by Peter Watt
We recently saw the publication by the electoral commission of the list of donations by all political parties in the first quarter of 2011 (Q1). The Labour party received £2,882,765 of which £2,507,372 was from trade unions. This means that almost 90% of Labour’s donations in Q1 came from affiliated trade unions. Now whichever way you cut that, it cannot be a good thing. There are two aspects that are specifically worthy of scrutiny. One is political and the other is financial.
Politically, it is a mixed picture. We share history, and over the years the trade unions have proved that they are more than fair weather friends. The affiliated trade unions are members of the party in their own right. Their membership (affiliation) fees mean that trade union members are in theory a constituency of millions of working people with a stake in the party. These members should act as a constant reminder of life in the real world. And, of course, their organisations and ours are enshrined in our constitution with ties at every level of the party.
Over the years, our opponents have unfairly characterised the relationship as one of master and servant, with Labour’s union paymasters demanding and getting their policies. The reality has been somewhat different. In fact, as one union general secretary said to me recently, “if that really was the case then the pound for pound return has been pretty fucking poor”. No. Affiliated trade unions are members of the party because they continue to believe that a Labour government will, on balance, always be better for their members than the alternative.
But we need to be honest. The relationship between the party and the unions has not been right for some time. It isn’t really a direct relationship between the party and millions of trade union members. The relationship is mediated by a small group of senior figures. While for many in the party, the trade union link is just a source of patronage and funds when they are seeking selection. Which comfortable status quo means that millions of trade union members are mainly represented by the millions of votes cast on their behalf by trade union general secretaries at party conference.
With 90% of all donations now coming from trade unions, it is simply not credible to claim that they are not in a stronger position to demand greater compromise on party reform and on policy. If they pushed hard enough, it would be all but impossible for Ed to refuse. And if Ed wanted to do something that they really they didn’t want him to do then could he just ignore them? No.
Meanwhile, our opponents have done a very good job in the minds of the public of painting us as a party of the trade union vested interest. And they have linked this to notions of political extremism and economic excess. Whether this is fair or not is one thing. Another is why are we not capable of attracting a broader base of financial support in the first place? Why are successful companies and individuals not beginning to support us again? Because while it is great news that 70,000 new members have joined leading to an extra £1 million or so into the coffers, that is simply not enough to arrest the long term decline in our income. Particularly when you think that the party costs roughly £25 million per year to run.
Which leads to the second issue worthy of scrutiny – the financial implications of the party receiving 90% of its donations from the trade unions. The first thing to say is that it is simply not sustainable.
Remember that we are committed to paying off £2 million a year in debt before we pay anything else. Of the £2.8 million received between January and March this year, £1 million came from Unite, £500,000 from GMB and £400,000 from Unison. In other words, it would only take a decision by one of their conferences to withhold or reduce funds and the impact would be pretty serious. Any organisation with the levels of debt that the party has, and that is so reliant on a single source of funding, can only be described as vulnerable.
Second, the overall reduction in the amount we have available to spend each year because of our narrow funding base is being masked. It is being masked by the tax payers’ money that we now receive because we are in opposition. A combination of Short, Cranborne and Scottish Parliamentary money took our income from £2.9 million to £4.6 million in the first quarter of this year, meaning that we will be in receipt of the best part of £7 million this year from the taxpayer. So while our income this year is likely to be about £23 – £24 million in cash terms, without the taxpayer we would be looking at income of about £17 million. In other words, we can barely afford to fight an election and we almost certainly can’t afford to win one.
Finally, and most seriously, there is the threat of party funding reform. Quite simply, if the government decides to implement its proposed cap of £50,000 on all donations to political parties, then the Labour party is in dire trouble. The money received from trade unions would go from £8 – £10 million per year to a maximum of £750,000. And yet there is every sign that that is exactly what the government is going to do. And I’m not sure that another “defend the link” campaign is going to be enough on this occasion.
