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Trade Unions and Democracy:
Party funding and the Labour-union link

10 September 2002. TUC Congress fringe, Winter Gardens, Blackpool.

Speakers: Rt Hon Peter Hain MP, Professor Keith Ewing, Tom Watson MP.

Peter Hain MP

Thanks for inviting me along this evening. I'm an enthusiastic supporter of Catalyst, I hope you go from strength to strength.

I want to just make one or two remarks about the financing of the party and how that might be reformed, but to put it in a wider context. Because I've been very concerned about the talk - and indeed more than simply talk - of a rift between the government and the unions. We've got to make sure that that is avoided.

I think it's important for us to talk about "our" government because that's what it is. It's not the Prime Minister's government, it's not my government; it's your government, our government. Because whatever our frustrations, whatever your criticisms, whether we've adopted the correct policy here or there, whatever mistakes have been made (and there have been), it's a Labour government, which came from the bowels of the labour movement and which could not have been elected without the broad mass of the labour movement's support behind it. If it wasn't for the unions there would not be a Labour Party, we wouldn't be here, we would not have had a Labour government in the first place.

So it's important to start from that, and for ministers to say that. I thought the Prime Minister's speech this afternoon was a really important statement of that position of partnership. Because although we govern for the whole nation, we can't always reflect union concerns, and we have a duty sometimes to take tough decisions and sometimes that means disappointment for trade unionists - and I'm a trade unionist, as are my colleagues here from the Parliamentary Party, and proud to be so - I think we need to remember what happened when there was last a breach between the trade unions and a Labour government. That of course led to 18 years of Tory rule. We don't want that again. So we need a new understanding and a new relationship. And let's hope the speech today, and the events of recent months, have started to generate the basis for that, based on partnership and honesty, not on slogans and confrontation, from either side.

It's also important to restate that although trade unions may not have got all the rights that their members want, and that their policies demand, the fact is major advances have been made. I think that needs stating and underlining. And it's important to state that despite the complaints, for example about PFIs and PPPs, the number of public servants, and therefore the number of public sector trade unionists, has been rising quite steeply. And public sector pay is actually outstripping private sector pay for the first time in a couple of decades. And last year under our new legislation unions got nine times as many union agreements as they did when we came to power in 1997. Rupert Murdoch couldn't do what he did in the 1980s under current legislation. It's important we acknowledge that, while of course acknowledging that unions are quite right to keep pressing their agenda and that we have to find a way of moving that forward together.

I notice as a representative of a traditional South Wales valley seat the dramatic change that I've seen since I've been MP in the last 12 years. Working class culture even in a former mining constituency is no longer the dominant culture that it was 12 years ago. It's a much more individualistic, much more fluid, sometimes harsher, lifestyle and culture. And the culture of the labour movement is no longer automatically passed on to the young, where both party and union membership is politically loyal. The average age of a trade union member as with Labour members is about 46. But of a worker it's 34. The only consolation being that the average age of a member of the Conservative Party is 67.

So the union movement and the party have got to find a way of adapting to the new attitudes of the "get ahead" generation and the young generation. We need to be social partners on that agenda, working for reform together - difficult but real work, not either hard left slogans on the one hand, or government spin on the other. We've got to press for reforms in society to improve life for working people and we've got to have reforms in trade unions which honestly confront why only 20 per cent of private sector workers are unionised, compared to 65 per cent in the public sector. These are issues that need to be honestly faced up to, and sometimes when demands quite properly are placed on government I think there's a failure to take account of the broader picture.

We need to look at reforms in the Party which address the decline of affiliated trade union membership. The Party's had not a single new affiliate in over 20 years, unlike the TUC which consistently gets new affiliates. We face together a major challenge on the political fund ballot, the first wave of which is coming up next year. I remember working for the Communication Workers Union when the first ballots happened in 1984 when we were worried about them. Mrs Thatcher introduced them to try and cut the link. This is an important challenge for us because we've only ever won these ballots under a Tory government. It's worth just pausing and emphasising this. There's little prospect, it seems to me, of winning them again, if the government, the Party and the unions are squabbling and grandstanding with each other. I just pose the question: how do we expect individual trade unionists to vote for unity if we can't show some unity at the top between the government and the trade union leadership?

So our relationship does need constant renewal. And on the specific issue of the public funding of political parties it's important that we look at the substance and the principle, not for hidden agendas. I have long been an advocate of both public funding and the union link. It's not something I've just come across in the last year or so when it's become an issue. I've long advocated that and written about it.

