LABOUR has haemorrhaged thousands of members and is stuck with a multi-million dollar financial deficit, the party’s latest accounts show.

The party lost nearly 100,000 members last year - falling from 523,332 at the close of 2020 to 432,213 by the end of 2021- and has been left with a £5 million black hole in its accounts.

Labour’s treasurer described 2021 as a “difficult and demanding year” in their report, with staff redundancy packages as part of a long-term strategy to slash costs exacerbating their deficit.

The majority of the £5m hole is made up of a £3.1m income drop as revenue from membership fees fell from £19.3m in 2020 to £16.2m in 2021.

The announcement paints a picture of gradual decline as the party went from balancing its books in 2019 to lodging a £1m deficit in 2020, before registering its current losses.

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The treasurer’s report said: "Party finances do remain challenging with pressure on income coinciding with increasing costs.

"This has led to difficult discussions and decisions, and we would like to thank everyone for their commitment and dedication during this process.

"The action taken by the Party to manage costs included reverting to the more traditional mid-election cycle model, after years remaining on an election-footing.

"The one-off cost of the voluntary severance scheme contributed to the deficit result which required the allocation of cash reserves to fund."

In a bid to cut costs, Labour reduced its number of staff from 424 in December 2020 to 331 by the end of 2021.

The cut to its staff and membership numbers has come amid growing tension between Keir Starmer and the left of his party.

The situation hit boiling point when Starmer ditched 10 pledges from his 2019 leadership election campiagn, on issues like public ownership, workers’ rights, industrial action and EU policy.

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Starmer’s leadership has also drawn the ire of trade unions, with Sharon Graham, the leader of Unite – Labour’s biggest donor- saying “the remaining financial support of Labour Party is now under review” and that the party should “act like Labour, be the party for workers”.

Despite the criticism, Labour has consistently beaten the Tories in the polls since last year, as scandals have relentlessly rocked the Government.

SNP MP Tommy Sheppard, who left the Labour Party in 2003, said the party's financial issues were a "mirror image" of their political issues. 

Speaking to The National, he said: "Labour party members are voting with their feet. To be a member of a political party, you've got to be in some way inspired by what it believes in. When you get a party that says it doesn't really believe in anything, that is so deeply uninspiring and demotivating people probably think ‘what’s the point?’

“Labour's financial problems are a mirror image of Labour's political problems and one is a consequence of the other. If you don't believe in anything, and you don't stand for anything, then what you become is increasingly irrelevant.

“If you can't win hearts and minds then you can't win their chequebooks.”

A Labour Party spokesperson said: “Thanks to Keir Starmer’s firm leadership and clear commitment to taking Labour back into power, the party is on track to returning to a firm financial footing – with commercial income and donations rising significantly.”

Meanwhile, the Tories also published their accounts on Wednesday, registering a £319,000 surplus in 2021.

This was supported by a relatively stable membership income of £1,989,000 in 2021 a £10,000 drop on the previous year.