Labour's deputy leader Tom Watson today called for his party to boycott the Lords appointments and honours system after the storm over David Cameron recommending peerages and gongs to dozens of allies and aides.

He urged Labour and other parties to cease “co-operation” on creating new peers, and on proposing people for knighthoods, OBEs, MBEs and other honours.

Mr Watson said: “It has been reported that David Cameron proposes to hand out peerages to a large number of his friends, a move that would undermine the honours system and damage the reputation of our second chamber.

“Until the Prime Minister can assure us that Cameron’s proposed list of crony lawmakers is dropped, Labour cannot legitimise this process by co-operating.

Labour requires working peers, as do the other opposition parties, but we cannot allow an outrageous abuse of a Prime Minister’s discretionary power to go unchallenged.”

He urged other parties to consider “boycotting the honours and appointments process until Theresa May agrees to act”.

However, in a sign of further Labour splits, Jeremy Corbyn backed a review of the system but not a boycott — amid reports that several prominent people, including ex-Liberty boss Shami Chakrabarti, are set to become Labour peers.

Accusing Mr Cameron of bringing the honours system into disrepute, Mr Corbyn said: “Labour will undertake a review of how honours are awarded, moving from a culture of personal patronage to one of individual contribution.” Ministers privately suggest Theresa May will reform the system.

Samantha Cameron's stylist was reportedly on the former prime minister's honours list. REUTERS/Eddie Keogh

A major Tory donor reportedly nominated for a knighthood in Mr Cameron’s proposed resignation honours has withdrawn his name from the list amid accusations against the former premier of cronyism.

Vitol oil boss Ian Taylor has written to Mr Cameron and his successor Theresa May asking that his name does not go forward on the list, which was leaked to the Sunday Times.

Opposition MPs have demanded a complete overhaul of the honours system after it was claimed Mr Cameron is pushing to reward personal aides, political donors and senior figures on the Remain campaign.

But Mrs May has said she will not interfere in the resignation honours process because it would set a bad precedent.

Meanwhile, Labour leadership challenger Owen Smith called for cuts in universal credit to be reversed and promised the “biggest boost to living standards for a generation” with a pay rise for five million workers if he becomes the next PM.

The party would push the minimum wage up to £8.25 and force employers to give it to all adults on the payroll, not just over-25s.