The Conservative Party has refused to comment on reports that it is facing a fresh cash crisis.

On Monday a national newspaper reported that the party was heading for a £2.5 million deficit - despite ending the last general election with a £4 million surplus.

Critics say donations have dried up since Iain Duncan Smith took over the leadership of the party.

Several top level donors are said to have ruled out any further donations unless Duncan Smith is replaced as Tory leader.

But one party source blamed outgoing treasurer Sir Stanley Kalms for the trouble.

The former Dixons chief, who this month announced he was set to quit as treasurer, has had a difficult relationship with Duncan Smith.

The two clashed over Duncan Smith's decision to appoint Barry Legg as chief of staff and chief executive.

"The party has not been run efficiently and has not got out there to attract big donors," the source told the Guardian newspaper.

"One person who was keen to donate got a request spelling their name wrong, so ended up declining to donate at all."

Party accounts for the last nine months of 2002, to be published at the end of June, are expected to show a deficit of £600,000.

It is estimated that £15 million is needed to run the next election campaign.

The reported problems come despite a 270 per cent increase in state funding.

The Conservatives now receive £5 million in "short money" which is paid for by the taxpayer.

Media reports also suggest that a £5 million donation by the late American benefactor, Paul Getty, has already been spent.

The Conservatives have been hit by losses in a deal over leasing their Central Offices in Smith Square.

A number of payouts to staff sacked by Duncan Smith - including £100,000 to former chief executive Mark MacGregor - and compensation to his replacement, Barry Legg, have also added to the party's cash problems.

Regular donations by former Dixons boss Sir Stanley were expected to total £500,000 per year, but Electoral Commission figures reveal that this was reduced to £160,000.

The party currently operates on £8.5 million from an overdraft facility at the Royal Bank of Scotland, and donations from constituency associations.

But wealthy donors may be set to come to the aid of the party - with new treasurer George Magan expected to donate a further £2 million within the next few weeks.

A spokesman for Central Office refused to comment on the reports, saying the party would make clear its financial position when the annual accounts are published.