When is a "reduction" not a reduction?

The BBC are "reporting" that there has been a "Reduction in insolvency figures", well that's the headline. The detail shows something slightly different, whilst:

"Government figures have shown that the number of people declared insolvent in England and Wales fell slightly in the three months to June. The number of individual insolvencies stood at 24,553, which was 2% down compared with the previous three months and 8.3% below the same period in 2007."

Also:

"But company liquidations were up by 11.6% on previous quarter, to 3,560."

So individual insolvencies are down 2% on the previous three months and that is worth the headline "Reduction in insolvency figures", whilst company liquidations are up by nearly six times that amount and that is worth just one line.

The BBC, trying to prop up the record of their Labour friends.

The Labour party have more financial problems

I have blogged many times about the Labour party's financial problems. Now I read in the Independent that

"Labour is to delay repaying its "cash for honours" loans for up to a decade as it attempts to plug a £16m black hole in its finances.

Senior officials are holding urgent talks with wealthy backers about restructuring the debts as the party struggles to stave off a financial crisis. Loans worth millions of pounds are due for review by the end of October – several of them from men who became embroiled in the honours police investigation after they were nominated for peerages.

Party bosses say their wealthy lenders will agree to put loan repayments on hold for a year to allow the debts to be restructured so they can be paid back over between seven and 10 years."

Some questions... Is the Labour party actually insolvent? How long before the Labour government try to introduce state funding for political parties as a way of rescuing their finances?

Is the Labour party that short of money?

I learnt yesterday that the Labour party has cancelled its Spring conference because of a shortage of money. I have blogged about Labour's financial problems previously, most recently here, and I think it is fair to say that I feel only joy at their problems. As I have said before, it seems a sort of justice for Gordon Brown's party to suffer, as the rest of the country has, from his incompetence and lack of frugality. And as I said a month or so ago:

"Some thoughts come to mind:
Can the Labour Party meet it's debts as and when they fall due? If not, does that mean they are trading whilst insolvent?
How many times can a "loan" be rolled over before it is a donation not a loan?
The "loans" were claimed to have been made on commercial terms, have the terms been made public on any of these "loans"?"

I think that the Labour Party are desperate to suggest that the state funding of political parties is the best solution to the "democratic deficit" in this country. They could use their large majority to get this into place before the next election and would choose to base the calculations for the funding on an average of the votes received at the last three elections so as to avoid the full impact of the coming election. Only the realisation that they are hated enough already without imposing a new "tax" on the public will stop them from carrying out this plan.

Labour Party Accounts (update)

Further to this and this, I read in The Times that:

"Labour files its annual accounts this week, and is only averting financial collapse because of a written guarantee that at least one union, Unite, will continue to provide significant funding. The party is negotiating with businessmen who lent Labour millions of pounds about extending the repayment period for up to a decade."

So insolvent but continuing to trade with the support of its bankers, rather like the UK...

Is the Labour party insolvent?

Further to my piece When is a loan not a loan? and others, I now read in The Guardian that (my emphasis):

"AFTER A year of Gordon Brown's leadership the Labour Party is in financial crisis, it emerged last night amid warnings of cutbacks that seriously threaten Labour's ability to fight the next general election.

Loyalists including the venture capitalist Sir Ronnie Cohen and the millionaire former science minister Lord Sainsbury are understood to have bailed the party out temporarily in the past few weeks - its accountants had been threatening not to sign off the accounts at the end of this month, which could have ultimately tipped the party into insolvency. Cohen is understood to have donated £100,000 while Sainsbury has pledged to underwrite certain future staff salaries.

However, Labour's new general secretary, Ray Collins, has admitted its finances remain in a 'parlous' state. The party is up to £24m in the red, with donors reluctant to give, thanks to Brown's collapse in the polls and a series of police investigations into party funding. The party is locked in what one source described as 'tortuous' attempts to defer a series of multi-million pound loans due to be repaid soon.

Insiders said that Labour now hoped to be able to cover its immediate costs, but only by leaving 'not a penny' in the bank for a general election campaign. It is relying on volunteers on the ground because it cannot afford paid staff, leaving parliamentary candidates hopelessly outgunned by Tory opponents, while party staff fear redundancies if new donors are not found...

...Party sources say one reason Labour did not field a candidate in David Davis's by-election is because it could not spare the £70,000 needed for a campaign."

Oh dear, oh dear, oh dear. It seems a sort of justice for Gordon Brown's party to suffer, as the rest of the country has, from his incompetence and lack of frugality.

