Election boost as overdraft slashed over 3 deckys

The Tory Party's plans for fighting the General Election were given a boost last night by the disclosure that the party had slashed its overdraft by pounds 8m to pounds 2.5m.

Senior party sources claimed the cut in the pounds 10.5m overdraft had been achieved by increased donations, mainly from small businesses, and individual donors, opposed to Labour policies for a minimum wage, and the workers' rights under the European social chapter.

Some party sources said pounds 18m had been received in donations over the past 12 months, from small businesses rather than large companies. "A range of people are giving sums which are substantial but not massive."

The size of the reduction in the overdraft is certain to lead to speculation about the identity of the donors, who are being kept a secret by the Tory Party. Labour has protested at the Tories seeking financial support from foreign backers, but the sources confirmed a recent report in the Independent that more money is being raised in regional fund-raising events, including key businessmen in Yorkshire.

A party source admitted for the first time that the party was close to bankruptcy in 1993.

"We wondered whether we could pay the staff at the end of the month at least on two occasions, when we thought we could go bankrupt."

The turn-around was achieved by cuts in staffing at Conservative Central Office but the party chairman, Brian Mawhinney, said an increase in donations had reduced the overdraft with the Bank of Scotland. The Bank allowed the overdraft against the leasehold on its Smith Square headquarters -the party sold the freehold in the 1980s - and never called in the loan. Sources said the bank was now "more relaxed".

"It means we will have a great deal more room for manoeuvre in the general election campaign. At the last election, we were dealing with a deficit of pounds 11m; it was one of the reasons why we opted for a poster campaign and not advertisements in newspapers. It means we can be much more flexible in our campaign next time," said the source.

The cut in the overdraft came as Tory activists warned membership was in decline in a meeting of the Conservative Central Council at Harrogate.

Graham Pycock, a member of the Dulwich and West Norwood Tories, and press officer of the Tory Charter group, said the Labour Party membership was set to exceed the Tory party membership for the first time. The Charter group is campaigning for one-member-one-vote democracy in the Tory Party, like Labour, to raise its membership.

Dr Mawhinney, Kenneth Clarke, the Chancellor, and Michael Heseltine, the deputy Prime Minister, tried to lift the morale of the conference of about 600 party workers by holding out the hope of an economic recovery.