Labour to pay back charity donation

The Charity Commission said the case was "of serious concern" because all charities are banned by law from giving financial support to political parties.

The Commission looked into the payment after a complaint last week from shadow charities minister Greg Clark, who said the case marked "a new low in Labour's donations history".

Catz Club is the UK's largest charitable provider of childcare, operating breakfast, after-school and holiday clubs across the country under the name Schoolfriendetc.

It has received funding from the National Lottery and its operations have won praise from Labour MPs including Cabinet minister Ed Miliband, whose website states that he was "very impressed" by a visit to a Schoolfriend after-school club in his Doncaster North constituency.

A report by the Commission found that Catz Club made a £7,500 donation to Labour in June, as well as paying the party £7,500 to attend a fund-raising dinner at which the charity said it "engaged with and lobbied senior politicians to encourage increased funding for after-school childcare facilities".

The charity said that the donation was "an administrative error" and should have been channelled through its trading subsidiary Catz Club Services Ltd. But the Commission said that this was also not permissible and the gift was in breach of charity law.

Although the Commission's concerns related only to the donation, the charity decided to ask for all the money to be returned, and Labour agreed to do so.

Commenting on the Charity Commission's report, Mr Clark said: "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."