Progressive Unionist leader David Ervine has accused the British government of attempting to try to push it out of politics by withdrawing its allowances for a second year.
He was responding to a warning by Northern Secretary Peter Hain that new financial penalties would be imposed if the party did not respond to an allegation that it had not done much to curb paramilitarism.
In a written statement to MPs, Mr Hain referred to the May report by the Independent Monitoring Commission on continuing paramilitary and criminal activity and claimed the PUP "had not done as much as it should in exerting influence to prevent such activities".
He revealed he had written to the party warning it he was "minded" to remove for another 12 months the party's entitlement to financial assistance. Last year the party lost £27,000 (nearly €40,000). Further penalties, Mr Ervine warned, would push it under. "We are hanging on by the skin of our teeth," Mr Ervine said.
The East Belfast Assembly member said his party and the UVF and Red Hand Commando were linked, but insisted there was "no cross-fertilisation" between his party and the two organisations. "I am the leader of the PUP. If I have broken any laws or rules, I would like to be arrested and charged now."