Labour sells HQ in bid to avoid financial crisis

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Labour leaders have been told they have a £6m buyer for their elegant Georgian headquarters in Westminster as the party makes desperate efforts to avoid financial meltdown.

In the wake of the secret loans scandal that has embarrassed Tony Blair, Labour faces a potential string of repayment requests from lenders who provided £13.9m before the last general election.

But the sale of the headquarters overlooking St James's Park in fashionable Old Queen Street will do little to ease the pressure on Labour's rising debt burden of more than £12m. It was bought in 2002 for £5.5m with a mortgage and Labour officials briefed the party's National Executive Committee in secret that it would make a profit of only £500,000 on the sale, which has already been approved.

A number of the millionaire lenders in the so-called "cash for peerages" controversy have said they want their money repaid within the next two years. There was some respite though when Chai Patel, the head of the Priory rehab clinics, made it clear he is not seeking the early repayment of his £1.5m loan to Labour and could be willing to turn it into a donation.

Under the terms of the loan, Labour is due to start repaying interest to Dr Patel in August. But his spokes man said: "He has got no plans to ask for all his money back and he has no plans to increase the financial pressure on the Labour Party.

"He will wait to see what the Labour Party want to do with regard to the loan."

He was nominated by Mr Blair for a peerage after making the loan, but it was blocked by the Lords Appointments Commission. Dr Patel this week asked the Prime Minister to remove his name from the nomination list.

Labour leaders are hop-ing to persuade the other big lenders not to press for the repayment of their loans which would push the party to the brink of bankruptcy. Labour could be faced with going back to their traditional backers, the unions, to bail them out, unless they can ease the pressure to pay back the loans totalling £13.9m from 12 lenders including Dr Patel.

The building in Old Queen Street was bought to avoid the Labour Party facing soaring rental costs after the lease on their Millbank headquarters became too expensive. The cramped rooms, low ceilings and small windows proved totally inadequate for running an election campaign and Labour moved to modern Victoria Street offices two doors along from Tory HQ.

The loans row showed no sign of abating last night after a shadow Cabinet minister, Chris Grayling, tabled Commons questions about the links between the Government and Rod Aldridge, the head of Capita, the IT company which has won over £500m in Government contracts. Mr Aldridge provided a loan of £1m after an appeal for cash by Labour fundraiser Lord Levy before the last general election. "I think there is a huge question mark over this whole affair," said Mr Grayling.

The Public and Comm-ercial Services union also called for an investigation into any link between companies and individuals who have given loans to Labour, and the award of Government contracts. The union, which is not affiliated to Labour, expressed "deep concern". Mark Serwotka, the union's general secretary, said: "This whole affair raises serious questions about the Government's privatisation programme and the awarding of Government contracts, where it is not uncommon to have just one preferred bidder.

"With billions of pounds of contracts already awarded to the private sector, it is a matter of public trust that there is an independent investigation into the link between companies and individuals identified as giving loans or donations to the Labour Party and the award of Government contracts."

Party has portfolio worth £9m

* Labour could raise around £9m with a 'fire sale' of its property portfolio to avoid bankruptcy, according to the latest accounts of its assets.

The party is highly secretive about its property holdings. However, searches at Companies House yesterday revealed the party has its own property development company listed as Labour Party Properties (Two) Limited. The latest accounts show that the party's portfolio of properties was worth £9.3 m, which is likely to be higher with a continued rise in property values over the past two years since the accounts were filed. The net book value after depreciation was set at £9.1 million. Assets previously listed by the party include Herbert Morrison House, a Victorian office block, in south London which was let as office space and a 3,000 sq ft office in Princes Street, Edinburgh. It is believed the party sold off John Smith House in Walworth Road, south London, when it moved into Millbank, which it rented.

Labour also had around 400 modest buildings across the country, including regional party headquarters, offices and clubs acquired by bequests, gifts and purchases over the last century. The party also has a pension fund worth in excess of £23.8m - but raiding it to pay off debts is not an option.

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