Labour Party in panic over party funding plans

Sir Hayden Phillips’s second interim report on party funding has been leaked to the BBC, and it contains bad news for Labour.

Sir Hayden appears to be leaning towards capping donations at £500,000, and reducing that cap over four years to just £50,000. This would be hard for the Labour Party, as it has less high income donors than the Conservatives, who have been calling for a £50,000 cap for this very reason. How it would leave the Liberal Democrats is known only to Cowley Street insiders.

However, it is in the following section that Sir Hayden strikes at the heart of the Labour Party. With impeccable logic and no sense of the political ramifications involved, the former Permanent Secretary at the Lord Chancellor’s Department has declared that “I see no reason why donations from trades unions should be exempt from the cap”. This, and another suggestion that trades union members should be allowed to opt out of donating part of their subscription to the Labour Party, could deal a fatal blow to Labour.

Labour has traditionally relied heavily on trades union donations. If these are now capped at £50,000 it will cripple them financially at a time when they are £23.4 million in debt. More importantly, it will break the unhealthy grip that trades unions have over Labour Party policymaking, effectively freeing the party once-and-for-all from the rent seeking of these particular special interest groups.

If proof of the significance of this were needed, it was provided by John McDonnell MP, so far the only Labour member to announce his candidacy for the leadership (his slogan: “Another world is possible” – and he should know, as he must be living on one if he expects to receive anything other than a drubbing).

McDonnell claimed that the party would react with “fury” to this independent review, and that there would be “uproar” at the next National Executive Committee meeting. According to McDonnell, trades union donations are the “cleanest money in politics”, and at a time of Labour sleaze should be welcomed. Presumably, he thinks cash-for-favours is somehow better than cash-for-peerages.

While there are important liberal questions about limiting how individuals dispense with their money, this is probably a good policy. Individuals will still be able to finance their own campaigns that support particular issues and so guide the decisions of electors but their power over elected officials will be greatly reduced. Even if Labour can survive the financial pain these proposals will cause them, Sir Hayden will have provided a great service to democracy.