The Staggers 20 August 2010 Labour on the verge of bankruptcy John Prescott warns of possible financial meltdown as Labour faces debts of £20m. Sign UpGet the New Statesman's Morning Call email. Sign-up John Prescott, who is campaigning to be elected Labour treasurer, issues a stark warning about the state of the party's finances in today's Guardian: The Labour Party stands on the verge of bankruptcy. We are more than £20m in debt, facing a long-term decline in membership and a crisis in funding. We are only kept alive by the Herculean work of party staff and volunteers, trade union contributions, high-value donations and the goodwill of the Co-op bank. This isn't the first time Labour has faced a cash crisis in recent years. Before the election David Blunkett memorably admitted: "We are trying to be careful so we don't end up bankrupt after the election if this all goes pear-shaped." Prescott also takes a sideswipe at Gordon Brown over the huge cost of the "election that never was": "[T]he so-called 'election that never was', in 2007, cost the party £1.5m in preparation costs which could have been spent on funding the disastrous 2009 European and local elections, for which Labour ran no real campaign." It'll be worth watching to see whether the parlous state of the party's finances boosts David Miliband's argument that Labour needs a leader who can attract cash-rich donors. Since the beginning of the campaign he has raised well over £300,000 but has sensibly chosen to contribute one-third of that total to a "fighting fund" for the party. › The Friday Arts Diary George Eaton is senior online editor of the New Statesman. Subscribe For daily analysis & more political coverage from Westminster and beyond subscribe for just £1 per month!