Labour failed to declare £2m funding

FRESH doubts about Labour’s finances were raised yesterday after it emerged the party had broken the electoral law by failing to declare donations totalling more than £2 million.

According to the Electoral Commission, Labour failed to report 236,952 worth of donations for the first quarter of 2002 and 1,815,549 for the second quarter - swamping the 591,000 declared at the time.

The Scottish Labour party - already at the centre of a row over its financial probity - dominated a list of constituencies which failed to declare on time, admitting to 16 cases of late notifications of donations.

Electoral Commission figures revealed five Scottish constituency Labour parties - including Falkirk West and Jack McConnell’s seat of Motherwell and Wishaw - were among the organisations whose donations came to light after the official deadline.

The embarrassing revelations come just weeks after the First Minister was forced on the defensive over allegations that his constituency party had failed to declare fully its expenses.

The commission, the watchdog responsible for policing donations to political parties, described Labour’s 2 million omission as "unprecedented" and warned Labour it could face a fine or see its treasurer go to jail.

The mistakes, brushed aside by Labour officials as "administrative errors", overshadowed a significant recovery in the party’s financial fortunes after a massive slump in donations earlier this year left them more than 6 million in the red.

Figures for the last three months showed Labour received 2,788,988, compared with 1,780,038 in the Conservative Party and 165,778 for the Liberal Democrats.

The Electoral Commission returns also highlighted concerns about the Scottish National Party’s readiness for the Scottish parliament elections this May. For the third consecutive month, the SNP received no individual donation of more than 5,000.

The June to October figures showed the party received just 87,000, of which 5,900 came from South of Scotland Power Ltd towards help with office costs, and the remainder was "short money" - financial support given by the state to opposition parties.

The donations to the Tories marked a downturn on the 1,977,807 figure for the months April to June and were heavily subsidised by more than 900,000 in short money.

More than half of donations to the Conservative Party came from public funds, including 25,502 from the Scottish Parliament, and 847,411 in short money - raising doubts about the party’s continued reliance on large, individual donations.

The Conservatives were also guilty of late reporting, though on a smaller scale, failing to declare 250 for the first quarter of 2002 and 2,900 for the second.

Sam Younger, the chairman of the commission, said the failure to declare donations on time was a "serious matter".

He said: "In accordance with our usual procedure, we will examine with the parties concerned the reason for the late submissions before deciding what further steps might be appropriate."

Labour officials refused to say when the additional 1.8 million had come to light. All of the money came from union donations, including more than 450,000 from the AEEU and 311,000 from Unison. The accounts showed the party was more reliant on union support than ever, with some 88.8 per cent of its donations coming from union subs - including more than 10,000 from the Fire Brigades Union.

David Davis, the shadow deputy prime minister, questioned the timing of the donation to Labour by the FBU.

"The FBU has made its latest donations to Labour while crucial talks were being held on the firefighters pay dispute. The government should ask itself whether it is proper for it to be willing to take money from public sector unions under these circumstances."

A Labour Party spokesman said: "The Labour Party is committed to openness and transparency in party funding, which is why we set up the Electoral Commission process and why we are as determined to make it work as we were when we introduced it.

"Due to administrative error, there was a delay earlier this year in reporting to the Electoral Commission some affiliation funds from trade unions.

"When we became aware of the issue, we notified the Electoral Commission and those contributions are listed in this quarter’s report."

The largest donation from an individual to Labour was 100,000, from a City stockbroker, Charles Peel, a regular donor to the party.

Labour’s business donors include Alec Reed, the founder of Reed Publishing, who gave 10,000 in September.

Rocco Forte, the hotelier and owner of the Balmoral in Edinburgh, also gave the Conservatives 10,000.