Gordon Brown is to tighten his grip on the Labour Party’s machine by creating a post of finance director to oversee its system for declaring donations.

The appointment, expected later this year, will give Mr Brown control over sweeping internal reforms after the scandal over £600,000 in proxy donations from a property developer.

The finance director will take over responsibility for ensuring that the party complies with the law on registering donations, effectively sidelining the general secretary.

Labour will first recruit a general secretary to replace Peter Watt, who quit in November after admitting that he knew of a secret arrangement whereby David Abrahams gave large donations via middlemen over four years.

A new general secretary is expected to be in place in mid-March, although technically the decision lies with the NEC, not the leader.

But the key task of implementing sweeping reforms to the party’s finances will be undertaken by a separate figure to be appointed afterwards by Mr Brown. He has asked Lord Whitty, the party’s general secretary under Neil Kinnock, to investigate the funding scandal that engulfed Labour in November and to recommend changes.

Lord Harries of Pentregarth, who retired as Bishop of Oxford two years ago, and a former judge, Lord McCluskey, have also been asked by Mr Brown to verify a new system for recording and reporting donations.

One of the changes expected within the party is to break up its department of finance and compliance, which comprises about 20 people, and to separate the tasks of seeking and banking donations from the legal role of checking that they are permissible and reporting them to the Electoral Commission, on the ground that there is a potential conflict of interest between the two.

Police are still investigating how the party came to accept 19 donations since 2003 from Mr Abrahams via his solicitor, his secretary, a builder and the wife of a business associate.

Jack Dromey, Labour’s treasurer, who is married to Harriet Harman, the party chairman, also faces a challenge this year from Mark McDonald, a human rights barrister. The post will be subject to a vote at the party conference in September.

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