But I'd be against public funding if it was a device to cut the unions out of the Party - as clearly it is in some quarters. It's the democratic right, in my view, of individuals or unions representing individuals, to donate to the Labour Party. The assertion of this right if it's one person giving one pound, or a union giving one million pounds of affiliation on behalf of thousands of members.

And I'm totally opposed to caps on donations as the price of public funding. Because there is an agenda to limit donations, bring in public funding and therefore effectively cause the umbilical cord between the unions and the Party to wither away. I think too that caps on donations would be arbitrary, difficult to police properly, and infringe the right to donate. Parties must remain free to fundraise and invite donations or affiliations to help finance campaigns. And I think that this would happen either in kind or in practice even if you limited donations in some arbitrary fashion.

I've actually favoured public funding since I first saw it working in Sweden nearly thirty years ago on a youth politics visit. And I think it should be given for specific purposes with the objective of creating healthier, better organised, local, regional and national parties, that are better in touch with their communities. Political education should be a key funding objective, to have political education officers, to have youth organisers, and so on. Public funding should be given to support one of the previous election in order to provide minimal levels of professional organisers, including, as I say, youth organisers, so that parties are properly linked to civil society, in a way frankly that we're ceasing to be. State funding can ensure the essential organisational infrastructure, in an era when voluntary activity and mass participation is hard to generate. That's simply a fact of life for all parties, of all ideological hues. Meanwhile we should accept ever greater transparency, and obviously retain restrictions on campaign spending.

It's important to just acknowledge that the reality is that the principle of public funding has already been conceded. Around £44 million of taxpayers' money supports parties in an average election year - up 270 per cent since 1997. Including just over £5 million to enable opposition parties in parliament to organise better, just under £3.5 million of which is going to the Conservative Party. This is for parliamentary organisation. So the principle's been conceded. The question is, do you take it outside parliament and outside the free post and free party political broadcasts and all that kind of funding that comes in to parties at the present time during elections, and actually go to do what most of the continental European parties do, and provide public funding?

I think the advantage is it would make parties less exclusively dependent on particular funders and instead have a more pluralistic basis for party funding, and that way we could counter the cheque book culture which risks giving the impression of the tap from the pool of union resources being turned on or off by general secretaries as part of a policy negotiation with government. This can look just as distasteful to the public as it does to union members watching a company or an individual apparently offering a £1 billion donation for a policy change. So I was encouraged that Derek Simpson, the joint general secretary elect of Amicus, argued that donations and policy differences ought to be separated. I think the idea that if you have an argument on policy as some union leaders have argued, I think particularly the RMT general secretary, you then cut the donations, that actually gets us into territory that's very, very dangerous for democracy, and for socialist politics in particular.

Yes, much more needs to be done by our government. Yes we've made mistakes - some gratuitous statements have alienated trade union activists. But everyone needs in my view to get real. We're in a tough political climate where our socialist values need to be fought for, not just indulged in. And the right's made huge gains across Europe and the USA. And don't be under any illusions: huge sections of the media are still determined to defeat us and see the return of a Tory government.

If we're not very careful therefore - to come back to my theme at the beginning - we'll play right into the hands of those whose agenda it is to break the historic link between the party and the unions, badly weakening both, and allowing only the Tories and the Trots to crow. As Jack Jones said when asked to sum up the relationship between the unions and the Labour Party: "murder sometimes, divorce never". That's my maxim too.

Professor Keith Ewing

Thank you everyone for coming, this is one of the better-attended fringe meetings we've had I think at Congress this year. I'd like also to thank Catalyst for asking me to do this Report, which has been completed and will be available in time for Party Conference. I don't want to speak too much about it because I don't want to give away too much at this stage, but there are a number of issues that do need to be highlighted now.

I'd like to begin by talking about a meeting that I attended earlier this summer about the question of party funding. It became quite clear to me at that meeting that one of the issues on the agenda, whether intentionally or unintentionally, is that there should be a breaking of the link between the trade union movement and the Labour Party. There are two things that struck me about that meeting, at which not all the people present, it had to be said, were Party members, although some were.

The first thing was the utter arrogance of many of those present who presumed to have a vision of how a political party should be organised, structured, and then presumed to impose that vision on the rest of us whether or not we accepted that this was the proper way by which a party should conduct its affairs. Part of that vision was an idea that the only kind of member that you could have in a political party were individuals. There's no sense that a trade unions or other organisations could, as organisations, be collective members of a political party. That was the first point and I suppose I was rousing to anger at this point.

