by Peter Watt
I have decided to write something about Labour party governance. Now wait; before you stop reading simply because you assume that any article about governance must be aimed at anoraks give me a moment as it really is an important issue.
The Labour party is governed by the National Executive Committee (NEC) who act in the same way as a board of directors or trustees do. In other words, they are responsible for ensuring that the party manages its finances well; delivers on its primary objective of securing elected Labour representation and other subsidiary objectives like better representation of women. And also for ensuring that the party complies with its legal responsibilities. They also oversee, but do not direct, day-to-day operations of the party. The day-to-day work is managed by the party’s chief executive the general secretary.
Traditionally the arrangement has not been a particularly good one in the Labour party with good governance being secondary to other political pressures. The result was that the party became horrifically in debt and no one on the NEC seemed to notice.
The reasons for this are twofold.
Firstly the NEC itself was much more interested in politics than governance. In other words they got elected or appointed by virtue of fighting for position or votes in internal elections on the back of taking positions politically.
They were experts in lots of things to do with politics, trade unions and so on. But that didn’t make them experts in governance, asking the right questions, finances and the like. Whilst other organisations could undertake a skills audit of their boards and appoint non-execs or other trustees to plug the skills gap – the NEC had elections to its various stakeholder sections.
And secondly the party management team saw it as their job to keep the NEC out of decision making. What they didn’t know couldn’t hurt and anyway the NEC really weren’t that interested, or so the argument went.
It was just easier to set up NEC committees and structures that provided more confusion than transparency. Plus there was always a third source of power that party managers had to worry about – the leader’s office. The leader’s office always wanted to be in charge of everything but knew that the key to managing the weird and byzantine world of the NEC was the general secretary and their team.
The result was that for many years the party management and the party leader pretty much got on with it despite the NEC. The members of the NEC were not unduly worried as they didn’t get on the NEC in order to deliver governance; it was a platform for them. NEC officers were often very committed but didn’t understand many of the responsibilities required of them. This all meant that there were not effective checks and balances in place and more money was spent over many years than was good for the party.
The needs of the leader’s office became the needs of the party and the party delivered with the NEC being both dysfunctional and side-lined.
And it could not go on. In 2007 the party pretty nearly became bankrupt. I will never forget the NEC where I explained to them just how close we were. The figures were horrific and the outlook bleak. There was a serious discussion about the rescue plan on the table. At the end of the discussion the NEC took the decision to reverse the recommendation to increase the price of reduced rate conference passes!
But the crisis changed attitudes. The NEC upped its game and rightly demanded greater openness from their management team. And I, as then general secretary, demanded that the NEC took greater responsibility and began to exercise it governance role.
The leader’s office also recognised that it needed to work with the NEC not despite it. There’s nothing like a good financial crisis to focus minds!
Over the coming years and through subsequent general secretaries the new approach prevailed. The finances were gripped and the leader’s office accepted that they could not spend party funds with impunity.
The NEC made sure that the party delivered a balanced budget that included debt reduction. And everyone, NEC and party Leader, knew that this was the general secretary’s job. It was the right balance of competing forces at the top of the party. This even prevailed throughout the last general election, a tremendous testament to Ray Collins and his then team. And rightly so; party members and indeed voters expect the Labour party to be well governed.
Which brings me to the appointment of the new executive board at party HQ.
It is welcome that the party is updating and streamlining its management structures and a good thing that teams are refreshed.
But if I was on the NEC I would be worried.
I would worry because it looks like the leader’s office has taken over the running of the party. It looks like the general secretary’s role is being watered down. And the danger is that when all of this plays out, the role of the NEC in overseeing the good governance of the party is being watered down.
History tells us that when the NEC is side-lined and the balance of power at the top of the party is shifted like this, the risk of bad short term decisions rises. Decisions to spend now in order to try and get out of a political hole are more likely to be taken – irrespective of the consequences for the party’s overall financial health.
In other words I worry that the new structures with a dominant leader’s office are making the Labour party once more prone to short termism in its decisions over spending and so on. You could almost say that the Labour party is becoming a bit more “predator”!
I hope that I am wrong. But one final observation which adds to my worry is that it is not clear who, if anyone, is worrying about finances on the executive board of the Labour party. Because unless I am missing something, there appears to be no executive director for finance.
Peter Watt was general secretary of the Labour party