Work and Pensions Secretary David Blunkett was last night fighting for his political future despite announcing that he had asked his sons to sell shares in technology company DNA Bioscience.

But Mr Blunkett insisted he had done nothing wrong - either by buying the shares in trust for his children, or by taking a directorship with the company while he was out of office and technically not even an MP in the run-up to the last General Election.

A spokesman for Tony Blair said: "The Prime Minister believes no further action is needed and the matter is closed."

But the Tories and the Liberal Democrats made clear they were not prepared to let the beleaguered minister out of their sights.

Shadow Commons leader Chris Grayling said Mr Blunkett should still resign. The decision to return the shares "suggests that he and the Government recognise there is a case to answer", he said.

Having again reviewed the rules on new jobs for ministers. Mr Grayling said he was "as sure as I can be that Mr Blunkett has not complied with them". And he repeated his demand for a "rapid inquiry to clear the matter up once and for all".

Liberal Democrat spokes-man David Laws said: "David Blunkett has done the right thing in disposing of the shares in DNA Bioscience, but he should be in no doubt that he has now used up eight of his nine lives.

"To have a Secretary of State who seems almost permanently distracted by issues relating to his personal affairs is simply not acceptable."

Mr Blunkett issued his statement yesterday after a day of mounting pressure on him to clear up the controversy that has raged for weeks.

It followed acceptance that he had not followed ministerial guidelines on taking advice from a committee on what jobs former office holders should take up after leaving office.

The further revelation that he had bought shares in DNA Bioscience in trust for his sons - when the company was said to be in the running for Government contracts - intensified the row.

DNA Bioscience was said to have been potential bidders for work from the Child Support Agency, which is run by Mr Blunkett's department.

But in a statement, Mr Blunkett said: "As previously stated, DNA Bioscience does not have any contracts with my Department or the Child Support Agency.

"I have not made any representations to any Government department or agency on behalf of DNA Bioscience since returning to Government, nor have I provided any advice to the company. There has therefore been no conflict of interest.

"However, I am not prepared even to have the appearance that there could be any potential future conflict whilst the trust retains any shares in DNA Bioscience.

"I have, therefore, asked my sons to authorise the trustees to dispose of the shares. They have agreed to this. I have taken this step not only to avoid continuing misinterpretation of the position, but also to protect family and friends from further intrusion and hope that will be respected."

Mr Blunkett also made it clear last night that he would not profit from the disposal of the shares, thought to be worth about £15,000.

Last night, a spokesman for the Prime Minister said: "The relevant part of the ministerial code is about preventing conflicts of interest, and is primarily designed to deal with the situation where a minister takes up a position on leaving office.

"Therefore, whilst he should have sought the committee's advice - as he fully accepts - the fact that he had no contact with the business before he resigned from Government, and that a period of more than four months had elapsed since the resignation, means that the Prime Minister believes that no further action is needed and the matter is closed."

But Mr Grayling insisted: "Just because he has disposed of the shares, it does not mean he should not face a proper investigation.

"It appears that Mr Blunkett broke the ministerial code when he accepted the directorship of DNA Bioscience.

"Tony Blair has been adamant that ministers should work to the letter and the spirit of that code.

"Is he now saying that Mr Blunkett should be an exception to this rule?"

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