Labour has said the Conservatives are in "disarray" after the resignation of London deputy mayor Ray Lewis.
Mr Lewis stood down amid claims of financial irregularities stretching back almost a decade.
Communities Secretary Hazel Blears said the affair had left Conservative leader David Cameron Deputy mayor resigns from office ...
New York mayor heads for London ... and London Mayor Boris Johnson "embroiled in a mess".
Mr Johnson lost confidence in his deputy after it emerged Mr Lewis was not a magistrate as he claimed to be.
Ms Blears said: "People across the country will note that after just two months, the new Tory administration in London is in complete disarray.
"David Cameron has known Ray Lewis since his first day as Tory leader and Boris Johnson appointed him as deputy mayor days into the job.
"People will ask themselves: how have they allowed themselves to be embroiled in a mess like this?"
The allegations against Mr Lewis date back to his time as a vicar in the Parish of St Matthew in West Ham, east London, in the late 1990s.
They include that he received money from a man with learning difficulties and owed a debt to a fellow priest.
In a third case, a female parishioner went to church authorities and the police after giving Mr Lewis Ј25,000 to invest for her.
She started receiving regular interest payments but these stopped after a few months.
'Shoulder to shoulder'
At a news conference with his deputy at City Hall on Thursday, Mr Johnson announced an inquiry would be launched into the allegations which he said should not stop Mr Lewis from serving in his role.
However, Mr Johnson later said his "confidence was shaken" when he was wrongly led to believe that Mr Lewis, the deputy mayor for young people, was a magistrate.
Ms Blears said: "Boris Johnson stood shoulder to shoulder with Ray Lewis but he has followed Boris's deputy chief of staff and become the second senior resignation from the Boris Johnson mayoral team in recent weeks.
"Londoners need to know what Boris knew and why the situation has changed."
Mr Lewis's resignation follows that last month of Mr Johnson's Deputy Chief of Staff James McGrath.
'Extreme contrast'
Ken Livingstone, who was replaced by Mr Johnson as London Mayor, said: "In my entire eight years in office I suffered only one enforced resignation of any of my most senior officials, Lee Jasper, and that only after seven years.
"This extreme contrast shows vividly the incompetence of Boris Johnson and his administration.
"It is an equal crisis for David Cameron who, it should be remembered, chose to make his first photo opportunity as Tory leader with Ray Lewis."
Mr Johnson said he accepted Mr Lewis's resignation with "extreme reluctance".
"I cannot deny, however, that my confidence in Ray was shaken by the discovery that he is not a fully fledged Justice of the Peace," he said.
Mr Lewis said he had been recommended as a magistrate but he had not been appointed as one.
(BBC)
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