The second point which roused me even further was the individual and collective amnesia of the Labour Party people who were present at that meeting, who had forgotten just what debt they owed to trade unions generally and to trade union members individually who campaigned actively to put these people into positions of power and influence, particularly at the election in 1997.

Now when I calmed down after several days of rage and anger which was vented on everyone that I met - for which I apologise now - I realised that in fact this is a wonderful opportunity for us within the labour movement to restate the importance of the link between trade unions and the Labour Party, to restate the importance of affiliated, collective membership of the Party by trade unions and also socialist societies.

Now it's not just historic - it's partly a historic thing as the Prime Minister reminded us today. It's not just an emotional attachment between the two wings of the movement - partly that. It's not just comparative, in the sense that similar parties operate in Australia, in New Zealand, in Canada, and in Ireland. It's partly that, the sense that we are the same as we find in other labour-based parties elsewhere in the world.

The real reason I think why this is an important relationship which has to be defended are overwhelmingly practical reasons. There are overwhelmingly practical benefits which come from this unique relationship between the unions and the Party from which I would argue everyone in this country benefits. So what I would like to do is talk through a few points why this is an important relationships with practical benefits. I hope they're not too pointy-headed, as Tom Watson accused me of being in an earlier meeting.

The first point is that trade union affiliation gives the Labour Party its identity as a Labour Party. Now I appreciate that there are people who are unhappy with that identity. There are Party members who are unhappy with that identity. But the response to them I think is to say, you're in the wrong party. If you don't like the identity of the Party, there are many others, which would be quite welcome to have you, and quite happy to take you. You could create your own one. But it's important to the identity of the party that this relationship exists.

Two: trade union affiliation gives the Party stability. Not just in 1931, not just in 1982, but today, when Party membership is in freefall, the last thing we need is to cut off three million trade union members, the last thing we need in such circumstances.

Three: trade union affiliation - and we forget this - has electoral approval. We forget the fact that the electorate of this country has in the last two elections returned landslide victories to a trade union based Labour Party. When presented with non-trade union based parties of the left, they have not enjoyed popular support. We've seen off the Social Democrats, and we've seen off the Liberal Democrats. And this is something, which for some reason, people in this country have supported, and something which they appear to endorse.

Four: trade union affiliation to the Labour Party is based on the principle of consent and not coercion. Now if we move to a system of public funding of the political parties, we as taxpayers will not be invited every ten years to ask if we want this arrangement to continue, and we as taxpayers will not be allowed to contract out of this system of mandatory funding. We will all be conscripts - trade unionists and otherwise - in a system which many of us will be opposed to. So basically we will be trading liberty, which we currently have, to a coercive regime to which we will all be required to make a contribution.

Five: trade union affiliation - and I think this is very important - gives working people an organised political voice. Now why is that important, that working people have an organised political voice? It's important to counteract the growing political power - not just generally, but within the Labour Party itself - the growing political power of big business, and in particular the global media corporations who for some reason want to end this link, so that they alone have the ear of Downing Street. And this giving people an organised political voice is the very reason why the Labour Party was founded a hundred and two years ago. That reason remains compelling today as it was then.

Six: trade union affiliation helps to ensure that our political institutions are more representative or at least are less unrepresentative than they otherwise would be. Trade unions recruit councillors, they recruit Members of Parliament, they recruit MEPS, and we find the Labour Party is less unrepresentative occupationally than any of the other parties in terms of their elected representatives. We have a political class which is male, stale, and pale. The trade union link helps in some small way to address that problem by creating spread of diversity in terms of representation.

Seven: trade union affiliation provides a channel of political participation which in a sense we are not at any liberty at the present time, given the low levels of political participation, to reject or to dismiss. The reality is now that trade union members can agree or can elect to join the Party as individual members, take part in the affairs of the Party as direct individual members, or they can choose to take their politics with a long spoon and to take part in the affairs of the Labour Party indirectly through their union. Trade unionists have a choice: they can choose members to be direct members or indirect members of the Party, and it's not the business of the State to say to people who want to engage politically in this indirect way that you cannot do it. What is the compelling public interest to say to people that you cannot engage politically indirectly through the political activities of your affiliated trade union? What business is it of the State to say to trade unionists that this is something which you cannot do in the future?

