Tory party forced to raid reserves as deficit soars

The Conservatives plunged deeper into the red as the party's losses soared in the past year, according to accounts published yesterday.

The Conservatives plunged deeper into the red as the party's losses soared in the past year, according to accounts published yesterday.

The party had to raid its reserves to cover a £2.4m operating deficit during 2003, up from £560,000 in the previous nine months, according to figures from the Electoral Commission.

The accounts were released as the Shadow Cabinet was forced to rally behind Michael Howard after Sir Malcolm Rifkind, the former foreign secretary, said the party's MPs had began to "mutter" about his leadership, fuelling speculation about a fresh round of infighting.

Mr Howard was also forced on the defensive over claims that the Chief Whip, David Maclean, had held talks with some back-benchers to urge them to stand down in favour of new blood.

The party's accounts, which cover the period to the end of December 2003, just one month after Michael Howard took over the leadership, show a £13.6m income from donations, membership fees, investments and grants only covered running costs and fell short of the total expenditure of £16m.

A report by the party treasurer, Lord Hesketh, blamed "internal personnel changes" and "the costs of gathering information on what the electorate feel are their prime concerns" for the operating loss, but insisted the party was "in a fitter state than ever".

Accounts showed donations to the Labour Party almost doubled to £9.1m last year, taking the party's operating surplus to £2.6m. Liberal Democrat income rose to £4.1m in 2003, leaving the party with an operating surplus of £92,000.

Tory officials said Mr Howard had moved to cut operating costs at Conservative Central Office by £2.5m a year to balance the books and had already vastly increased donations. Donors gave more than £1.8m to the party in the first three months of the year, nearly double the figure for the first quarter of 2002.

Yesterday the Conservatives went on the offensive, claiming that Gordon Brown's promise to cut 84,000 civil service jobs would lead to thousands more bureaucrats being employed.

Oliver Letwin, the shadow Chancellor, said Mr Brown was planning to recruit 360,000 public sector workers by 2006. He said: "If over half of those are in bureaucracy, then he will be adding many more bureaucratic jobs than he is getting rid of."

The party also launched proposals to change planning rules to prevent local objections to wind farms being overruled. Tim Yeo, the shadow Environment Secretary, said ministers had "bet everything" on land-based wind farms.

But the initiatives were overshadowed by renewed speculation over the leadership after Sir Malcolm spoke out in an interview with The Independent yesterday.

Mr Howard said: "These things always crop up from time to time. It's not the first time and I'm sure it will not be the last."

Mr Letwin told BBC Radio 4: "I am absolutely confident that Michael Howard is the person who deserves to be, and I believe will be, the next Prime Minister of this country.

"What Michael Howard has done for the Conservative Party is to give us a new sense of working together and he has also given us a sense of strategy."

Mr Yeo said: "The party is in vastly better shape than before Michael took over. I remember what last summer was like. It was a nightmare of dissent."

Mr Howard refused to be drawn on reports that veteran MPs were being urged to stand down in favour of new blood. He said: "All Conservative members of Parliament are doing a first-rate job in looking after their constituencies and playing their full part in parliament."

A party spokesman said discussions with MPs was "normal practice". He said: "Over the past two years the Chief Whip has had conversations with a number of colleagues about whether they intend to fight the next election. That is normal practice among all parties."