by Atul Hatwal

Nick Clegg? Yes, Nick Clegg. Yesterday Ed Miliband gave a landmark speech about Labour’s relationship with the union movement, but it is Nick Clegg who will determine whether this boldest of gambles pays off for Labour’s leader.

To understand why a call to Clegg is so important, we need to be clear on the purpose of yesterday’s speech.

For all the talk of democracy and the new politics, this was only ever about dealing with the fall-out from Falkirk.  David Cameron’s recent barrage at PMQs defined the immediacy of Ed Miliband’s task: to demonstrate Labour is not in the pockets of the unions and can govern in the interests of the whole country.

Yesterday’s address was a visionary response that has the potential to transform what has been an unmitigated disaster, into defining moment for Ed Miliband.

But now comes’ the hard work. Turning aspiration into reality will be difficult and the path to success is both narrow and parlous.

Based on the details we have about the proposals, we know the arrangements for the political levy will remain the same.

Trade unionists will still contribute to their union’s political fund, unless they expressly opt out. Just as they do now.

What will change is how the political fund is distributed by the unions.

Under Ed Miliband’s plan, trade unionists will now have to “opt-in” to pay a portion of their political levy to the Labour party as an affiliation fee.

At the moment, the union leadership decide the number of members it will affiliate (for example, the GMB affiliates 400,000 of its 600,000 members) and the fees are paid in bulk, by the union, to the party.

The likelihood is that no matter how successful Labour is at encouraging union members to contribute to the party, there will be a major shortfall in affiliation fees.

Unions have estimated a potential 90% drop in affiliations. This isn’t even a particularly pessimistic assessment. Let’s not forget, the majority of trade unionists didn’t even vote Labour at the last election, let alone want to fund the party.

As the level of affiliations fall, so the portion of the union’s political fund that can be used for discretionary donations increases. The overall total in the political fund remains the same; it’s the split between affiliation fees and donations that will change.

In a scenario, where affiliation fees drop significantly, union leaders could end up with greater powers of patronage from the increased sums available for donation.

Arguably, they will only be able to donate a comparable proportion of their discretionary funds as the percentage of members that opted into affiliation, but even then this would give several millions pounds of leverage to individual union leaders.

After all that has happened in Falkirk, this would be politically unacceptable. Union leaders would still have enormous personal power, the Tory attacks would continue unabated and the public would draw their own conclusions.

This is why the Labour leader also made mention of a cap on individual donations. Restricting the size of donations to a maximum of £5,000 would effectively remove any question of over-mighty union bosses pulling the strings.

So far, so good. But here’s where it gets complicated.

There’s no point unilaterally implementing a donation cap of £5,000. The Tories have to be tied in as well otherwise Labour will be effectively cutting its income potentially by 90% or more while the Tories are free to outspend the party by triple digit margins.

Unless Ed Miliband can secure a parallel deal on party funding, that includes an individual donation cap of £5,000, at the same time that changes to union affiliation fees are made, political disaster will loom.

The deadline for Labour’s new settlement with the unions is clear: Ed Miliband was unequivocal that it had to be in place by the time of the next election.

If the agreement on party funding isn’t also implemented at this point, then Labour will go into the next election either: having to ask the unions for enormous discretionary donations to fund the campaign, rendering pointless the process started yesterday, or fighting an election with a fraction of the funds available to the Tories.

It’s Hobson’s choice with electoral catastrophe the one certain outcome.

Politically, Ed Miliband now desperately needs a deal on party funding. Which is exactly why the Tories will do all they can to kill Labour’s new attempts to resurrect funding talks.

No matter how bad the headlines are for the Tories on their obstruction over party funding reform, the electoral self-interest is too great to give in.

This might explain why Len McCluskey and Unite were so sanguine about the speech. They know that a parallel party funding deal is very difficult to achieve, and that faced with an election to fight, Labour would likely have to come cap in hand for funding.

It’s a bleak vision of the future. One where the union bosses would exert maximum leverage in return for their funds, where Labour’s brand would be irreparably damaged by this biggest of U-turns and Ed Miliband would be wholly emasculated in the eyes of the voting public.

The one hope to avoid this Götterdämmerung is Nick Clegg.

Extraordinary as that sounds, he could yet be Labour’s salvation.

The Lib Dem leader is keen for a new deal on party funding. For years his party has been crippled by its lack of resources. An agreement along the lines of the recommendations of the 2011 Kelly committee report, with caps on donations and some measure of limited state funding would revolutionise his party’s electoral capability.

After the disasters of the AV vote and Lords reform, it would be a change long sought by the Lib Dems that he would have delivered. Finally, he would have a political legacy.

If Ed Miliband and Nick Clegg can work together, as over hacking, the votes are there on the floor of the House of Commons to pass new party funding legislation, just as they were when it came to passing hacking legislation.

The nationalists and minor parties would all benefit from a new party funding settlement and combined with Labour and Lib Dems could comfortably defeat the Tories.

David Cameron’s one defence is that he will not give government time to such a bill. But, as was demonstrated with hacking, party funding measures could be appended as amendments to existing bills, and voted upon.

The government’s anti-sleaze bill, hastily announced in the wake of the lobbying scandals just over a month ago, which will already contain clauses on trade union election funding, is a potential candidate.

Without doubt there are several ifs and buts on this route. The risks are high and timelines incredibly tight. Yet there are few alternatives.

Union affiliation fees to Labour are almost certain to fall precipitously. Accepting large discretionary union donations would be political madness after Falkirk. The electoral playing field can only be levelled if the Tories’ funding is capped in a comparable manner.

The only route to achieving this, before the next election, is through a legislative deal on party funding, similar to the Kelly proposals.

And only an alliance between Ed Miliband and Nick Clegg can deliver that.

Atul Hatwal is editor at Uncut

Tags: Atul Hatwal, Ed Miliband, Falkirk, Nick Clegg, party funding, Sir Christopher Kelly, union link, Unite

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