Why did the Labour party’s running costs go up by almost 20% last year?

by Atul Hatwal

Earlier this week the Electoral Commission released the latest quarterly donation figures for the political parties. Once again, income across the board fell. Down for the Tories but more importantly, falling faster for Labour.

As my esteemed colleague Peter Watt said in his post yesterday when he reviewed these figures, “the party simply cannot go on like this indefinitely.”

In these uncertain times the one action the party can definitely take is to cut costs. Yet the latest financial accounts for the party for the 2011 calendar year, released at the start of this month, reveal a disturbing situation.

Yes, expenditure was lower in 2011 than 2010, dropping by £3.5m from £33.8m to £30.3m. But in 2010 there was a general election that cost £8m while in 2011 the local election campaign only cost £900k.

If the party had managed to keep all non-campaigning costs at roughly the same level as in 2010, the reduction in expenditure in 2011 should have been just over £7m (the difference between the cost of campaigning in 2010 and 2011).

But it wasn’t.

The reason was an 18% hike in running costs for the party. Running costs are the biggest single line item in the party’s expenditure making up 80% of total spending. In 2011 they went up by £3.6m to £24m, from £20.4m in 2010.

An almost 20% spike in running costs, when there is no general election or major campaign, is quite extraordinary.

Delving into the detail of accounts, there is a breakdown of running costs which sheds some light on where the money is being spent.

source: Labour party 2011 accounts

In the first line of the table, it is clear that there was a £900k rise in expenditure on staff from 2010 to 2011. A note in the accounts reveals that this equated to an increase in headcount from 287 to 307 staff.

Moving from government to opposition brings costs, particularly as policy research and support is no longer conducted by the civil service. Opposition parties need to develop their own in-house capabilities.

But equally, the staffing levels required for a party fighting a general election compared to one at the start of a parliament are very different. Even with the increased need for support and research, the natural downscaling of the campaign operation following the election should have meant costs were contained.

How and why the party decided to take on even more staff is questionable. In the context of the programme of redundancies that is currently being implemented, just one year later, it is inexplicable.

However, staffing is not the source of the biggest rise in costs. That accolade belongs to the obliquely titled “political activities & publishing”.

In general election year, the year in which there was also a leadership election and a London Mayoral primary, the cost for this expenditure category was £1.1m.

In 2011, when there was no comparable internal or external campaign activity, costs rose by five times to £5.5m. Five times. The rise in spending in this one area alone was equivalent to over half of the cost of the general election campaign.

The accounts do not explain what constitute “political activities and publishing”. In the past, costs included under this heading have typically included things like administration of the National Policy Forum and annual conference. But it is hard to see how this type of expenditure could have spiralled out of control to the extent that spending hit £5.5m.

Insiders have pointed to the extra costs of the leader’s office and the teams of political advisers supporting the shadow cabinet as the source of the rise in spending. Unlike the party employees who are counted under the staff heading, these advisers are not directly employed by the Labour party.

Their employer is the shadow cabinet member who would also be the recipient of short money – the government grant that helps fund opposition party activities – via the party.

If this is the case then the Labour party needs to take a long hard look at the value for money it is receiving from its army of political advisers.

There are 27 members of the shadow cabinet. Each of these MPs and Lords has a staffing allowance to pay for support staff. For example, an MP in London is allocated £144,000 while MPs outside of the capital can claim £137,000.

Some shadow cabinet members will need extra support, particularly in the high profile briefs, but at a time when the Labour party remains deep in debt and with income falling, does the central party need to be funding so many advisers, especially when shadow cabinet members have their staffing allowances?

The Labour party currently has outstanding loans of £5.6m and is paying over £200,000 each year in interest. Even diverting half of the rise in “political activities & publishing” to reducing the debt would enable the party to have paid off the loans by the next election and be clear from the annual interest payments.

Whatever the money is currently being spent on, whether it is extra advisers or another apparently pressing priority, is it really as useful as putting the Labour party on a more sustainable financial footing?

