Campbell denies Lib Dem funding crisis

Sir Menzies Campbell has dismissed reports that his party faces financial meltdown if it is forced to repay a controversial £2.4m donation.

The Liberal Democrat leader said that, according to legal advice, the party was not obliged to return the gift from financier Michael Brown.

But he also insisted that, if this changed, "we will survive".

The Electoral Commission is examining fresh evidence over the validity of the donation - the biggest in the party's history.

It follows a High Court judge's ruling that the firm through which the cash was given - 5th Avenue Partners - was fraudulent and had never traded.

Electoral Commissioners examined the latest developments at their monthly meeting last week and are expected to decide whether to take action soon.

They have the power to order the party to pay the money into the consolidated fund, the government bank account at the Bank of England.

Sir Menzies downplayed this possibility, telling BBC1's Sunday AM: "We have taken legal advice, and the legal advice is that we are not obliged to repay it. That is the present position."

"The Electoral Commission has indicated it is looking at these matters again, but it has not yet issued any demand and if it does then we will rely on the legal advice that we have been given," he added.

A commission spokesman said last week that it was satisfied that the Liberal Democrats "acted in good faith at that time" and was not re-opening an investigation into the party.

But he added: "It is not clear to the commission that 5th Avenue Partners Ltd was carrying on business in the UK at the time the donations were made. If not, then the donations were impermissible."

Sir Menzies insisted: "This was accepted in good faith. It was spent on the purposes for which it was given.

"No preferment was asked for, nor was it given and our legal advice is that are not obliged to repay it."

Questioned on the likely impact on the party of repayment, Sir Menzies responded: "Our party has been in existence for the best part of 150 years. We'd go on being in existence."

He stressed that all political parties currently had "financial problems", adding: "Everyone knows and understands that. That's why the debate is taking place on state funding. So what I say to you confidently is: we will survive."

Asked about reports that party members will be asked to donate £33 each to help repay the loan, he said: "I don't think it will come to that."