William Hague has admitted he was wrong to declare Lord Ashcroft would pay "tens of millions of pounds" more in tax as a result of a deal struck to allow him to take a seat in the Lords.
As Conservative leader in 2000, Mr Hague gave the assurance to then prime minister Tony Blair amid efforts to secure a peerage for the major party donor who had twice been refused, partly because of concerns that he was a tax exile.
Lord Ashcroft revealed earlier this month that, despite becoming a UK resident under the deal, he remained "non-domiciled" for tax purposes, meaning he does not pay UK tax on his overseas earnings.
Mr Hague, now the shadow foreign secretary and party leader David Cameron's de facto deputy, approved the deal at the time but insisted it had never concerned tax matters.
He told BBC Radio 4's Today programme that he became aware at the beginning of this year of Lord Ashcroft's tax status - before Mr Cameron was informed.
Liberal Democrats estimated the "non dom" arrangement has saved Lord Ashcroft more than £120 million.
Mr Hague told the Today programme: "The one thing I will concede on this - and which I think in retrospect was a mistake - was to say tens of millions because it may have cost him millions. We don't know, it may cost him millions into the future.
"None of us can know - other than him, I suppose, and the tax authorities - what it has cost
"But it was certainly an important change for him to go from being not resident in the UK."
Mr Hague spoke as two parliamentary committees prepared to hold inquiries into the circumstances surrounding the award of the peerage to Lord Ashcroft.
