At least pounds 1,600 was diverted into the party's "master account" at the Hyatt Regency in Birmingham, some of which was used to pay for a pounds 475- a-night executive suite for Tony Blair and his wife, Cherie, on Sunday night.
The deceit was uncovered yesterday morning, when more than 40 journalists and camera crew travelling on the party's three campaign battle buses, including The Independent, came to settle their hotel bills. They were charged pounds 148 per night, a rate which desk staff said had been negotiated between the hotel and the Labour Party. Yet journalists who made their own bookings were charged just pounds 69.
When challenged over the difference, Roddy Gordon, the hotel's marketing director, said: "You are all journalists, so you are going to find out anyway. The Labour Party have asked us to mark up the rates.
"The Labour Party was aware of the charges. During the negotiating process, we were asked to credit the master account of the Labour Party to the tune of pounds 40 per individual."
He said the sales person who conducted the deal was in Morocco and could not be contacted.
Labour initially denied there had been any surcharge on journalists' bills. Lesley Smith, one of its press officers, said a premium room rate had been paid because a large booking was made three weeks in advance. However, after consulting with London, she said: "There has been a cock- up."
"We do attempt to cover the cost of a small number of staff members but in this case it was somewhat overdone and pounds 40 that should have been your discount was credited to us. That will be refunded to all those who paid pounds 148."
It is understood the money was used to subsidise the cost of Mr and Mrs Blair's room, which usually costs pounds 475, the rooms of an entourage of 11 officials and a drinks party at which the Labour leader met the journalists who were unwittingly picking up the tab.
Media organisations have already each paid pounds 7,500 plus VAT to the party for the privilege of having their journaists travel around the country with the Blair convoy.
The Conservatives were quick to pounce on Labour's embarrassment at a time when the issue of trust is high on the agenda.
Alan Duncan, one of its campaign team, said: "If Labour had any decency left, it would impose a windfall tax on its excess profits."
The legality of what Labour did was being questioned last night. Dan Prentice, professor of corporate law at Oxford University, said: "You have effectively been made to contribute to Labour's campaign funds without your knowledge. There is no heavy law involved here. It is simply wrong."Reuse content