A parliamentary watchdog censured the European Research Group, the hard-Brexit faction of Conservative MPs led by Jacob Rees-Mogg, for using taxpayers’ money for party political activity in breach of rules.

The group has received hundreds of thousands of pounds from taxpayers through the MPs’ expenses system to support its research activities. The funds cannot be used for party political purposes.

In an email to the ERG last September, the Independent Parliamentary Standards Authority (Ipsa) said the contents of a research note produced by the group last year amounted to political attacks on the Labour party for voting against the government’s European Union (withdrawal) bill.

“Labour’s decision to vote against it is irresponsible, a breach of trust with their voters and a vote to create chaos,” said one of the passages in the briefing.

The email last year to the ERG’s researcher, made public after a freedom of information request, said some of the group’s materials crossed the line into political campaigning and asked that this activity stop.

Early this summer the watchdog wrote to the ERG again after a number of complaints, saying it wanted reassurance that public money was not being misspent on party political campaigning.

The ERG receives taxpayer funds from MPs for its work as a “pooled service” providing research and briefings to MPs, and is not supposed to carry out political campaigning. But within the past week it has dramatically escalated its efforts to pressure the prime minister into abandoning her Chequers proposals as a basis for negotiating with the European Union.

The group has reportedly drafted its own 140-page blueprint for an alternative to the prime minister’s negotiating position. The alternative manifesto was slated for launch this week as part of a concerted campaign to “chuck Chequers” and force the PM to make a U-turn or face a leadership challenge, until it was put on hold because of divisions within the group.

The ERG is officially one of five parliamentary pooled services that conduct research for each party. MPs can claim £2,000 a year each from public funds to cover the cost of this research, as long as the material they produce does not constitute party political campaigning.

Fifty-three Conservative MPs have claimed subscription money from Ipsa for membership of the ERG since 2010, and the group has received around £340,000 in taxpayers’ money in that period. Its membership has fluctuated, with 90 MPs said to be on its WhatsApp group at various times.

In response to last year’s Ipsa email, the ERG revealed that it operated a second bank account for receipt of private donations from benefactors in addition to its receipt of public money.

“The non-Ipsa one pays for occasional functions, MPs’ breakfasts, drinks, etc. That’s it really,” it replied.

The ERG has received multiple donations from private donors. Paul Dyer, a pro-Brexit businessman, donated £10,000 to the group in March 2017. Earlier in the year Steve Baker, until recently a Brexit minister, reported a donation of £6,500 in his capacity as ERG leader to pay for an event.

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That money was received from the Constitutional Research Council (CRC), a mysterious organisation of unknown membership said to be committed to pro-union causes. The CRC donated £435,000 to the Democratic Unionist party ahead of the Brexit referendum, part of which the party then paid to AggregateIQ, a little-known Canadian data consultancy also used in the referendum by Vote Leave.

In 2014 the ERG’s then researcher, Robert Broadhurst, disclosed to parliament that his salary for working for the group was financed by private donations in addition to Ipsa funds. One donor was Norman Lamont, the pro-Brexit former chancellor of the exchequer.

Lord Lamont said he could not recall the specifics of his donation but he remembered contributing “about £1,000” to Broadhurst’s salary. “I used to ring up Robert and ask him questions. I probably felt that it was wrong that I was not contributing, and MPs were,” he said.

He agreed that the organisation had changed in recent years. “It has become more of a sort of campaigning thing,” Lamont said. “I supposed we all campaigned for certain things, but it did not have a collective policy. It largely consisted of having breakfast once a month and hearing from Robert Broadhurst, and making up our own minds.”

An ERG spokesperson said: “We are strictly compliant with Ipsa rules.”