And eight, finally: trade union affiliation actually strengthens party politics. Now just imagine what will happen if trade unions are told, you can no longer affiliate to the Labour Party. And trade unions say well look, we raise £16 million every year into our political funds. How are we going to spend this money? We can only spend this money on political activities, that's the purpose for which it was raised. That's the purpose for which it has to be spent. So does the Labour Party, does the Conservative Party, want to have £16 million every year being used to campaign independently on trade union issues in a way that can only harm the interests of both of these parties. I think if I was the Labour Party leadership I would rather money come into the Party being used to promote the interests of the Party, rather than being used on the outside to spend in a way that would inevitably be harmful. And if you were the Tories, I'm not sure you could be very sanguine about the prospect of all this independent trade union money being spent in elections either. So the Tories then are faced with a spending cap currently - the last election it was £15 million, Labour have a spending cap of £15 million pounds, but hey thirdly, the trade unions together can spend £15 million at the election, fantastic.

But it gets worse, it becomes a nightmare. Because one of the implications of the Human Rights Act is that the current ban on political broadcasting will have to go. Which means that trade unions and other third party interest groups will be able to spend money on television, taking out television campaigns, to promote their particular interests, in a way that political parties can't do. This is a nightmare scenario for a political party, this increased expenditure by third parties. But that would be an eighth reason, that trade union affiliation strengthens the role of the parties in the political process, if you take it away, you will end up strengthening the role of independent third parties, and I don't think that would be to the benefit of the Labour Party or indeed any other political party.

I think that together these eight reasons - and I'm sure there are others - provide for me a continuing powerful reason why this link should continue. Now I'm not saying that there aren't problems with the way the link operates in practice, and I'm not saying either that there are not problems with the way in which our parties are funded. But I would make three simple points by way of conclusion.

The first is that the current problems caused by these sugar daddy donations to the Labour Party - these problems should not be used as an excuse to undermine the existing relationship between trade unions and the Labour Party and should not be used to undermine the existing structure or organisation of the Party.

Two, these problems should not be used as an excuse to turn the Labour Party into a poor imitation of the American Democrats which appears to be on the agenda of some people. That is not the type of Labour Party that we need in this country. We don't need a party with registered supporters, with unaffiliated organisations, we need a part with real members, and the strength and commitment which trade unions bring.

And thirdly, the existing problems should not be used as an excuse for another round of ill-judged legislation or ill-judged regulation of the affairs of political parties. British parties, and British trade unions, are already the most heavily regulated in the world. We don't need any more regulation.

Tom Watson MP

You've had the pointy-head, I'm afraid you've now got the blockhead.

I'd like to thank Catalyst for inviting me tonight, I think you are addressing a number of pertinent issues that have not been addressed by other forums in the party, not just on state funding, the work you're doing on poverty, the work you're doing on pensions, the future work you're doing with Robert Taylor on the future of the European left, really means that we're going to have a good debate over the next few years in the Party that perhaps we've not had in the last couple of years.

State funding - a lot's been said on this in the last three months, some of it alarmist, some of it kneejerk, and some of it hysterical. None of that I hope by the three panellists you've got speaking on the issue tonight, but certainly it's the issue that I want to address tonight. Peter's talked about the principles of state funding, it's a principle that he's held for many, many years, and I very much appreciate where he's coming from. He comes from a view in the Party when a democratic socialist left did not have a voice in the media or in the country, when we had to fight to get any message out to the electorate, and he's been a noble pusher for that in many years. And Keith has talked about the practices and principles of state funding and the link. But I want to talk about perhaps some of the politics we've got out there in the country, with the electorate, how we talk to them about state funding.

I remember a picture from the general election, when I wasn't knocking on doors in my first general election I saw a news clip with my good friend and fellow whip to Gerry Suttcliffe, Mr Fraser Kemp, who was leading a man dressed as Sherlock Holmes in a deerstalker with a pack of hounds to Tory Central Office. On that particular day he was exploring the mysterious disappearance of Oliver Letwin. The Tories had sent him back to his constituency and had sent him into hiding for three or four days. It was a hilarious stunt. It got a laugh from everyone in the election campaign, and made quite a symbolic picture image on the television news about how the Tories were imploding in front of our very eyes.

The electorate liked it. But would they have liked it if they'd have had to pay for the hire of the dogs and deerstalker? I don't think they would. And would they like some of the other things that politicians get up to? I suspect not. Are we really going to say with state funding legislation that we're going to pay for photo opportunities for Ian Duncan Smith, for more Liberal Democrat Focus leaflets, for more Millbank spin doctors, like Mr Pakes who I see sitting at the end of the room there? I think not.