Atul Hatwal is editor at Uncut


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13 Responses to “Why did the Labour party’s running costs go up by almost 20% last year?”

  1. john says:

    My local party was A grand in debt when I took over treasurer in 2009 and even after the 2010 council elections and General one, by the time I stopped treasurer in Jan 2011 we were A grand in credit, Now after a year we’re £3000 in Debt, spending it on talking photos of Councillors hiring halls and then cancelling the meetings

  2. Atul: I think you’re wrong about Shadow Cabinet/Leader’s staff. They are employed by the party and Short money goes to the party to cover the cost.

    However, aren’t there also redundancy costs, and more of these in 2012?

    Of course, it doesn’t help when you make redundant highly paid Deputy/Asst Gen Secs and then take them on at presumably similar salaries in the Leader’s office. And it may also be that redundancies should have come sooner although there was a change of Leader & Gen Sec. All of which is argument for strengthening the power/role of the NEC.

  3. Don Gately says:

    an inability to manage our own finances doesn’t bode well for a 2015 GE dominated by the economy

    What’s more worrying is that we’re using paid staff to do a job that could be done by a strong activist base, if we had one. Many of the single issue campaigning groups develop policy research through the activity of their members and they not only are able to make their case but it gives members a role beyond leafleting. There’s an offer to be made here for bright unemployed and underemployed supporters who want to make a difference to become a real engine for the party. Co-production has to be the way forward for public services and should be for the party as well.

  4. Atul Hatwal says:

    Jon – Fair enough if the shad cab/leader’s office go through the staff budget, but that does beg the question, what did the extra £4.4m go on? That’s an enormous amount of money for the party.

    On redundancy, the costs in 2011 should be limited. There was a turnover in staff, but my understanding is that many of the people leaving were on rolling contracts. The redundancies this year have bitten into the permanent ranks more deeply with bigger redundancy costs due in 2012’s accounts.

    I did also wonder at whether there had been any substantive discussion at the NEC on such a big spike in costs, but couldn’t see anything in the various reports

  5. Clint Spencer says:

    Perhaps Ed Balls is managing Political Activities and Publishing????

    Perhaps this is a Labour party stimulus package that will turn the economy and be referenced in the 2015 campaign?

    The mind boggles?

  6. Amber Star says:

    @ Atul

    Please find out the facts about Short Money. According to Wiki, the Labour Party would have received about £5.2M. This Short Money must be spent to specific activities – Parties are not permitted to use the money to pay down loans or fund campaigns etc.

    If the above expenditure does include Labour’s use of Short Money, you ought to take down this article immediately because it is deeply flawed & utterly mis-leading! Many visitors will not read the comments pointing out the article’s short comings (no pun intended).

  7. Clr Ralph says:

    Marvellous news 🙂

    So in attempting to win trust and increase you’re membership your useless Leaders are becoming increasingly self obsessed and wasting the money on themselves and those privalaged scroungers who suck up to them. Perhaps being in opposition is disagreeable to them…prehaps they are missing all the TaxPayer based perks and executive non-jobs that were available previously lol.

    This is excellent news for 2015….by the way a fair none-party political question for you all, how many non-voters has your mighty, grand Leader returned to the fold? Did he not promise to rebuild trust in politics? I am guessing that is why over the last year you only gained 30 or so members because Ed was so busy “healing” the rift and well qualified hard working people have for Labours MPs and assistant cretins. Please pass on how many people have registered to vote as a result of all the hard work Ed Milliband asked you all to do…after all it’s not like he (or the useless cronies he has employed at your Party’s expense) would ever get their hands dirty doing any work.

  8. Ralph Baldwin says:

    Marvellous news 🙂

    So in attempting to win trust and increase your membership your useless Leaders are becoming increasingly self obsessed and wasting the money on themselves and those privalaged scroungers who suck up to them. Perhaps being in opposition is disagreeable to them…prehaps they are missing all the TaxPayer based perks and executive non-jobs that were available previously lol.

