Labour has admitted that its local party in Motherwell and Wishaw broke the law by failing to declare union donations.

First Minister Jack McConnell said he was surprised to learn of the "shocking situation" as the controversy over his constituency party finances continued.

He stressed that he "will not allow the Labour Party to be above the law".

Jack McConnell: "Shocking situation"

Speaking in a BBC interview, he urged every constituency party in Scotland to ensure that it was not in breach of the rules.

It emerged on Tuesday that donations from the Iron and Steel Trades Confederation (ISTC) to a development fund of the Motherwell and Wishaw constituency Labour Party were not declared.

Under rules which came into effect in February 2001, donations of more than �1,000 a year should be declared to the Electoral Commission.

Sources confirmed that the ISTC contributed �375 a quarter (�1,500 a year) to a Motherwell and Wishaw party "development fund".

A spokesman for the Electoral Commission said it would be contacting the Labour Party about the claims.

Internal investigation

"It appears there has been a failure at local level to declare this money", said a party spokesman.

"This will now have to be part of the Labour party's internal investigation into the financial problems of the Motherwell and Wishaw constituency Labour Party.

"It would be wrong to comment further at this stage, other than to make it clear that this, like so many other aspects of this story, has no connection whatsoever with Jack McConnell or Frank Roy (the Westminster MP for Motherwell and Wishaw)."

It is absurd for Jack McConnell to try to distance himself from a scandal within the party he leads

John Swinney SNP Leader

Mr McConnell described it as a "shocking situation" and said the party should be applying the letter of the law.

"As first minister I will always put the law before the Labour Party," he said.

"That is my duty and my responsibility, and I will make sure that the Labour Party upholds the law, enacts the law and will do what is right and proper."

He said that the party would take action if anyone was guilty of not upholding the law.

And he added: "This matter needs to be cleared up as quickly as possible."

Constituency accounts

However, Scottish National Party leader John Swinney accused Mr McConnell of attempting to evade responsibility.

"It is absurd for Jack McConnell to try to distance himself from a scandal within the party he leads," he claimed.

He also described the failure to declare party donations as a "cover-up".

The latest revelation comes after a week of controversy over the constituency accounts.

Christina Marshall was Mr McConnell's PA

Labour launched an inquiry into the constituency accounts last week when it emerged that a local activist may have used party funds without authorisation.

There were arguments in the Scottish Parliament about when Mr McConnell found out about concerns over the accounts and when he reported his worries.

On Monday it emerged that Mr McConnell received cash from a party development fund set up by the ISTC to help fund his failed Labour leadership bid in 2000.

It also emerged that Mr McConnell's personal assistant Christina Marshall was given the role of signatory to the fund as his representative.

According to the SNP, this contradicts the account given by Mr McConnell to parliament when he insisted that he had no input into the running of the accounts.