Labour forced to repay illegal funding donation

Labour was embroiled in a fresh row over donations last night after it was forced to pay back £15,000 to a children's charity which illegally donated cash to the party.

Catz Club, which has received lottery money to run breakfast and after-school clubs across Britain, paid the money to attend Labour's star-studded fundraising sports dinner this summer. But it was forced to ask for the money back after the Conservatives uncovered the donation and told the Charity Commission.

The commission said the case was of "serious concern" because of the blanket ban on charities making donations to political parties. The Conservatives said the case marked "a new low in Labour's donations history". But the charity insisted that the donation was made "inadvertently", while Labour said it had done nothing wrong.

Catz Club, which received more than £200,000 in lottery funding in 2003, is Britain's largest national charitable provider of childcare, running breakfast clubs, after-school clubs and holiday schemes across the country. It works in more than 100 schools.

A Charities Commission report released yesterday said the charity had made a £7,500 cash donation to Labour, as well as paying £7,500 to attend the fund-raising dinner where the charity said it "engaged with and lobbied senior politicians to encourage increased funding for after-school childcare facilities".

The dinner and celebrity auction at the new Wembley raised more than £600,000 for Labour, as guests paid £1,000 a head for a seat. Guests included the former EastEnders actress Michelle Collins, the Sunderland FC chairman, Niall Quinn, and the former England footballers Viv Anderson and Peter Reid.

The chance of playing tennis with Tony Blair went under the hammer for £20,000, while the prospect of tea with Nancy Dell'Olio sold for more than £9,000.

The commission raised concerns about the £7,500 donation, but the charity responded by asking Labour to return the full £15,000 payment, its report said.

A Labour spokesman said the charity had paid £15,000 to attend the party's sports dinner. Half the money went towards the cost of the dinner, but the other half was registered as a donation with the Electoral Commission.

Greg Clark, the Tories' spokesman on charities, said it "beggared belief" that Labour would take money from a children's charity. He said: "It is well known that Labour have staggering levels of debt and are scrabbling round for money to stay afloat. But after the cash-for-honours investigation, Peter Hain's resignation and the David Abrahams scandal, taking money from children's charities strikes a new low in Labour's donations history.

"It beggars belief that Labour should accept money from a lottery-funded charity that surely needs all the money it can get to fund its clubs for disadvantaged schoolchildren. Labour should have known that it was wrong to accept this donation."

A Labour Party spokesman said: "The Electoral Commission has confirmed that the Labour Party did nothing wrong in accepting this donation, which is allowed under party funding rules.

"We accepted this donation in good faith, but once Catz Club were told that they had inadvertently breached Charity Commission rules, we were asked to return the donation, something we were happy to do."

A spokeswoman for the charity, which receives funding from some local authorities for its work, said: "It was an administrative error that has now been corrected and the Labour Party have now repaid all the money. The situation is resolved and has been closed."