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