Labour took funding rules grant

The money was received shortly before the party began taking "disguised" gifts from a millionaire businessman,

The party received a "start up grant" from the electoral commission to help it abide by the Political Parties, Elections and Referendums Act 2000 (PPER) - which the Labour Government had introduced.

The money was intended to make sure officials understood the regulations on submitting accounts and declaring donations above £5,000.

However, shortly after the grant arrived Labour began accepting money from property developer David Abrahams that had been channelled through intermediaries.

The Act provided a training kitty of some £700,000 from the taxpayer which was to be divided up between all political parties on the basis of how many votes they garnered at the 1997 General Election and 1999 European Elections.

Labour received just over £183,000 - the same as the Tories - with the bulk of the money handed over in April 2001 and the final £18,000 in 2002.

The first donation of £25,000 from Janet Kidd, the wife of a business associate of Mr Abrahams, was received in January 2003. A further 18 donations were made by Mr Abrahams in the names for intermediaries over the following four years, totalling more than £650,000.

The party's general secretary, Peter Watt, resigned last month after admitting that he was aware of the practice - described by Prime Minister Gordon Brown as unlawful - and a police investigation has been launched.

There have also been claims that Labour officials helped set up the system for disguising donations, which included using legal covenants to ensure intermediaries gave Mr Abraham's money to the party. However, Mr Brown and senior ministers have denied any knowledge of the scheme and pledged to co-operate fully with the probe.