Ukip has struck a deal with a Polish MEP whose far-right party leader casually uses racial slurs and questions the Holocaust following fears that its grouping in Europe would lose millions of pounds in taxpayers’ funds.

Nigel Farage’s Europe of Freedom and Direct Democracy group recruited an MEP from the Congress of the New Right with the blessing of its controversial leader Janusz Korwin-Mikke, according to reports from Poland. The Polish MEP Robert Iwaszkiewicz is to join the EFDD’s ranks as an individual, which will restore the group, a Ukip spokesman said.

The deal means that the EFDD group, set up by Farage, has 25 MEPs from seven countries, which should guarantee that Ukip will maintain about £1m a year in funding. The group received €2.6m (£2.1m) in 2013. Ukip accounts for 53.3% of the group.

The deal is yet to be confirmed by the European parliament, after Iwaszkiewicz’s application was handed in this afternoon.

Korwin-Mikke, whose party has two remaining MEPs and received 7.5% support in Poland during May’s European parliamentary elections, is one of the most outspoken figures within the far-right groupings of parliament.

In July, he declared in English that the minimum wage should be “destroyed” and said that “four million niggers” lost their jobs in the US as a result of President John F Kennedy signing a bill on the minimum wage in 1961. He went on to claim that 20 million young Europeans were being treated as “negroes” as a result of the minimum wage. He refused to apologise and was fined 10 days of allowances for his comments.

Korwin-Mikke has also called for the vote to be taken away from women, has claimed that the difference between rape and consensual sex is “very subtle” and said that Adolf Hitler was “probably not aware that Jews were being exterminated”.

Marine Le Pen, the leader of the Front National, ruled out forming an alliance with the Congress of the New Right after the European elections. “His [Korvin-Mikke’s] remarks, his political views ran contrary to our values,” she said at the time.

The EFDD has been desperate to recruit a new MEP since last Thursday, when Iveta Grigule, a Latvian member of the group, resigned. This meant that the group only had MEPs from six EU member states, just below the number needed to qualify for official group status.

Farage accused Martin Schulz, the president of the European parliament, of acting as the head of a “banana republic”. He said that pressure was placed on Grigule to stand down if she wanted to lead a parliamentary delegation to Kazakhstan.

Polish newspapers reported that a Ukip official negotiated with the Congress of the New Right in Poland this weekend over plans to give a single MEP to EFDD.

A spokesman for Ukip did not respond to questions asking what Ukip has promised the Congress of the New Right in return for allowing the EFDD to be revived or whether they had negotiated directly with Korwin-Mikke.

In a statement to the BBC, Farage accused Schulz, a German socialist, of “manipulative backroom politics of the worst kind”.

“EU federalists will be sitting in a corner somewhere slowly rocking, muttering the words ‘please make the Eurosceptics go away’ over and over,” Farage said. Last week Schulz denied any wrongdoing in connection with Grigule’s decision to leave the EFDD.

Iwaszkiewicz said he joined EFDD “because of two important values – opposition to EU bureaucracy and support for free markets”.