DAVID Steel has had the Liberal Democrat Party whip restored and his suspension lifted following an internal investigation into remarks he made about child sex abuse claims concerning the late MP Cyril Smith, according to a senior party source.

Lord Steel, the former Liberal Party leader, was suspended and had the parliamentary whip removed in March following the remarks, which he had made to the Independent Inquiry into Child Sexual Abuse.

The 80-year-old peer explained how in 1979 he had asked his colleague about allegations that he had abused boys at a Rochdale hostel in the 1960s after an article appeared in the Private Eye satirical magazine.

Lord Steel said he came away from the conversation "assuming" Smith had committed the offences. He explained: “It was before he was an MP, before he was even a member of my party. It had nothing to do with me."

The inquiry was told that the party had held no formal inquiry into the claims against Smith, which had been investigated by the police in 1969 but no prosecution was brought.

Lord Steel, the former Holyrood Presiding Officer, described recommending his colleague for a knighthood in 1988 and pointed out that he did not pass on any child abuse allegations because "I was not aware of any such allegations other than the matter referred to…which appeared to have been fully investigated".

Richard Scorer, a lawyer acting for seven victims in the abuse inquiry, said Lord Steel's “inaction was an appalling dereliction of duty” and that his admission that he had assumed Smith had committed offences would "cause victims great anger".

The claims against the late Lib Dem politician came to public prominence after Smith died in 2010. In the 1960s, he was a Labour councillor in Rochdale before becoming the Liberal and then Lib Dem MP for the town between 1972 and 1992.

Last night, a senior party source told The Herald: “The fact is the whip has been restored to Lord Steel in the House of Lords and as a result the suspension has been lifted.”

When the party was approached for a response, a spokesman said: “The process is ongoing,” adding there would be no further comment while this was the case.