Will we be honest with the electorate if we were to introduce it this Parliament? We won the 2001 general election with a commitment to reform and invest in public services. We didn't go into the election with a slogan saying "Political Parties First, Schools and Hospitals Second", and I don't think the electorate are going to buy that position. We went into the last general election with the position that we submitted to the Neil Committee, which I know Keith had had some involvement in, where we had a line that said the needs of political parties are not the greatest in terms of public expenditure. It was true then. It's true now. And I suspect it will be true in the future.

We also went into the election with a huge degree of state funding - or hidden subsidies - for political parties. Peter touched on them: free delivery of manifestos is one. I went to the House of Commons library, asked them how much that was: £17.5 million for the taxpayer to deliver all politicians' election leaflets, be it Labour, Conservative or some of the smaller parties. The estimate for the TV slots for the political parties, last year alone, a general election year, was £26 million. And I'm embarrassed to say - Peter touched on the Short money - we now give £5 million to opposition parties. I'm embarrassed because it was only £1.5 million when we came into office in 1997, and I can't understand why we would be so generous as to give the Liberal Democrats a threefold increase in their opposition funding so that they now get £1.5 million courtesy of the taxpayer.

We have actually addressed some of the policy issues that I think are very real. As a former Labour Party employee I know that when the budgets are tight the first thing that is always cut back is political education, youth participation, women's involvement, all those activities that broaden out a political party, that make us look to communities that perhaps are not traditionally involved in politics. And that's a great problem - particularly when it comes to involving people in policymaking. But again the Electoral Commission - thanks to a Labour government - has now got £2 million that parties can bid for to develop their manifestos at the next general election. So we've almost got a creeping - I won't say insidious, but an extension of the funding principle. I'm not even going to go down the avenue of talking about how MPs' offices have had a recent increase in funding, but the research budgets for MPs have been considerably increased in recent years - I think appropriately, I would say that wouldn't I - but we have got a position where last year we could safely say that £80 million of hidden or taxpayer subsidies were given to political parties. I think that's enough.

And at a time when political parties are in debt, and the Labour Party I know is £7 million in debt, I think the answer is not to say "we can't balance the books so it's over to you taxpayer to fund it", the answer is to cut your cloth. Businesses do it, trade unions do it, community groups do it, we have to do it, I don't think it will stand the test of the electorate if we do anything else.

One of the arguments that is being put forward for state funding is that there's a perception of sleaze in politics. I don't think state funding is going to end sleaze, you've only got to look at what's gone on in Germany to see that that's the case. What you get is a micro-industry of people who try to get around the rules. You're almost encouraging people to try to get around the rules when you have a regulatory framework and a taxpayer dropping a lot of money on a party treasurer.

Let's also remember what the Prime Minister's position is on this. He has said that we cannot have state funding unless we build a consensus across political parties. Well you won't be surprised to know that the Liberal Democrats are in favour of state funding, they'd sell their granny if they could get a pound. And you also won't be surprised to know that the principled Tories have got a position where they're totally opposed to state funding but of course they would take the money were a Labour government to introduce it. Well I don't think we can go to an electorate, either with a party consensus or not, but certainly not on those terms.

Both Peter and Keith alluded to what I think the real agenda on state funding is. Let's remember, there is a principled position, and there's also the practical position that we have got to fund political activity. But what is more worrying for us is the Trojan Horse policy. There's people who aren't going to like this, but let's remember, in 1997 there was a concerted effort to break the link between party and unions. It was called proportional representation, it was called merger with the Liberal Democrats. The movement very cleverly saw that off. But those people that were pushing that agenda in 1997 and 1998 have come back in 2002 with a new agenda, and that is state funding, caps on party political donations. You might read lines in Tribune that say we might just have to twiddle around with the relationship on the link. If you cap donations and you have state funding, the link is dead. And what we have is a party treasurer running the party, and more Westminster technocrats dictating to a party membership that will dwindle because they don't think they can participate in proper policymaking. That is the agenda we have to look at.

I think that for those reasons, dropping £15 million on the political system in Westminster will alienate the electorate, it will undermine party membership, it will ultimately make parties more irrelevant to the electorate not less. We need to take it on. But also within the Party, if we're going to have state funding, let's not have it in the Queen's Speech this year, let's use the mechanisms of policymaking in the party, the Policy Forum, trade union branches, party branches, to have that debate, and the decision has to be made at Labour Party Conference. I think if we have that, it will be a resounding "no" to state funding - because we want participation in political activity, not exclusive technocracy at the top.

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