So all in all, 90% of donations to the party coming from the trade unions exposes some pretty serious political and financial weaknesses that we need take seriously. If it’s not happening already, I hope that we are talking to the other parties about agreeing some sort of consensus on party funding reform. I hope that we are looking at why we don’t appear to have been able to diversify our income and attract back large numbers of successful wealthy individuals and companies. And I hope that we are looking at how we can further increase the amount that our members give.
If not, then we may well have a bit more to worry about than Refounding Labour and poor attendance at local party meetings.
Peter Watt is a GMB member and former general secretary of the Labour party.
Tags: party funding, Peter Watt, trade unions
This is a good article, grim reading but informative and helpful for the party.
The dismissive and derisory tone of that final paragraph though underlines why we are in this mess. As does the fact that the only suggestion for more funding a former General Secretary can come up with is to attract wealthy individuals and large companies. Peter with the likes of you running the party we really are in trouble.
Over the years, our opponents have unfairly characterised the relationship as one of master and servant, with Labour’s union paymasters demanding and getting their policies. The reality has been somewhat different
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The reality has been somewhat different.
Pull the other one, it’s got bells on it.
Though fair play to the bruvvahs, they’ve discovered what most of the rest have us discovered years ago, you can’t trust TUCLabour with your money.
Amazing the rank hypocrisy, no, of TUCLabour taking the Union shilling, the paymaster’s shilling, and dancing accordingly, while bleating about Michael Ashcroft who *gasp* doesn’t live in Britain.
£25 million a year to run?Sounds a bit like Greece, expenditure exceeds income,bankruptcy looms.Try adopting some English voter friendly policies,and attempt to recruit a membership of private individuals that subscribe every year.BTW,the Tories ,post 1997,organised this funding model very cleverly.Relying on the dear old trade unions for cash is a bit like hoping the Cayzer family will switch sides.
@ Peter Watt
The legislation to cap donations at £50k should be no problem for Labour. Simply work out with the affiliated Unions an agency agreement, where the Unions are agents passing to Labour the individual donations of its members.
Anyway, the legislation is not going to happen. It is a LibDem attempt to get tax-payer funding for political parties.
If you think Labour are in financial trouble, look at the problems the LibDems have. They are in government, they’re not getting any Short money & they are utterly skint. IMO, The Coalition won’t end because of any policy issues, it will end when the LibDems run out of money, unless the Tories ‘direct’ a few wealthy donors towards the yellow team.
That doesn’t mean Labour shouldn’t seek out donors; & I have no problems with those donors being wealthy individuals, if they are supporting the Party out of altruism not in the expectation of payback.
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Peter Watt normally talks sense. But this:
“And they have linked this to notions of political extremism and economic excess”
Unions are inextricably linked to political extremism and economic excess. Tony Blair seemed to grasp this and created New Labour in order to move away from the idiotic brothers.
Peter,
This is broadly a good article and you raise some interesting and important points. Regardless of whether you think that we should be a far left party of a centre right one everyone should want more income from the grass roots.
One part that this article doesn’t cover is partly how we ended up in so much debt. This was nothing to do with the unions and nothing to do with the current leadership. It was to do with Messer Blair and his fellow travellers.
Many on this site talk about the need to apologise for financial mismanagement under the last government, do you think the old guard of the party management could apologise for getting us in this financial situation?
@ All who are making an issue of Union members voluntarily making a political contribution to the Labour party.
Your ‘politics of envy’ are showing. You really don’t like the fact that the Tory Party was saved from bankruptcy by one uber-wealthy individual: Lord [C]Ashcroft (he of the non-dom tax status) whereas about 2,500,000 Uk tax-payers, via their voluntary contributions, pay for the Labour Party.
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Amberstar
The legislation to cap donations at £50k should be no problem for Labour. Simply work out with the affiliated Unions an agency agreement, where the Unions are agents passing to Labour the individual donations of its members.
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Yes, that’s right fiddle it.
Fine, but don’t come on here weeping about tax avoidance loopholes.
How I love the smell of rank hypocrisy in the morning.
@ Peter Watt
If donations are to be capped at £50k, there isn’t a great future in seeking out wealthy individuals because they’re capped anyway.
I have set myself a target to recruit new members & raise donation/ event funds.
