Donations to Labour fall by £2.2m after 'dodgy gifts' scandal

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They plummeted to £581,000 between October and December last year - just a fifth of the £2.8million raised in the previous three months.

Donations tumbled after it emerged that property tycoon David Abrahams had funnelled more than £650,000 to Labour through middlemen in a bid to conceal his identity, breaking electoral laws and prompting a police investigation.

Instead, the party was forced to rely heavily on handouts from the trade unions, with donations nearly tripling from £1.6million to £4.5million over the same period.

It meant Labour's finances remained in a perilous state as the party struggled to stay afloat with £20million of debt - of which more than three-quarters must be repaid this year.

Peter Hain was forced to resign after he failed to declare donations to his deputy leadership campaign

Startling figures published by the Electoral Commission yesterday highlighted Gordon Brown's need to drum up urgent financial support to bankroll the ruling party as it reels from the "dodgy donations" row.

Labour is also several million pounds in hock to wealthy businessmen embroiled in the cash-forhonours affair, where entrepreneurs were allegedly offered peerages in return for cash.

Dr Chai Patel, founder of the Priory Group which runs the chain of rehabilitation clinics frequented by celebrities, is still owed £1.5million.

In total, Labour received £5.5million from supporters in the October-to-December period.

Meanwhile, the Tories raked in £9.8million donations and their debts fell to £12.9million.