Labour donors reluctant to pay up

By Iain Watson
Political correspondent, BBC News

Criticism in some parts of the press that the Labour Party is "financially as well as politically bankrupt" look to be wide of the mark.

I'm not one of those Johnny-come-latelies who gives money to the Labour Party when the ship is sailing smoothly and jumps overboard when things are perceived to go wrong David Abrahams

At least on the former point; the latter is rather more subjective.

Despite predictions it would miss Monday's deadline as it wrangled with creditors, the party has now lodged its annual accounts with the Electoral Commission.

But while Labour will not suffer the latter-day equivalent of being thrown en masse into a debtors' prison, it is facing what might be termed financial embarrassment.

Labour is increasingly dependent on the big trade unions to avoid falling into a financial black hole and the party is facing an impending credit crunch of its own.

In recent years, and particularly in the run up to the 2005 election, Labour became less reliant on big spenders - long standing donors - and more in hock to big lenders.

Reluctant lenders

But within the next 12 months, some very large loans from the party's so called "high value" supporters need to be paid off and quite a few lenders are not feeling quite so generous after the long-running "cash-for-honours" saga in which it was alleged that some stood to gain peerages in return for providing loans.

From conversations I have had over the past week with Labour's recent lenders, and their representatives, it would appear the party has had a limited amount of success in getting these supporters to reschedule their loans.

One of the party's most generous backers initially told me he would be happy to extend his loan, but then said subsequently that negotiations were getting bogged down in the detail.

Two former lenders were so fed up with the adverse publicity they said they would not lend again.

But others were merely reluctant and were persuadable, while one potential backer - who had had a previous loan repaid - was surprised not to have been approached for more cash.

But I did come across one unequivocal supporter who would be happy to open his chequebook - David Abrahams.

Police investigation

Mr Abrahams was the North-East businessman at the centre of the funding scandal that rocked Labour last November.

He had donated more than £600,000 to the party through proxies or intermediaries - including his secretary and his builder - over a period of at least four years, potentially falling foul of Labour's own laws on transparency.

The party's then general secretary, Peter Watt, resigned, there was a police investigation and their file was passed to the Crown Prosecution Service last week.

The CPS told me they were still reviewing the evidence but Mr Abrahams told me the minute the case is concluded, he is willing once again to cough up cash.

"The Labour Party need the money to keep themselves going -I'm not one of those Johnny-come-latelies who gives money to the Labour Party when the ship is sailing smoothly and jumps overboard when things are perceived to go wrong.

"I have got no problems donating to the Labour Party."

And he said that he and his proxies would not be prosecuted for their role in channelling money surreptitiously to Labour.

"The police have cleared the proxies and myself - my solicitor has had a letter from the Metropolitan Police saying that they may want to use me as a witness, but there is no intention to go further with this as far as I'm concerned."

Neither the CPS or the police would confirm this and the CPS said they would decide whether or not to charge anyone connected with the case in due course.

Whether charges are brought or not, the Labour Party - whatever its financial state - is not likely to be approaching Mr Abrahams for cash.

Instead they will have to work much harder on more reluctant backers if their finances are to be put back on a firm footing.