The next Labour leader will inherit tea towels and donors help, but also a debts set to be paid off by next summer

Tea towels and donors help put reds back in the black

Iain McNicol inherited a Labour party deficit of £12m (Getty)

The next Labour leader will inherit a party in the strongest financial shape for at least a decade, with debts from the 2005 general election set to be paid off by next summer.

The transformation of the party’s finances has been orchestrated by Iain McNicol, who became its general secretary four years ago.

Labour was saddled with debts totalling almost £25m after Tony Blair won his third straight election victory in 2005, though this was reduced when two major donors converted their loans into donations. There were suggestions at the time that the party was close to bankruptcy. Mr McNicol inherited a party £12m in the red and has reduced that debt substantially. Although Labour was heavily outspent by the Conservatives in May’s election, it is thought it raised more than the £12m it was tipped to secure.

Labour raised £2m in the year before the election from online donations alone, and tea towels featuring vintage campaign posters added £250,000 to its coffers. The party’s annual accounts are due to be published soon and should confirm its much-improved financial situation.

The news will boost Mr McNicol’s chances of retaining his job in the wake of Labour’s disastrous election result. He was essentially bypassed when Mr Miliband installed Spencer Livermore as campaigns director two years ago. In any case, Mr McNicol’s defenders argue, any blame for the heavy election defeat lie with Mr Miliband’s team and its tactics.

Mr McNicol, a former GMB union political officer, would prove difficult to remove, given his employer is Labour’s National Executive Committee and not the leadership.

Mr McNicol said: “With a surplus of over £4m last year and paying down the loans we inherited, the Labour Party is returning to a strong financial foundation and will be debt-free by summer 2016.

“In the run-up to the general election, Labour saw a significant increase in income from members, online supporters, affiliates and high-value donors, and we are grateful to all of them for their support.”