Labour left £27m in red by costly general election

THE LABOUR party has been plunged £27.3 million into the red by the most expensive election campaign on record, as questions were raised over the terms of its loans from private bankrollers.

Labour spent nearly 15.2 million at the last general election. The Conservative party spent 15.7 million, with total debts of 26.4 million.

The figures are provoking concern privately within the Labour party and Hazel Blears, the party chairman, yesterday acknowledged Labour was in a "fairly challenging position" financially.

While the Tories continued to resist naming all their millionaire lenders, Labour published the names of 14 individuals who lent 13.95 million between them in unsecured loans ranging from 250,000 to 2.3 million. Some of these lenders have been plunged into the centre of the loans-for-honours scandal currently under police investigation.

In its accounts to the Electoral Commission, Labour disclosed that the businessmen were being paid a "commercial rate of interest" of around 6.5 per cent to 6.75 per cent, or 2 per cent over the Bank of England base rate at the time of the loans last year. The loans all have to be paid back in the next six months to three years.

Credit experts have said it would be difficult for normal organisations, with liabilities of 27 million and few assets, to raise unsecured loans of up to 2 million. Neil Munroe, of finance experts Equifax, said:

"A normal company applying for such a loan would expect a higher rate, and unless it was secured, they would find it difficult. Political funding is obviously a different matter."

Conservatives revealed they took on interest-bearing loans totalling almost 23 million in 2005 but would not name all the lenders. A spokesman later explained some of this was repaid before the party's announcement in March of 16 million worth of loans, all of them outstanding.

Labour's net debt was more than twice the 12 million recorded at the end of 2004, while the Conservative figure was almost exactly double the 13.1 million of a year previously.

The size of last year's deficits - compared with the 9 million run up by Labour and 5 million by the Tories in 2001 - reveals the scale of their woes and has triggered calls for a cap on campaign spending.

The Liberal Democrats recorded a deficit over the year of 207,052 after spending 4.9 million on the election campaign. The party had a net surplus of 155,840 in the bank at the end of 2005.

In contrast, the SNP had an income of almost 1.1 million last year - almost twice as much as the Labour Party in Scotland. The party spent almost 1.2 million last year as it fought the general election. The SNP's net debt stands at 724,087, up 38,000 on the previous year.

The Labour party in Scotland publishes its own accounts and spent 437,219 north of the Border. This compares with an income of 523,523 for the year. Overall north of the border, the party was 255,000 in the black.