Pressure was mounting on Saturday for the businessman Sir Philip Green to lose his knighthood following allegations that he had sexually and racially abused his staff.

“If the allegations are true, then Philip Green should be stripped of his knighthood,” said Ian Lavery the Labour party chair.

“The public rightly expect high standards from public figures and they’re not getting it. The honours system is clearly flawed and the prime minister should take steps to remove honours from people who bring their office into disrepute.”

The MP’s comments follow those of the Liberal Democrat leader Sir Vince Cable, who also called for Green to lose his knighthood after the businessman’s decision to drop a legal case against the Daily Telegraph, which had been investigating claims he had harassed staff and used non-disclosure agreements to pay them off and secure their silence.

It has also been suggested that the corporate culture over which Green presided was a continued cause for concern even after several aggrieved employees had received the pay-offs.

Peter Hain, the Labour peer who last year used parliamentary privilege to name Green as the businessman who had been accused of sexual and racial harassment, said his decision to speak out had come after being approached by a person “intimately involved” in the case because he “had been known to speak up for human rights from my anti-apartheid days”.

“Their motive was that nothing had really changed [after the pay-offs had been agreed] and that the alleged behaviour was continuing – that was another factor motivating me,” Hain said. “You could tell just discussing it with them, the feeling of anger that whatever that person did, whatever steps he or she took to gain redress, they didn’t get anywhere.”

When the claim was put to him yesterday, Green declined to comment. In the past he has always denied any claims of sexual and racial harassment.

Hain’s decision last October to stand up in the House of Lords and identify Green as the businessman at the centre of allegations being investigated by the Telegraph ignited a ferocious legal battle which ended on Friday when the magnate, who with his wife, Tina, is worth some £2bn, abandoned his court action preventing the newspaper from reporting some of the allegations against him.

Facebook Twitter Pinterest Peter Hain names Philip Green in a speech in the House of Lords under parliamentary privilege. Photograph: HO/AFP/Getty Images

The Telegraph said the Arcadia boss, whose brands include Topshop and Miss Selfridge, had paid out millions of pounds in settlements to staff members who include a senior female executive who Green allegedly called a “naughty girl”. The newspaper said he allegedly kissed her face on a number of occasions, slapped her behind and commented on her weight.

According to the Telegraph, Green also allegedly drew attention to the dreadlocks of a black male employee in front of other staff, and referred to him “throwing spears in the jungle”.

Lawyers for Green told the Telegraph that it was “denied that any of Sir Philip’s conduct towards employees amounted to any type of crime, or anything that would amount to gross misconduct, or a serious risk to health and safety”.

The use of non disclosure agreements now faces calls for reform as a result of the case. “NDAs should never be used to suppress allegations of criminal behaviour so the next Labour government will review the statute book to ensure that the law protects the voices of survivors,” Lavery said.

Late on Saturday the Telegraph published further revelations and said its investigation showed “witness testimonies were left out of a report into sexual harassment.” It said Arcadia group was “facing accusations of a cover-up” as a result.