UK's Cameron orders probe into cabinet minister
* Conservative Party co-chair Warsi under fire
* Apologises for not declaring business interest
* Referred to ministerial watchdog in rare move
LONDON, June 4 (Reuters) - British Prime Minister David Cameron on Monday took the rare step of seeking advice over allegations that his Conservative Party co-chairman had broken ministerial rules, the latest twist in a row that has embarrassed his beleaguered government.
Sayeeda Warsi has in recent weeks battled accusations of improper expense claims, but on Sunday a newspaper alleged that she had not declared a business interest with a relative who had travelled with her on official business.
Cameron said he had asked Alex Allan, his adviser on the ministerial code, on how to proceed in the case. Cameron decides how to handle breaches of the code - there are no set sanctions.
No other politician has been referred to the adviser since Cameron came to power in 2010, underlining the seriousness of the allegations and lending weight to expectations that Warsi will lose her post in any upcoming cabinet reshuffle.
The latest furore comes at a bad time for the Conservative-led coalition government, which has seen its popularity slump in the polls since a badly received annual budget in March and the economy's return to recession in April .
The opposition Labour party welcomed Warsi's referral to the ministerial code watchdog, but accused Cameron of double standards for his refusal to refer Culture Secretary Jeremy Hunt to Allan over allegations Hunt was too close to Rupert Murdoch.
Hunt had been in charge of scrutinising a bid by Murdoch's News Corp for pay TV operator BSkyB.
"David Cameron is bending over backwards to defend Jeremy Hunt because he knows that it is his own judgment, in appointing a man he knew to be biased to oversee the BSkyB bid, that is in question," Labour lawmaker Michael Dugher said.
Warsi, Britain's first Muslim woman to hold a cabinet post, had travelled to Pakistan on official business with her husband's second cousin Abid Hussain, a fact Warsi said was known to British officials.
However, in a letter to Cameron made public on Monday she said she had not realised the need to disclose her and Hussain's common business interest in a small food company.
"I sincerely regret that I did not consider the significance of this relationship with Mr Hussain when the arrangements for the visit were being made," Warsi said in her letter.
"In retrospect, I accept that I should have made officials aware of the business relationship between Mr Hussain and myself, and for this I am sorry. I regret that this failure may have caused embarrassment to the government," she added.
Replying to Warsi, Cameron said "there are clearly lessons" for the future and he had asked that Allan examine the case.