Labour Party General Secretary Peter Watt has resigned over a series of controversial donations to the party.

A wealthy party donor, David Abrahams, gave £400,000 to the party via "gifts" to friends and colleagues, without revealing his identity.

Mr Watt, whose career with the party spanned seven years, said he had been aware of the arrangement, and had believed he had complied with party funding rules - but had now been informed that there were "additional reporting requirements".

In a statement, he said: "Once I discovered this error, I immediately notified the officers of the National Executive Committee.

"I take full responsibility for the Labour Party's reporting obligations.

"Consistent with my own and the Party's commitment to the highest standards in public life, it is with great sadness I have decided to resign my position as General Secretary with immediate effect."

Electoral Commission records show a series of large donations from Mr Abrahams' associates Ray Ruddick and Janet Kidd, culminating in gifts of £80,000 from each of them on a single day in July this year.

The Commission demanded an explanation and Mr Watt launched an internal inquiry - which has now led to his own departure.

NEC chairwoman Dianne Hayter said the party had been "shocked and disappointed to learn of the circumstances surrounding these donations".

"The Labour Party is committed to the highest standards of openness and transparency," she said.

"Peter Watt has taken full responsibility and offered his resignation, which we have accepted."

Shadow chancellor George Osborne said it was "beyond belief" that Mr Watt had not objected to the donation - and demanded to know whether Prime Minister Gordon Brown was aware of it.

"Despite today's resignation serious questions remain unanswered about the circumstances of this murky affair," he said.

"What's perfectly clear now is that incompetence not only runs through this Government but it also runs through the Labour Party.

"Everything Gordon Brown promised about his premiership - competence, honesty and change - has been blown away in the last few weeks. Gordon Brown's Government is now officially in crisis."

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