It's unpleasant, but is it racist? TV chief doesn't know...but everyone else condemns Big Brother

Andy Duncan, chief executive of the broadcaster, which has consistently courted controversy in recent years, insisted the issues raised by programme were "undoubtedly a good thing".

However, as Channel 4 officials admitted for the first time that they could not say categorically whether the comments on the show were racially motivated, Mr Duncan's claims were branded "absurd" by Ken Livingstone, the mayor of London.

Tessa Jowell, the Culture Secretary, described the programme as "racism being presented as entertainment" and "disgusting".

The intensifying row over the alleged racist bullying of Shilpa Shetty, the Bollywood star, by housemates Goody, Jo O'Meara and Danielle Lloyd has made news around the world. Hertfordshire Police also launched an investigation into allegations of racism as complaints to Ofcom and Channel 4 about the show reached a record 36,000.

But Mr Duncan insisted that Channel 4 would not axe the programme and said behaviour inside the Big Brother house was a "mirror of British society".

Mr Duncan added: "What constitutes racism is a complex question. We have been monitoring extremely carefully events in the house and have reached the view that we cannot with certainty say that the comments directed at Shilpa have been racially motivated or whether they stem from broader cultural and social differences.

"There's no question it's unpleasant. But we haven't been convinced that what has been said has been racially motivated."

However, Carphone Warehouse yesterday ordered Channel 4 to remove its name and branding from the programme with immediate effect as it suspended its 3 million sponsorship agreement. Charles Dunstone, chief executive of the firm, said the behaviour of some of the housemates was "entirely at odds" with its brand values.

Channel 4 was also warned that its bid to get 100 million in state subsidies could be jeopardised by the row. Ms Jowell told MPs the channel's success in getting a greater proportion of the BBC licence fee to cope with an expected shortfall in income when digital TV takes off would depend on whether it maintained the "trust and confidence" of the public.

Ken Livingstone last night called for all housemates who have made racist comments to be evicted immediately and accused Channel 4 of damaging Britain's international standing.

Dave Prentis, general secretary of the trade union Unison, also accused the station of promoting a "circus of racism" and giving publicity to "louts".

Shetty, 31, who has appeared in more than 50 films, is up for eviction tonight against Goody, whom bookmakers made the overwhelming favourite to be booted out.

The actress yesterday appeared reluctant to portray herself as the victim of racist abuse.

"I thought about it for a long time. It's not racist. You know people say things in anger," she said.

But in scenes shown on Channel 4 last night, Goody - who has carved out a niche as a celebrity since finishing fourth in the programme's 2002 vintage - was shown calling the actress "Poppadom".

'BRAND GOODY' TAKES A HIT

JADE Goody's role as chief tormentor of Shilpa Shetty is likely to lose her public support and damage her earning power when Celebrity Big Brother ends, experts warned last night.

Goody, 25, is said to have amassed up to 4 million through activities such as a television series, a perfume, keep-fit DVDs and a best-selling autobiography. The former dental nurse became an instant celebrity in 2002 as a contestant on Big Brother, trading on her apparent stupidity and ability to mangle words to generate public sympathy. The editor of the celebrity magazine Reveal said the public had now seen a nastier side to Jade. Michael Butcher said: "She has come across as a much more confrontational person. Jade was also dropped by her anti-bullying charity [Act Against Bullying, of which she was a high-profile supporter), and that will have damaged her."

Nicola Ibison, an agent who represents celebrities such as Gillian McKeith, Peter Schmeichel and A Place in the Sun presenter Amanda Lamb, also suggested Jade's personal appeal had been dented.

"What may have been endearing mistakes when she was originally on Big Brother have changed on this occasion to show Jade as a nasty bully," Ms Ibison said.

One retail chain, The Perfume Shop, yesterday withdrew sales of Jade's perfume Shh as controversy over her behaviour mounted. Gordon Macmillan, editor of the PR and marketing website Brand Republic, said: "I think 'brand Goody' is going to take a serious hit.

"Jade has now been in the public eye for a long time. In the first series of Big Brother it was all drunken antics, but this is a bit more sinister."

A spokesman for Goody insisted last night the reality TV contestant was not racist.