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

The millionaires, most of whom lent money to Labour in the run-up to the 2005 election, are due to be repaid by the party in the coming months but with the party £20m in the red, they are in no position to do this.

The party is holding combined talks with the lenders to find a single agreement that would enable the Labour to stagger the repayments over nine years. Sources on both sides of the discussions have said that an announcement is just weeks away.

The news is just another kick while Gordon Brown is down, after the Conservatives claimed that the PM had “lost control of the Scottish Labour party”. Wendy Alexander, the party’s leader north of the border, defied the prime minister by calling for an early referendum on Scottish independence.

Chief fundraiser for Labour, Jon Mendelsohn, has been leading talks with representatives of the businessmen, who include curry magnate Sir Gulam Noon, property entrepreneur Sir David Garrard, retail tycoon Richard Caring and former chief executive of Priory healthcare, Chai Patel.

Although most of the dozen millionaires who bankrolled Labour in 2005 have accepted the principle of the negotiations, Biotech entrepreneur Sir Christopher Evans openly asked for his money back and was repaid.

If talks succeed and everyone agrees the terms, the loan repayments will be spread up until 2017.
If talks were to fail it may have severe consequences for the ruling party at time when morale is fading fast. Labour’s general secretary, David Pitt-Watson, pulled out of the position last week because he was concerned about an unincorporated association due to the debts of Labour. Ray Collins, a senior figure in the Transport and General Workers Union is likely to take the position.

As Labour struggles to find funds the opposition’s coffers have been filling up. Conservative fund-raising has reached £11.3m in the fourth quarter last year, compared to £5.9m for Labour, who are relying heavily on the unions who gave the party 77 percent of its funding in those three months.