Party funding reform could be a blessing in disguise for Labour

By James Graham of Unlock Democracy

The committee on standards in public life’s report on party funding is a gift to the Labour Party, if only it realised it.

In the last Labour leadership election, just nine per cent of votes issued to trade unions were cast; of these 15 per cent were spoilt. That is despite Ed Milliband’s controversial and ultimately successful campaign to woo trade union voters.

In a nutshell, those two figures illustrate the true nature of trade union/Labour relations at the moment. While it may still operate at the top of the tree, at the bottom the links between the Labour Party and the trade union movement have never been weaker.

This fact ought to primarily inform Ed Miliband’s response to the committee on standards in public life’s report on party funding, published today.

Unfortunately, Labour’s response to this report thus far, and to its predecessors, has been to act as if it isn’t a fundamental problem. It was this barrier which lead to the cross-party talks chaired by Sir Hayden Philips in 2007 to collapse. Back then, Labour had a chance to reform party funding on its terms, but failed.

The key sticking point has been over how the trade union contributions are treated. The committee’s report has rightly recommended that these contributions should be regarded as an aggregate of contributions made by individual members. In exchange however, the committee has recommended that union members would have to opt in to make the contribution rather than have the option of opting out as is currently the case.

This would almost certainly reduce the amount each union can give the party; to what degree it does in practice will depend entirely on to what degree Labour engages with trade union members directly.

As a bonus, Kelly has also recommended introducing giftaid-style tax relief on small donations, meaning that each contribution will be boosted by an extra 25 per cent. Furthermore, Unlock Democracy believe that unions could rightly argue that in exchange for moving towards this system, the existing practice of balloting members every 10 years on whether or not to affiliate should end.

One major union already does effectively have an opt-in process. For historical reasons, Unison already has a Labour-affiliated fund and a general political fund. Despite this, Unison remains one of the largest annual contributors to the Labour Party.

Labour’s existing relationship with its affiliated trade unions is profoundly dysfunctional. Each year, union general secretaries elected by a small minority of members issue yearly demands to the party from the conference stage and Labour leaders have to choose between either acceding to their demands and looking weak, or adopting a macho, anti-union stance.

The result is a zero-sum game played by a handful of people at the top. Union members themselves are left on the outside. It is hardly surprising that trade union membership has steadily declined over the past 30 years.

If Kelly’s recommendations are taken up, while the influence of trade union general secretaries may decline, Labour will have every incentive to do a much better job at feting the support of trade union members directly. The result is likely to be far less dysfunctional than the current system of megaphone diplomacy between Labour and the unions.

On the other hand, if Labour blocks these reforms, it will find itself in the curious position of defending the right of multi-millionaires to donate to the Conservative Party. The Tories’ “compromise” of a £50,000 cap, affecting trade unions on an equal basis to companies, will work to their advantage and will fundamentally fail to take big money out of British politics. In that context, Ed Miliband ought to embrace Christopher Kelly’s report as the liferaft it really is.

See also:

• Clegg under fire over voter registration, party funding and youth unemployment – Shamik Das, November 15th 2011

• Clegg attacks Labour/union link – but keeps schtum on Tory/City links – Shamik Das, September 21st 2011

• Coalition’s party funding cap plans would be bad for our democracy – Stephen Crone, August 30th 2011

• More evidence of big donor culture shows urgent need for party funding reform – Stephen Crone, February 10th 2011

• Party funding reform: Why the cap may not fit – Dr Stuart Wilks-Heeg, October 18th 2010