The Labour Party has accepted a series of large payments originating from Labour-controlled council money, a BBC investigation reveals.
Manchester airport is controlled by local councils
The revelation came during an investigation by BBC One's Kenyon Confronts into unelected power and influence in the UK.
The Labour Party has accepted a total of nearly £150,000 of Labour-controlled public money through payments handed over by the Manchester Airport Group (MAG), since 1997.
MAG is a commercial company that is 100% owned by the 10 councils of Greater Manchester and the biggest shareholder of the group, Manchester City Council (55%), is Labour-run.
The Labour Party has overall control, or a majority, in nine out of 10 of these councils.
Since all profits from the airport group go back to the councils, this is money that could have been spent on local services.
The money was handed over via the two airports the group owns,
Manchester Airport and East Midlands Airport.
Both Labour and MAG point out that all money has been spent on sponsorship of events rather than direct cash donations into party fundraising coffers.
However, under new legislation that came into effect in February 2001 (via the Political Parties Elections and Referendums Act 2000), sponsoring an event by more than £5,000 is defined as a "cash donation".
Paul Kenyon investigated unelected power and influence in the UK
Out of the total handed over by MAG, £78,000 was given between 2001 and 2003 and is listed by the Electoral Commission under these latest rules as "cash donations".
It took two years for MAG to realise this money would be defined as donations and eventually ask for the money back.
MAG says this move was simply to outline its position as a company that does not make political donations and was not an admission of any wrongdoing.
The amount has now been returned by the Labour Party with interest.
The remainder - approximately £71,000 - has never been returned.
When the Kenyon Confronts team put these allegations to the Labour Party and asked for an interview, they were promptly banned from September's Labour Party Conference in Bournemouth, despite the fact that many of them had already had their passes processed.
In a statement, the Labour Party denied these were cash donations.
It said: "Sponsorship from Manchester Airport Group was repaid not because the Labour Party had made any error accepting the amounts paid.
"The definition of donations to include sponsorship... was not appreciated by Manchester Airport Group due to a genuine mistake on their part."
It added: "The Labour Party checks to ensure that we only work with permissible sources."
The Labour Party disputes that it has accepted any public money, arguing that MAG is a separate legal entity from the councils.
However, Geoff Muirhead, the chief executive of MAG, told reporter Paul Kenyon that the airport group is owned "by the people of Greater Manchester" and every penny of profit from MAG goes back to the councils.
There is nothing currently in the law that prevents Labour-controlled councils giving large amounts of money to the Labour Party in this way.
Under this law, the list of "permissible sources" for donations and sponsorship includes commercial companies and there is no detail which makes an exception for council-owned or publicly-owned commercial companies.
The Labour Party maintains it has been far more transparent and open with regard to donors than the Conservative Party ever was.
Lord Sainsbury's role questioned
The programme also examined the Labour Party's biggest donor, Science Minister Lord Sainsbury.
Because his financial interests included Sainsbury's supermarket and Diatech research company, which has carried out GM research, he does not comment on GM issues and has put any holdings which could be seen as a conflict of interest into a blind trust.
Lord Sainsbury became science minister in 1998
This means he cannot see or know anything about his own financial dealings.
He also had an interest in the Sainsbury Laboratory, which is partly funded by a charity he set up.
However, he does have the final say on appointments to a quango called the Biotechnology and Biological Sciences Research Council (BBSRC), which has spent more than £18m on research into GM-related crops.
Eight out of 15 people appointed to this quango have connections to the pharmaceutical or biotech industry.
Since Lord Sainsbury became science minister, the quango has increased funding to the Sainsbury Laboratory - which also researches GM - by 400%.
Lord Sainsbury told the programme: "I do not take part in any government decisions or discussions relating to GM food."
He said the Sainsbury Laboratory is: "an independently administered organisation with charitable status... I have no financial interest in it.
"The members of the BBSRC are selected on the basis of their expertise.
"People are not excluded because they have commercial connections but of course they have to be declared."
Kenyon Confronts: Who Rules Britannia? will be broadcast on Wednesday, 22 October, 2003 at 1930 BST on BBC One.