    This is excellent news for 2015….by the way a fair non-party political question for you all, how many non-voters has your mighty, grand leader returned to the fold? Did he not promise to rebuild trust in politics? I am guessing that is why over the last year you only gained 30 or so members because Ed was so busy “healing” the rift and anger of genuinly well qualified hard working people and the contempt they understandably have for Labours MPs and assistant cretins. Please pass on how many people have registered to vote as a result of all the hard work Ed Milliband asked you all to do…after all it’s not like he (or the useless cronies he has employed at your Party’s expense and of course your money collectively) would ever get their hands dirty doing any work.

  9. Atul says:

    Hi Amber Star

    Short money must be spent on specific activities but in practical terms it is spent on people. These people do multiple tasks, from research to party project management. The key on short money is how much of the latter can be bundled into the individual’s daily activities. The more that is bundled in, the less money is spent centrally on extra staff. No, this isn’t within the technical terms of Short money, but neither are MPs using parly resources for constituency political work. But they do, from all parties. And it is how the Tories, and Lib Dems used their Short money, when in opposition, to effectively pay down debt. Given the scale of our debt, I’d suggest we should do no less.

  10. Amber Star says:

    @ Atul

    Thanks for being open enough to debate this. It is genuinely appreciated; too many poltical commentators are ‘hit & run’.

    Okay, so the Tories & LibDems ‘cheated’ in the way they used their Short money & you’d like Labour to do the same. Hmmm…

    I know several MSPs & MPs here in Scotland. They rigorously respect the division of parl’y & political resources. e.g. My son regularly does volunteer work for MPs & MSPs who, quite rightly, do not use their staff to prepare party political mailshots, surveys etc.

    On your other point, my response is: The Tory & LibDem time in opposition was characterized by knee-jerk, badly researched challenges to Labour policy initiatives & a lack of evidence based alternative policy offerings. The Tories spent 13 years in opposition & in 2010 couldn’t get a majority when they were shooting at an open goal because their policy offering lacked rigor & supporting evidence. They were unwilling to spend the money & time to develop good policies. They relied on special interest lobbyists & think tanks to fund & supply them with information & provide their policy platform.

    Is this the example you are recommending Labour follow? Trim sails, cheat the rules & settle into ill-informed opposition as a way of cutting costs & paying down debt? Please make a better case for such an approach because it doesn’t hold much attraction from my perspective.

    And a position which openly advocates some sleight of hand with Short money, I think it is not a good thing for politics, for Uncut or for the Labour Party.

    Which of course brings us to the ‘real’ issue. How does Labour increase its income so that we can mount a strong, well resourced challenge to the incumbent government?

  11. Atul Hatwal says:

    Hi Amber Star,

    I understand your point about doing things the right way, but I’d say two things in response:

    (a) we aren’t developing the substantive, evidence based policy alternative at the moment because (i) politically its not expedient (ii) there is little practical joined-up working between advisers across shad ministers. They are their masters’ servants and in varying degrees of competition to help their minister get ahead

    (b) the accounting for Short money is exceptionally opaque. When we were in govt, Fraser Kemp and Andrew Dismore asked PQs about Con use of Short money, but the govt soft pedalled the response and didn’t push greater scrutiny. My understanding is that the same holds true today, for example in the return on use of Short money submitted to the parly authorities there is no breakdown of individual staff employed.

    In the context of (a) and given (b), using the Short money to enable the paying down debt that is crippling the party should be (imo) a priority

  12. BenM says:

    What a pointless article.

    Meaningless without a budget or strategy to measure it against.

    Pointing to figures and saying “look! they’ve gone up!”is idiocy in the extreme.

  13. I don’t think that putting Labor on a more sustainable financial footing is really a good idea. They talk about money problems and yet still they don’t wanna cut the costs. Where is logic? Nowhere. Party is not able to manage their finance properly. So far enormous amount of money is being spent on the Party, and it’s not like most of it don’t go to Party memeber’s pockets

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