Labour is forcing local parties to hand over their headquarters buildings, enabling it to shore up its precarious finances, The Times has learnt.

The move allows the party, which has a deficit of millions of pounds, to raise loans against the properties. It has caused unrest in constituency offices, which have been told that they will be thrown out of Labour unless they agree to sign over their assets.

Several have told The Times of their anger at having to give up ownership of the buildings. They have been told to transfer the deeds of the properties into a company controlled by the national party.

Letters sent out to constituencies that oppose the ruling state that complying is a “pre-condition of continued affiliation to the party”.

Peter Watt, who served as Labour’s general secretary when the party narrowly avoided bankruptcy, said that it was right that local members helped to sort out its finances. “I think [the party] is doing a terrific job at stabilising the balance sheet,” he said. “But there is still a fragility to the party’s accounts. I sympathise with the local parties. But it is right that they should play their part in helping the party remain financially viable.”

The internal battle comes as union leaders threatened Ed Miliband yesterday with cuts in funding for the party. They warned that his support for government public spending cuts could put their multimillion-pound contribution, on which Labour increasingly relies, at risk.

Independent auditors said the party would be in no position to fight an election campaign if it were called tomorrow. While Labour’s finances have improved since the huge deficit run up after the 2005 general election, it still has a £7.5 million deficit on its books.

Bath constituency is particularly worried about the move because its property, a Grade II listed building in the centre of the World Heritage city, is worth about £½ million and brings in a considerable rent, which is used not only to fund the party’s campaign in Bath but also in neighbouring constituencies.

“We’ve owned ours for 50 years and don’t want to see anyone take it over,” said Mary Young, its treasurer. “If we’re forced to sell it, it’ll look as if we’ve been given up on.

“It makes you think they are sequestering properties because the party is in debt and they want to claim [them] as their own.”

Joy Hurcombe, who has managed the hall belonging to Worthing Labour Party for 24 years, said that the constituency was resisting the move.

“Labour gives you assurances and all that but it’s quite devastating,” she said. “[The hall] was bought and looked after by local people, but we don’t have local trustees … the national Labour Party is getting a portfolio of properties to raise loans with.”

Under the new property rules, local parties have been ordered to transfer the deeds of their properties to Labour Party Nominees Ltd. Its directors include Iain McNicol, the general secretary, and Chris Lennie, who is responsible for Labour Party fundraising. The subsidiary has the power to raise loans against constituency assets. A party spokeswoman said yesterday that no loans had yet been raised.

The leader of the GMB yesterday threatend to sever its links with Labour in protest at Mr Miliband’s backing for the Government’s austerity drive, which would rob the party of millions of pounds of income.

Paul Kenny, GMB general secretary, told Mr Miliband and Ed Balls, the Shadow Chancellor, that their decision not to reverse coalition cuts after 2015 was “the most serious mistake they could have made”. It would have “long-term implications” on the GMB’s links with Labour.