Prescott admits that Labour is "on the verge of bankruptcy" and dependent upon "the goodwill of the Co-op bank"

By Tim Montgomerie

Today may not have been a great day for the Conservative fundraising operation but the resignation of David Rowland before he even became Tory Treasurer is a small problem compared to Labour's financial problems.

John Prescott - who is running for the position of Labour Treasurer - has written in tomorrow's Guardian that his party is "on the verge of bankruptcy" and facing a "crisis in funding". He says that the party has debts of £20m, its membership is declining and is only remaining a going concern because of "the goodwill of the Co-op bank".

He also puts a price tag on the decision by Brown to abort the honeymoon election of autumn 2007. Estimates at the time suggested a £1m hit. Prescott puts it at £1.5m.

The new Labour leader will be hampered in two ways by the fact that Brown left his party as well as the country in bad financial shape:

• He will have to spend a disproportionate amount of his time fundraising. Hague from 1997 to 1999 in particular was not able to campaign on the scale he would have liked because of the dire state of Tory finances. He and Lord Ashcroft had to fight a battle to stop the Tories from going under. That he succeeded is one of the under-reported achievements of the Hague leadership.
• The new Labour leader will also need to lean heavily on the unions if he is to keep Labour afloat and this will restrict his policy options. The public sector unions, in particular, might decide to fund their own political campaigning if they do not see the Labour leadership defending their members' job security and perks.

> From ConHome's General Election Review: The Conservative Party enjoys a massive financial advantage over Labour and the Liberal Democrats