A leading Liberal Democrat has queried the status o f loans totalling £12 million taken out by Labour in the run-up to last year's General Election, after the party confirmed that it had not yet paid any interest on them.
Labour's annual accounts, published on Thursday, revealed that t he £436,000 interest accrued on the loans had not been repaid, but added to the amount owing.
L ib Dem Treasury spokesman Lord Oakeshott said this was an "un-usual" arrangement for an unsecured loan, and said it pointed towards the money in fact being a disguised donation.
But a Labour spokesman insisted that the money would be repaid with interest.
All but two of the 11 millionaire supporters who lent the money had agreed for the repayments to be rescheduled, with the capital and interest paid off in one lump sum at the end of the agreed term.
Anti-sleaze rules in force at the time of the election stated that loans taken out on commercial terms did not have to be declared publicly, as donations do.
However a loan taken out on non-commercial terms - for instance, at a preferential rate of interest or favourable repayment terms - could be regarded as a donation.
Labour's accounts state that interest is being paid on the loans at a commercial rate of 6.5 per cent to 6.75 per cent - two points above the Bank of England base rate. By the end of December, the interest had increased the amount owed to 11 millionaire lenders from £11,950,000 to £12,386,000.
The terms of these loans ranged from 180 to 365 days.
However, interest totalling £505,000 was paid during 2005 on long-term loans, including bank overdrafts.
Lord Oakeshott said: "It is very unusual, particularly for subordinated unsecured loans of this type. These are just donations in dark glasses.
" Labour looks like someone up to his eyeballs in debt who can't even make the minimum monthly payment on his credit card."
A Labour spokesman said: "This story, like so much of what has been written over the last months regarding party funding, is nonsense.
"Our annual accounts clearly show how much interest the Labour Party has accrued from all its borrowing, including that from our supporters."