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.