As I said last month:

"Some thoughts come to mind:
Can the Labour Party meet it's debts as and when they fall due? If not, does that mean they are trading whilst insolvent?

How many times can a "loan" be rolled over before it is a donation not a loan?

The "loans" were claimed to have been made on commercial terms, have the terms been made public on any of these "loans"?

Now look out for the Labour Party suggesting that the state funding of political parties is the best solution to the "democratic deficit" in this country. They could use their large majority to get this into place before the next election and will choose to base the calculations for the funding on an average of the votes received at the last three elections so as to avoid the full impact of the coming election."

Labour party finances

I believe that the Labour party accounts are due to be signed off soon and that there are fears amongst the Labour party that their accountants may feel that they have to "qualify" the accounts. Any qualification would, I presume, be a "going concern" one.

A "going-concern" qualification is an explanatory paragraph that states that the independent auditors have substantial doubts about the ability of the entity being audited to continue to meet its obligations as and when they fall due over the next 12 months.

I have blogged before, querying how long loans to the Labour party can be extended, often with the interest rolled up, before the loans can be deemed to have in fact been donations. More interestingly, the benefits of loaning or donating money to the Labour party are diminishing as the Labour party looks more and more like being on its way out of power within the next 23 months. So will the wealthy individuals who have large loans outstanding to the Labour party now decide that they would like that money back and if so how will the Labour party pay it back? If they cannot pay it back then they are "trading insolvent". Under UK law, if a company is trading insolvent, then the company directors may be liable for wrongful trading. If the director knew or should have known that the company could not avoid becoming insolvent but still continues to trade then he or she must cease to trade immediately and take steps to liquidate the company. Under UK law, trading while insolvent can trigger several provisions under the Insolvency Act 1986 which may have the effect of making directors of a company personally liable to contribute to the assets of a company.

The coming months may be rather interesting ...

Couldn't run a whelk stall

The Guardian reports under the headline "Labour cash crisis could bankrupt party leaders" that:

"Senior officials in the Labour party, including Gordon Brown, could become personally liable for millions of pounds in debt unless new donors can be found within weeks, the Guardian has learned.

The party has five weeks to find £7.45m to pay off loans to banks and wealthy donors recruited by Lord Levy, Tony Blair's former chief fundraiser, or become insolvent. A further £6.2m will have to be repaid by Christmas - making £13.65m in all. The sum amounts to two-thirds of the party's annual income from donations.

The figures are a conservative estimate as they do not include interest that will also have to be paid. A Labour source said that although the total debt was listed as £17.8m on the Electoral Commission website, the true level, with interest, was nearer to £24m.

The possibility that party officials and members of its national executive committee could become liable is being taken seriously by union leaders, and has been underlined by the decision of equity fund chairman David Pitt-Watson not to accept the post as Labour's general secretary.

Though he was Brown's candidate for the post, he declined the offer after receiving independent legal advice that he would be personally liable for repaying the loans and could be bankrupted if Labour's finances collapsed.

The advice from City solicitors Slaughter and May said unequivocally that leading party officials and members of the NEC would be " jointly and severally" responsible for the party's debt.

The reason is that the Labour party constitution is framed like a local club or society, and has no provision for limiting the liability of its officials or managers.

A Labour source said: "The party's constitution is like a five-a-side football club, or the local cricket club. The big difference is that the most club officials and managers could expect to have to fork out is an unpaid bill for hiring the pitch. In Labour's case, it's tens of millions of pounds."

The advice was the sole reason why Pitt-Watson, a committed Labour supporter and former Westminster City councillor, turned down the job this month.

But the reverberations inside the party have been enormous. Earlier this month the GMB union's executive decided to indemnify its two members on the NEC - Debbie Coulter, the union's deputy general secretary and a former Labour party conference chairwoman, and Mary Turner, GMB's president - to protect their homes and savings. A GMB spokesman told the Guardian: "They told the executive they would not continue to sit on the NEC unless they were indemnified. It's too much a risk for them."

As leader of the party and a member of the NEC, Brown is also potentially vulnerable. Other prominent members of the committee are Harriet Harman, the deputy leader; her husband, Jack Dromey, the party treasurer; Pat McFadden, minister of state at the department for business; Angela Eagle, exchequer secretary at the Treasury; Dawn Primarolo, public health minister; and former ministers Keith Vaz and Janet Anderson.

Anderson said last night: "I am very concerned and we should look into the situation immediately. If this is the case, I can't see how anyone, unless they are very wealthy or are indemnified, like in the case of the GMB, can serve on the NEC. I can't see who would want to be general secretary following this advice."

