Trade Unions, the Labour Party, and Political Funding
The next step: reform with restraint

By KD Ewing.

EXECUTIVE SUMMARY

1. Introduction

This report examines the case for the reform of party funding in the light of recent funding scandals, and in the aftermath of the Political Parties, Elections and Referendums Act 2000, which came into force on 16 February 2001. The key points emphasise the need
(i) to maintain the Labour Party - trade union link,
(ii) for further funding reform by the Labour Party to eliminate large private donations, and
(iii) for greater state support for (but not state funding of) the parties.

2. The need to respect existing party structures

Further reform should respect the existing structures of the political parties, and in particular the nature of the Labour Party which is a combination of affiliated (trade unions and socialist societies) and individual members. This is a form of party organisation which is not unique to Britain, and is a feature of labour-based parties in Australia, Canada, Ireland, and New Zealand. Funding reform should not be used as a vehicle to transform the nature, structure or composition of political parties. These are questions for the parties themselves and not the State to determine. An attempt to use funding reform as a vehicle for party transformation would be contrary to constitutional principle and in particular the right to freedom of association.

3. The trade union - Labour Party link adds value to democracy

The relationship between trade unions and the Labour Party is one which brings benefits to the democratic process generally and to the Labour Party in particular. Electors benefit from a party which provides them with a wider electoral choice than would otherwise be the case, and by more representative political institutions. The Labour Party also provides trade unionists with an opportunity to participate in the affairs of the Party directly as individual members, or indirectly through their affiliated union. The Labour Party benefits from the stability and diversity which the unions bring to the Party, and from the support which the unions provide at election and other times: in terms of communications with electors and support for the Party and its candidates.

4. The trade union - Labour Party union link is already heavily regulated

The link between trade unions and the Labour Party has been heavily regulated by law since 1913. Additional controls were introduced in the 1980s. Trade unions can only affiliate to the Labour Party if they have a political fund. Members are consulted every 10 years in secret ballot about whether they want the fund to continue. If a union has a political fund, any member has a right not to pay the political levy at any time by contracting out. There would be no comparable rights of periodic consultation and contracting out under a system of State funding of political parties. All taxpayers (including trade unionists) would have to contribute whether they wanted to or not. All would be conscripts in a system which many would oppose.

5. The trade union - Labour Party link strengthens party government

The relationship between trade unions and the Labour Party is one which strengthens the party system as a whole. If trade unions were prohibited from affiliating to the Labour Party by funding reforms, they would have to find other ways to spend their political funds, which currently raise about £16m per annum. That money can be spent only for political purposes, and would have to be used on independent political campaigns before, during and after elections. It would be very difficult to impose any additional controls on such expenditure. This is because political speech is protected by the Human Rights Act 1998. Careful consideration needs to be given by all the political parties to the dangers of weakening the party system in this way.

6. The Labour Party should implement further funding reforms

The Labour Party should take steps to develop the Party's policy on soliciting and receiving donations in the light of the Political Parties, Elections and Referendums Act 2000. The Statement on Donations and the ethics committee announced in May 2002 are welcome initiatives. The Party should take the next step and indicate
(i) the maximum permitted donation it is prepared to accept from any private individual, and
(ii) the ethical principles which will determine whether or not to solicit or accept a donation from any particular individual.
The Party should make it clear that there are certain categories of donor from whom it would not be appropriate to accept gifts, either because
(i) it would be contrary to the public interest to do so, or
(ii) contrary to the interests of the Party to do so.

7. There is no case for a statutory cap on donations to political parties

There is no case for the introduction of a statutory cap on how much may be donated to political parties. This is a regulatory method which is adopted in some countries but which experience reveals to be ineffective. Statutory caps are easily evaded where there is no consensus that they are desirable. They require a large and intrusive regulatory structure to police, which as the Neill Committee pointed out in 1998 would be disproportionate to the objectives they are designed to promote. The purpose of a contribution cap (namely donor restraint) can be served by other regulatory strategies, not least disclosure and transparency of the kind introduced in 2000. Despite recent controversies, disclosure is beginning to work: the big donors are going cold.

8. There should be greater state support for political parties

It is unrealistic to expect the political parties to give up large private donations unless funding needs are met from other sources. The State has a role to play in helping the parties meet their core needs, including
(i) the national and regional infrastructure,
(ii) education and training of members and representatives, and
(iii) policy development.
But any support should be tied to steps taken by the parties themselves to engage with electors. A fixed sum should be allocated annually from the Consolidated Fund; the parties should receive support based on votes received in recent elections and on the number of individual members the party has recruited. No party should be entitled to receive more than a third of its income from this source.

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