Delegates walk past a banner outside the Labour conference on September 23, 2013 in Brighton. Photograph: Getty Images.
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Labour's finances are healthier than most think - but dangers remain

The party has reduced its debts from £25m in 2005 to £4.5m but risks to funding have increased. 

Labour's decision to end its commercial relationship with the Co-operative Bank has come as no surprise to anyone in the party. The bank, which is now 70 per cent owned by US investors, was already reviewing the link as part of its new "apolitical" approach and, for Labour, there is an understandable interest in no longer being directly associated with the scandal-ridden instiution. The £1.2m loan that the party currently has with the Co-op will be transferred to the Unity Trust Bank, jointly owned by a coalition of trade unions and the Co-op itself (although it is currently attempting to sell its 27 per cent stake). 

The move has inevitably led to comment on the wider state of Labour's finances. ConservativeHome's Mark Wallace writes: "All of this is bad news for Ed Miliband’s election machine. True to their national record, the Labour party itself is laden with debt, and its fund-raising attempts have brought in less money than they hoped." Yet while Labour is far from flush with cash, its financial situation is healthier than generally thought. After reaching the dangerously high level of £25m in 2005 (putting it close to bankruptcy), its debts have been reduced to £4.5m and the party is on track to eliminate the blackhole entirely by 2016. In 2012, it ran a surplus (for the sixth successive year) of £2.8m and raised £12.03m to the Tories' £13.8m. 

But there are several black clouds on the horizon. The first is the probability that the separate Co-operative Group will end most or all of its funding to Labour having recently consulted the public on whether it was appropriate for it to continue to donate to a political party. In 2012, it donated £810,000 to Labour (the typical annual amount), including £563,000 to the affiliated Co-operative party (of which 32 Labour MPs are members) and £50,000 to Ed Balls's office. 

The second is the impact of Ed Miliband's party reforms. To date, his decision to require all trade union members to opt into donating to Labour, has prompted Unite and the GMB to reduce their funding by £2.55m. Both unions have already made it clear that some of this shortfall will be reduced through one-off donations but the party is still likely to suffer a net financial loss. 

The third is the likelihood of the party winning the next general election. As one source recently pointed out to me, this would mean the loss of all of the £6.4m Labour currently receives in "short money", the state funding made available to assist opposition parties with their costs (such as travel expenses and running the leader's office). "A lot of people know their jobs are on the line if we win," he said. 

With Labour's general election spending already constrained by its debt reduction target, expect the party to step up its fundraising efforts over the next year in a bid to ensure a fair fight with the Tories. 

George Eaton is political editor of the New Statesman.

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John McDonnell "will never" stand for Labour leader and has a warning for rebels

Shadow Chancellor John McDonnell says a rebel front bench can be replaced. 

Moments after sacked Cabinet minister Hilary Benn called for other MPs to "do the right thing", Shadow Chancellor John McDonnell was telling rebel Labour MPs where to go.

McDonnell played down the risk of a coup against Labour leader Jeremy Corbyn, telling the BBC's Andrew Neil: "Jeremy's not going anywhere."

And he ruled himself out as a replacement candidate for leader: "Let me get this absolutely clear. I will never stand for leadership fo the Labour Party. If Jeremy has to stand again, I will chair his campaign."

He denied rumours his ally Seema Malhotra was phoning round to gather support for his candidacy and added: "Jeremy is not falling on his sword and if he did I wouldn't be standing."

McDonnell also dismissed the rumours of a Shadow Cabinet revolt, despite the news Shadow Health minister Heidi Alexander had resigned and others were expected to do so. If they left, he said, they could be replaced.

Given the growing antipathy of Labour MPs to the Corbyn leadership, this claim is rather questionable. There are only so many Labour MPs.

But McDonnell was on stronger ground when he reminded any listening Shadow Ministers of the electoral victories in by-elections and the London election. 

He said: "Every electoral test Jeremy's faced since becoming elader he's won."

And in a veiled warning to rebels, he warned: "Who is soverign in our party? The people who are soverign are the party members.

"I'm saying respect the party members. And in that way we can hold together and win the next election."

MPs were citing polls, he said. "But who trusts polls?" 

Indeed, with events happening so rapidly, and the choice between party members and voters so stark, Labour MPs will have no time to trust anything but their instincts.