The balance sheet is deepest red

Today’s Observer has an update on the state of the Labour party’s finances, as Peter Oborne reported back at the end of May there is a real chance that the Labour party might actually go bankrupt. Gaby Hinsliff reports that this worst case scenario appears to have been avoided thanks to a substantial donation from Sir Ronnie Cohen and Lord Sainsbury agreeing to guarantee the salaries of various future staffers. However, the party remains heavily in debt.

Ray Collins, the new general secretary, has said that Labour cannot afford to recruit many new staff before the next set of European and local elections in 2009 or the general election. This is going to severely weaken Labour’s field operation, accentuating Gordon Brown’s political problems. 

It remains to be seen whether the Unions are prepared to bail Labour out of its financial difficulties in exchange for a string of further policy concessions. But at the moment, it looks like Labour will be going into an election with both the political environment and the mechanics of campaigning against it.