Venom between leading figures, donations drying up and membership falling...ANDREW PIERCE on how Ukip is on the verge of collapse

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Diane James, pictured at the Ukip annual conference in September, has resigned as party leader after just 18 days

The bruising encounter this week with the party’s MEPs was especially venomous even by Ukip’s standards. 

And it was the moment Diane James finally accepted she was not suited to the job of the party’s leader.

The showdown took place in a café at the European Parliament in Strasbourg.

Voices were raised. Expletives uttered. Most other customers in the café took no notice. 

Rows, peppered with four-letter words, are commonplace in the mad and poisonous world of Ukip politics.

The argument, this time, was about whether Ukip should pour scarce resources into the looming by-election in Witney that had been triggered by David Cameron’s resignation as an MP.

James insisted they could not afford it because the party is in so much debt it’s on the verge of financial ruin.

But the MEPs shouted her down and, for her, it proved the final straw.

Her shock resignation means that Ukip, founded in 1994, is teetering on the edge of implosion just weeks after the party realised its dream of persuading Britain to leave the EU.

Donations have dried up, membership is falling, and the acrimony is so all-pervasive that some of the party’s best known figures now refuse to speak to each other. 

‘Ukip is now unmanageable. It’s a basket case,’ said one senior member.

James was always a reluctant candidate in the first place. Nigel Farage had wanted the party’s telegenic immigration spokesman Steven Woolfe to take over as leader.

But she was persuaded by Farage to put her name forward as an insurance policy in case any mishap befell Woolfe. 

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James, pictured being congratulated by former leader Nigel Farage upon her election, is said to have left after 'venomous' rows with MEPs

And because Woolfe’s nomination papers were rejected by the party’s NEC – they arrived after the agreed deadline because of a technical fault with his email – she was forced, against her wishes, to step into the limelight.

Even so, James refused to attend any of the party’s hustings and gave only a handful of media interviews. 

‘Diane never really wanted the job,’ said a source. 

‘She resigned after 18 days but to be honest she was agonising over whether to stay for more than a week,’ said a source.

As the Mail reported yesterday, in the signature box of the party-leader registration form that she lodged with the Electoral Commission, she wrote: ‘Vi Coactus’ – Latin for under duress.

But despite her apprehensions, nothing could have prepared her for what she would face once she took over Ukip.

First there was the party’s financial meltdown. Last year it spent £6.6million but generated only £5.8million in income, and it now has liabilities of £820,000. 

‘We are virtually broke,’ admitted a senior source. 

‘Even if Diane James had wanted to launch a major campaign she couldn’t because the coffers were empty.’

Only on Monday there was an emergency meeting in London of some of the party’s biggest donors who were warned she was on the verge of quitting.

It is understood James opposed several MEPs wish for Ukip to pour money into the upcoming by-election in Witney after David Cameron resigned his seat

Their donors included Arron Banks, who gave millions of pounds to the Leave side in the referendum, and Chris Mills, a hedge-fund financier who has loaned Ukip £200,000.

Banks, who has given the party more than £1million, is refusing to part with any more money until certain reforms are introduced. 

And these, crucially, include the deselection of the party’s only MP, Douglas Carswell, and its newly elected leader in Wales, Neil ‘Cash for Questions’ Hamilton – both of whom are despised by Farage and Banks.

This brings us to the second reason James decided to leave – the blisteringly toxic atmosphere in the party.

Just days before that vicious clash at the European Parliament, James had had another row, this time with the party’s ruling National Executive Committee.

She had tried to meet NEC members to implement Carswell’s and Hamilton’s deselections. 

(Hamilton, of course, is the former Tory MP who has never escaped his reputation for sleaze. He lost his Tatton seat in the 1997 election after being accused of taking cash from Harrods owner Mohamed Al Fayed in return for tabling parliamentary questions – a charge he’s always denied)

James also wanted to give party members a say in policy for the first time and to bring in professional administrators to try to restore order to the chaos – managerial and financial – at Ukip’s headquarters.

James, pictured, also revealed she had been shaken when she was spat at by someone at Waterloo station in London

Yet the NEC – where both Carswell and Hamilton now have considerable influence – rejected James’s demands and refused even to meet her.

This must have been sweet revenge for Hamilton – for in one of her first acts party leader, James blocked him from speaking at their party conference in Brighton. 

‘The amount of abuse she received from some of Hamilton’s supporters was unbelievable,’ said a friend.

A third factor in her resignation is the hostility she encountered from the general public. 

When she announced she was stepping down, James revealed she had been badly shaken when someone spat and shouted at her at Waterloo station. 

Then, travelling by train from London to Cardiff recently, a fellow passenger recognised her and shouted abuse at her.

And the fact is that, while Nigel Farage has his own personal security guards who travel everywhere with him, members of the NEC laughed at James’s request for similar protection. Farage’s guards are paid for by a wealthy donor.

On top of all this is the fact that James, 56, loathes the media spotlight.

In 1998 a tabloid newspaper exposed her three-year affair with a senior MoD official Ron Smith, who was married and a senior aide to the then Labour defence secretary George Robertson. 

The affair came to light when Mr Smith’s wife Susan, an RAF wing commander, was investigated by the military police over another matter.

James now lives with another man in a secluded £1million house in Surrey – John Forrest, who at 73 is 17 years her senior and seriously ill with cancer. 

He had been married for 32 years to his wife Jane when he and James started having an affair.

James was never destined for frontline politics – she used to work in private healthcare before becoming an independent local councillor in Waverley, Surrey, a decade ago. 

She switched to Ukip and became the party’s MEP for the South East in 2014.

And now that she has stepped down, Farage – who is temporarily taking her place although immigration spokesman Steven Woolfe is front-runner to take over in the long term – will have to contend with all that fear and loathing within his party.

Last year Farage was accused by Ukip MEP Patrick O’Flynn of being a ‘snarling, thin-skinned aggressive’ man who risked turning the party into an ‘absolute monarchy’ and a ‘personality cult’. 

O’Flynn, a former Daily Express journalist, said Farage had been transformed from a ‘cheerful, ebullient ... daring’ politician into a ‘bullying control freak’.

Whatever happens, the divisions in Ukip and the loss of its leader risk alienating the four million people who voted for the party at the last election. It can only be good news for the Tories.