.

Miss Hewitt, Miss Harman and her husband Jack Dromey, a Labour frontbencher, all had key roles at the NCCL.

PIE disbanded in 1984 after two former executive committee members were convicted of child-porn offences and the group's leader fled the UK while on bail.

Commenting on the possibility PIE was funded by the Home Office, Mr Watson said: 'It's a remarkable state of affairs and the Home Secretary must make sure a report is presented as soon as possible.

'If the allegations are true, it shows how insidious an organisation PIE was that they could even convince the Home Office to give them taxpayers' money.'

Comment: It sounds more like they're all in on it!

A spokesman for the Home Office said: 'We are aware of the allegations and the Permanent Secretary has commissioned an independent investigation.'