I doubt I’ll raise £25M 😉 but, breaking it down, I think of it as 250,000 members contributing via subscriptions & donations £100 (£2/ week) on AVERAGE per year.
My friend & I are in the process of recruiting 10 new long-term members (5 already, 5 to go) & forming a group that will, by fees & donations, contribute at least £1200 to the Party this year.
I believe, through the strength of our common endeavour, we (ordinary people) can finance the Party. Why do you have so little faith in us? You seem to be giving up on us before even asking for our help….
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@ Billy Blofeld
Unions are inextricably linked to political extremism and economic excess. Tony Blair seemed to grasp this and created New Labour in order to move away from the idiotic brothers.
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What?!! Ask how much funding New Labour received from Union Members & how much from non-Union Member donations & loans (which are now to be paid down).
I think you’ll find that Tony wouldn’t have won a single election, never mind 3, without funds from Union Members.
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Peter Watt makes a common mistake in equating new members with a rise in membership. In fact while 68,000 new members joined The Labour Party over the last 17 months, 38,000 old members left. The rise in membership was thus 30,000, almost entirely concentrated in the 2nd half of 2010.
Over the last 6 months Labour membership has been roughly stable, numbers joining being equal to those leaving. The big question is whether Labour Membership will fall again as it did after the last peak in 1997 ?
DOesn’t the laobur party spend afortune on having run down houses for its meeting palces ,that due to nostalgia onyl have a few peopel tun up in the middle of the week ,who’ve been doing it for 40 years, or hire halls and then cancel meetings, let alone spend a fortune on leaflets throught he door that get crumple dthat no one reads, I’ve reasied fortunes for laobur over the years andwe burn mone on things that are pointless or not needed, I’d raius emore but not unless we stop wasting moeny.
This has been true for years, good for Peter for pointing it out so starkly. The shocker for me is that the party is costing £25m to run. Does that include local parties as well as the national and regional infrastructure? Given that we haven’t spent a penny in our area since 2005 other than that we have raised ourselves that seems a shockingly large amount.
The answer should be to reduce the spending on politics. Let’s be clear though: a party which rightly wishes to redistribute wealth away from the rich is unlikely to gain large donations from those people. Similarly being beholden to private companies is not acceptable to the Labour party. The only reason these appeared in the Blair era is that we posed no threat to their comfortable position. So they could donate to either the Tories or Labour because there was so much convergence
A national network of Labour Party charity shops?
Entrepreneur Labour members setting up a party-owned business to generate profits for the Labour party?
Sadly, I’m not much of an “ideas” person, myself.
@ iain ker
Yes, that’s right fiddle it.
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Au contraire, it is the attempt of the Coalition to characterize subscriptions from millions of people as a single donation which is ‘fiddling it’.
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“In other words, we can barely afford to fight an election and we almost certainly can’t afford to win one.”
Says it all really. Election victories are bought.
“If it’s not happening already, I hope that we are talking to the other parties about agreeing some sort of consensus on party funding reform.”
Jeez, the author is supposed to be a politicaal hack with his finger on the button and he doesn’t even know that these talks have been on-going for some time now. Gerrim off.
“And I hope that we are looking at how we can further increase the amount that our members give.”
The author really is clueless. Labour party membership is the most expensive of all parties. Members are already balking at the two increases in the past year. Increase it again and the law of diminishing returns will kick in.
“Amazing the rank hypocrisy, no, of TUCLabour taking the Union shilling, the paymaster’s shilling, and dancing accordingly, while bleating about Michael Ashcroft who *gasp* doesn’t live in Britain.”
What a surprise , Mr Embittered Ian Ker, strikes out barely has a new article appeared, like a flycatcher sat on a branch waiting for prey to pass. Sad life indeed.
Something for his acrid mind to dwell on: every shilling received from the unions is post-tax, unlike the tax-dodged millions of Cashcroft.
“and attempt to recruit a membership of private individuals that subscribe every year.”
Considering the Labour party has the highest membership of private individuals of all parties, they are clearly more successful than the Tories at this.
Where do these ignorant numbskulls like BloHead come from?