DTI chief executive Chris Corlett admitted that he was 'somewhat surprised' to discover that £10 million earmarked for a wind farm project had, in effect, been spent elsewhere.

Steve Rodan, chairman of the select committee investigating the MEA loans affair, put it to the witness: 'He (Mr Proffitt] was rather leading you by the nose.'

Mr Corlett nodded his assent.

The committee also heard from Mr Corlett's predecessor at the DTI Kenneth Bawden that the Treasury had ordered the destruction of documents.

>> Former DTI minister says MEA complied with Treasury regulations

These related to a direction issued by then chief financial officer Mary Williams in June 2002 to ensure the MEA complied with capital project procedures, a direction subsequently withdrawn on the advice of the then Attorney General.

Asked by committee member David Callister MLC whether the destruction of such documents was standard procedure, Mr Bawden replied: 'No.'

The former DTI chief executive, who was in post from 1987 to his retirement in 2003, said the direction from Mrs Williams had 'come out of the blue'.

Describing the move as a 'complete surprise', he said: 'We had not been told about it at all. It really came out of the blue.'

He insisted his department had 'no involvement whatsoever' in the issue of funding for the MEA's capital projects.

'I would go so far as to say we were excluded from such deliberations by the Treasury. We were told to keep out.'

Mr Bawden said the only Treasury frustration he was aware of was about the MEA's failure to comply with capital procedure notes. 'We were not fully aware of their frustrations because we were not told about them.'

Mr Rodan said a picture was emerging of the Treasury and the DTI 'not exactly working in parallel'.

'We thought we were,' the witness replied.

Mr Corlett, too, said he was not fully aware of the Treasury's concerns about the MEA's lack of compliance with strict capital project procedures and he had been satisfied with the amount of financial information being provided by the authority at quarterly liaison meetings.

He said he had learned subsequently that the MEA had made the case that the Treasury's procedures were too inflexible and could cause undue delay.

They refused to comply with the 10-stage process, believing it to be 'onerous' and it had been accepted politically that the MEA would not have to fully comply but provide regular financial information to the Treasury.

'I wasn't a party to that decision,' he told the committee.

Tynwald last year voted to retrospectively sanction £120 million of loans apparently taken out without Treasury concurrence. These were in an addition to a £185 million government-backed bond aimed at funding the new power station, a natural gas pipeline and the undersea electricity and fibre optic cable.