The Labour Party heads for financial meltdown

Its finances that is, not the country’s, following up earlier bad news:

Loyalists including the venture capitalist Sir Ronnie Cohen and the millionaire former science minister Lord Sainsbury are understood to have bailed the party out temporarily in the past few weeks – its accountants had been threatening not to sign off the accounts at the end of this month, which could have ultimately tipped the party into insolvency. Cohen is understood to have donated £100,000 while Sainsbury has pledged to underwrite certain future staff salaries.

However, Labour’s new general secretary, Ray Collins, has admitted its finances remain in a ‘parlous’ state. The party is up to £24m in the red, with donors reluctant to give, thanks to Brown’s collapse in the polls and a series of police investigations into party funding. The party is locked in what one source described as ‘tortuous’ attempts to defer a series of multi-million pound loans due to be repaid soon.

Insiders said that Labour now hoped to be able to cover its immediate costs, but only by leaving ‘not a penny’ in the bank for a general election campaign.

It’s not all bad news for Labour though:

The news comes as it emerged that David Cameron is facing a second embarrassing inquiry into the finances of a shadow cabinet minister, just weeks after the furore over his party chairman, Caroline Spelman, paying her nanny on Commons expenses.

The Electoral Commission, the government watchdog, confirmed it was ‘in correspondence’ with defence spokesman Liam Fox, a right-winger who ran for the Tory leadership in 2005, over whether he should have declared three gifts from wealthy City backers made to his private office.

The full piece is in The Observer.