SCOTTISH Labour suffered a catastrophic drop in donations last year, hamstringing its ability to fight the Holyrood election, its accounts have revealed.

Published ahead of this weekend’s conference in Perth, the figures show Kezia Dugdale’s first full year as leader was the party’s worst for donations since 2009.

In 2015, the party had donations of just under £600,00; in 2016 it was just over £100,000.

And after a £98,000 surplus in 2015, Scottish Labour ended 2016 with a deficit of £104,000.

The party’s reserves also slumped below £160,000, their lowest level since 2003.

A Labour source admitted: "Donations to the party across the entire UK have dried up since Jeremy Corbyn became leader. Scottish Labour is no different. People are not donating while Jeremy is leader."

Figures released by the Electoral Commission showed Scottish Labour spent £337,814 fighting the 2016 Holyrood poll, 59 per cent less than the £816,889 it used for 2011.

Now the party’s latest accounts, which cover the year to 31 December 2016, show that the party’s slide in the polls mirrors a massive deterioration in its finances.

It suggests a sharp loss of confidence among donors in the party under Ms Dugdale and her deputy Alex Rowley, as well as UK Labour under Mr Corbyn.

Despite Ms Dugdale making her party more autonomous in terms of policy and personnel, the figures also underline Scottish Labour’s reliance on financial support from the UK party.

At the previous Scottish election in 2011, Scottish Labour’s total income was £735,774, of which £287,827 was in donations, and total expenditure was £781,569.

In 2015, income was £1,073,108, of which £592,641 was donations, and expenditure was £974,931, leaving a surplus of £98,177.

But in 2016, despite election years usually boosting donations, income slumped to £400,436, of which £105,752 was donations, and expenditure was £504,402, leaving a deficit of £103,966.

The failure to pull in donations was compounded by other problems raising money.

In 2015, Scottish Labour spent £133,335 staging its conference, but raised £169,538, a positive difference of £36,203.

But last year, the party spent £40,859 on its conference, and raised just £40,837, a negative difference of £22.

Similarly, Scottish Labour spent £12,334 on fundraising in 2015 and returned £53,765, a positive difference £41,431.

In 2016, it spent £26,055 only to raise £26,839, a plus of just £784.

Labour recorded its worst result since the start of devolution in 2016, falling to third place behind the Tories and winning just 24 MSPs.

The result followed a near-wipeout in the 2015 general election, when then leader Jim Murphy outspent the SNP by £1.6m to £1.47m, yet lost his own seat and 39 others, while the SNP went from six MPs to 56.

Despite a recent membership rise to 21,000, Scottish Labour is now tipped to come third behind the Tories in May’s council poll too.

Asked just before the Holyrood election how much her party would spend, Ms Dugdale said it would be “substantially less” than in 2011, with “more small scale fundraising” on an “Obama model of regular small donations, rather than have one or two big donors or funders”.

Ms Dugdale, 35, a list MSP for Lothians, became Scottish Labour in August 2015 after Mr Murphy's resignation.

She opposed Mr Corbyn's re-election as leader last year.

A Scottish Labour spokesperson said: "While the SNP is funded by bus tycoons and lottery winners, Labour is mainly funded by the membership and donations of working people.

“Every Labour politician who is elected fights for working people.

“At conference this week, Kezia Dugdale will set out our message to voters that together we’re stronger.

"We don’t need another divisive referendum from Nicola Sturgeon and the SNP – we need Government to be getting on with the day job.”

An SNP spokesperson said: “Labour are showing themselves to be a completely pointless party – incapable of providing any opposition at Westminster and in terminal decline in Scotland.  

“No wonder members and donors are turning away from Labour in their droves. Despite Kezia Dugdale’s desperate attempts, she’s failed to shake off Scottish Labour’s 'branch office' status and is still beholden to London HQ to keep her party from going under for good.”