Complaint over Gordon Matheson's campaign finances

However, Matheson has become embroiled in a separate row about his campaign finances after a complaint was made about the use of his local party’s bank account.

The tight three-way battle is between Matheson, who has led the country’s biggest council since 2010, and MSPs Alex Rowley and Richard Baker.

It is believed Dugdale would prefer Baker to win, while the party establishment is behind Matheson.

The winner is automatically entitled to the top spot on whichever regional List they choose to stand on in next year’s Holyrood election.

However, while Rowley and Baker have promised to forgo this perk, Matheson has said he will take the top position in Glasgow.

This decision has enraged senior party figures in the city who believe their own Holyrood candidacies could be impeded by Matheson.

His leadership bid has also incensed over half the members of his Labour group in Glasgow, who believe Matheson’s Holyrood ambitions show a lack of commitment to the council.

It has now emerged that Haughey has donated £4,500 to the ‘Gordon for Deputy Leadership’ campaign, a contribution that has appeared on the councillor’s register of interest.

Haughey, who is also Labour peer, has donated over £1.4m in personal donations to Labour at a UK, Scottish and local level since 2003.

However, questions have been asked locally about Matheson’s campaign using a local party bank account to hold leadership donations.

Minutes of a meeting of Cathcart Constituency Labour Party (CLP), seen by the Sunday Herald, show that Matheson’s campaign paid £2,000 into a CLP account marked ‘election fund’, before members were asked to approve the move.

The cash injection also came weeks before party members in Cathcart CLP were asked which deputy leadership candidate to endorse.

Matheson’s campaign paid £2,000 into the CLP bank account on June 23, party members were asked to rubber stamp the use of the bank account the following day and it wasn’t until July 9 that they met to decide which deputy candidate to endorse.

It is understood the Labour Party’s compliance chief, Margaret Lynch, who oversees external finances nationwide, has received a complaint about the sequence of events from at least one party member.

The treasurer’s report in the minutes of a meeting of Cathcart CLP held on June 24 stated: “Request for use of CLP bank account from Councillor Matheson's campaign.

“It was agreed that the bank account could be used for the term of the campaign in line with conditions agreed and set out in exchange of letters between (Chairman of the CLP) Alan Stewart and Councillor Malcolm Cunning (Matheson’s campaign spokesman).

“Balance at 23rd June. Election Fund £3642.63 - this includes a deposit of £2,000 from Cllr Matheson's campaign.”

One local member, who asked not to be named, said: “Councillor Archie Graham asked if anyone knew the rules. I certainly could not answer that question but I was perturbed that noone seemed to be able to clearly explain the rules, including (CLP Chairman) Alan Stewart and Councillor Cunning, whose exchange of letters was not shared at the CLP.”

Councillor Graham said: “I did ask the question because I wanted to be sure that everything was within the constitution and I was assured that that was the case by both Alan Stewart and Malcolm Cunning.”

Local members were then asked which deputy leadership candidate they would like to endorse.

The CLP source added: “In the event the CLP did endorse Councillor Matheson that night. However, this makes me even more uneasy about these actions surrounding the bank account.

“I contacted the Scottish Labour Party and they advised me to raise it with national compliance manager Margaret Lynch, which I have now done.”

Cunning said: “There was money coming in and it had to go somewhere because, certainly, you don’t want that sort of money lying around in cash.

“Setting up a separate account, by the time you go through everything that is required by the banks, can take several weeks. This is a relatively short campaign. Going through that process when expenditure was happening was going to be difficult.

“It was checked out with both the Labour Party and the Electoral Commission as to whether it would be permissible to use an existing CLP account and the indication was yes, and therefore an approach was made first to all the senior office bearers of Gordon’s CLP. That was approved by all the officers and therefore some money went in on that basis.

“It was then discussed at the executive committee and the executive was happy with that and then the executive presented it to the CLP.”