The party's financial plight can be shown by the current negotiations taking place with banks and donors.

The Co-operative bank, whose £2.61m loan is due to be repaid on June 30, has told the party it wants its money back, even though it is getting 7% interest. The bank has asked the unions to offer loans to Labour so the party can pay its debt, but some are refusing to do this. Paul Kenny, the GMB's general secretary, has told the Co-operative bank it will refuse to help unless the bank withdraws its de-recognition of the union, which represents staff at Co-operative Funeral Services.

Three other loans are due to be repaid on June 30 and July 1. They are a £1.54m loan from Unity Trust bank, also at 7%; a £1m loan at 6.75% from Nigel Morris, founder of the Capital One financial group, and £2.3m from Sir David Garrard, a property developer. He had already extended the loan by 15 months from April 2007.

Labour is hoping that the donors can be persuaded to extend the loan period. Sir Richard Caring, owner of the Ivy and Caprice restaurants, has agreed an indefinite extension of his £2m loan, due to be repaid last March. He has agreed to give 180 days notice if he wants it repaid.

The party's financial crisis could be compounded this autumn. Three of the biggest unions, Unison, the Communications Workers Union and the GMB have tabled motions at their annual conferences next month calling for members to disaffiliate from Labour. If this goes ahead, Labour would lose £4m of its £19m a year in donations.

The Labour party is said to be investigating whether it can change its status to a limited liability company to protect its officials and NEC members - but such a move could be open to legal challenge until it clears its debts."

Gordon Brown, Harriet Harman and her husband Jack Dromey, Keith Vaz and Dawn Primarolo could be bankrupted by this, Oh dear, how sad, never mind. As these scum have been amongst those chiefly responsible for the near destruction of the UK over the last 11 years it seems only fair that they too should suffer personally. Unfortuantely someone, somewhere will find a way for these "persons" to wriggle out of their responsibilities; in reality these people never pay for their sins, in this life anyway.

When is a loan not a loan (update)

Further to my piece about the financial stability (or otherwise) of the Labour party, I see in Tribune that:

"Labour chiefs have until the end of this month to plug a £4 million hole in the party’s finances and avert the possibility of a formal declaration of bankruptcy....

Auditors are due to sign off the party’s accounts soon after the end of May, but there are fears that they will refuse to do so and instead declare the party insolvent.

Arrangements have been made to account for most of the party’s £21 million debt, through negotiations with the Co-op Bank and rescheduling deals done with the donors of the controversial loans which led to the “cash-for-honours” affair.

But officers have identified a gap in the balance sheet of around £4 million which must be closed in order to satisfy the auditors, either by cash in the bank or certifiable promissory notes."

Oh dear, oh dear, oh dear.

As I said yesterday:

"Now look out for the Labour Party suggesting that the state funding of political parties is the best solution to the "democratic deficit" in this country. They could use their large majority to get this into place before the next election and will choose to base the calculations for the funding on an average of the votes received at the last three elections so as to avoid the full impact of the coming election."

When is a loan not a loan?

The Financial Times reports that:

"Labour is in emergency talks to renegotiate more than £10m of loans from wealthy businessmen to prevent itself running out of money.

Most of the millionaires who secretly lent money to Labour in the run-up to the 2005 election ought to be repaid in the coming months but the party – which is £20m in the red – is in no position to do this.

As a result, it is holding combined talks with all the lenders to find a single agreement that would allow the party to stagger repayments over up to nine years. An announcement is just weeks away, according to sources on both sides of the discussions."

Some thoughts come to mind:
Can the Labour Party meet it's debts as and when they fall due? If not, does that mean they are trading whilst insolvent?

How many times can a "loan" be rolled over before it is a donation not a loan?

The "loans" were claimed to have been made on commercial terms, have the terms been made public on any of these "loans"?



Now look out for the Labour Party suggesting that the state funding of political parties is the best solution to the "democratic deficit" in this country. They could use their large majority to get this into place before the next election and will choose to base the calculations for the funding on an average of the votes received at the last three elections so as to avoid the full impact of the coming election.

Is the Labour Party trading insolvent?

Guido Fawkes has pondered this matter before, as have I - if not here then in someone else's comments. The "loans" that gave rise to the "cash for honours" kerfuffle have not all been repaid, some or more being rolled over - does this still make them loans rather than donations?

Go and read this and this at Guido Fawkes and see what you think.


I suppose it is only fair that the man who has ll but bankrupted the United Kingdom should also preside over the nearer bankruptcy of his political party.