Tories must fight election with huge burden of debt

Labour starts the run-in to the next general election, at most 21 months away, with an unprecedented financial advantage, party officials disclosed yesterday, reporting a pounds 4m cash surplus on the day Conservative Central Office accounts revealed it is still pounds 15m in debt.

The Tory debt represents a pounds 2m improvement since 1994, helped by a pounds 3.4m rise in donations. But the party will fight the next election deep in debt, under pressure from its bankers and facing a stronger Labour Party than ever before. Labour's National Executive will report a net cash surplus of pounds 4.2m at the 1994 year-end to October's party conference.

The rise in Tory donations, which is believed to come exclusively from computerised direct mail to individuals, including party members, offsetting static contributions from companies, is impressive at a time when the party's political fortunes have been so low.

But campaigners for greater democracy in the Tory party suggested that contributions from party members were being diverted from local associations and sent direct to Central Office - concealing the party's overall decline. Each of the party's 600-plus local associations, to which members belong, is an independent self-governing body, which is invited by Central Office to contribute a "quota" to national funds.

The party also developed a new wheeze last year, asking supporters to make interest-free loans to Central Office if they were not willing to make outright donations. The pounds 2.3m lent this way enabled the party to cut its overdraft at the Royal Bank of Scotland by pounds 4.4m to pounds 11.4m, and to cut interest charges from pounds 1.1m to pounds 900,000. Labour still has a pounds 1m overdraft with the Co-operative Bank, but this is offset by a cash pile in a ring-fenced general election fund.

Brian Mawhinney, Conservative party chairman, welcomed the pounds 2m surplus, "achieved for the second year running, despite the additional expenditure of the European election campaign". The accounts show the cost of that campaign was pounds 1.4m.

But he refused to give details of the source of donations, beyond a paragraph in the accounts which says: "Personal donations now account for two-thirds of our donation income." Until recently, corporate donations accounted for about half of Central Office income.

The paragraph also refers to a "substantial legacy", without naming the benefactor, already identified from public records as John Jackson, a Bournemouth builder who left the party pounds 1.1m last year. Central Office sources said that only about half this figure was included in the pounds 12.7m donations in the year to March 1995.

Michael Trend MP, Dr Mawhinney's new sole deputy chairman, conceded that the party would have to "negotiate" with the Royal Bank of Scotland the amount it proposed to spend on the next general election. The bank has agreed overdraft facilities only until next June.

The accounts also show that staff numbers, at 273, are up 10 on the year before.