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Is Ed Miliband taking political funding back to 1927?

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The funding of political parties has been hugely contentious for centuries - from the days of the pre-reformed Parliaments with their tiny franchises and 'rotten boroughs' in the gift of the aristocracy and nobility. Yet the funding of the reformed Parliament parties after 1832, Whig/Liberal and Conservative/Unionist, by the railway companies and other industrial and newspaper barons, rarely attracted great attention. It is only since the trade unions came into the political arena from the late 19th century, that their funding of politicians and the Labour Party, has aroused concern.

In 1907 a Walthamstow Liberal trade unionist began legal action against his union, the Amalgamated Society of Railway Servants' (forerunner of the RMT) decision to levy a compulsory contribution (1 shilling a year) to the union's political fund. Osborne was outraged that the proceeds would be donated to the infant Labour Party, to support the union's political objectives, which he regarded as extremely socialistic. The Establishment concurred, especially the judiciary, and in the famous 1909 'Osborne Judgement', the House of Lords held that the levy was unlawful.

That judgement was overturned after a huge campaign by the unions and the Labour Party, by the Trade Union Act passed in 1913 by a Liberal government (in which Labour and the Irish Nationalist Party held the balance of power). However, this Act limited the unions' freedom, requiring them to ballot all their members for a majority to approve the levy and political fund. It also required them to allow any individual member to 'opt out' of paying the levy by signing a form.

The Trade Union Act remains the bedrock of union political funding and individual membership rights to this day, but it always remained controversial for the other parties. In 1927, after the General Strike, the Conservative government under Stanley Baldwin replaced the onus on an individual to 'opt out' with a positive decision to 'opt in'. It is this 'old-fashioned idea' that CWU leader Billy Hayes this week accused Ed Miliband of reviving. The opt-in resulted in a serious drop in the numbers of unionists paying the political levy and a corresponding drop in union funds to the Labour Party. Nonetheless, Labour was returned as the largest party to government in 1929.

This reversal remained a major bone of contention for the unions and Labour throughout the 1930s, but it was not until Labour secured a majority in the 1945-51 Parliament that they were able to revert to the opt-out in 1946. That has remained the position, with the further requirement by Margaret Thatcher's government in 1984 that the individual ballots to validate the union political fund should take place every 10 years. She did consider but decided against reverting to the 1927 'opt in' formula, because she wished to preserve the two party system with Labour as the Opposition in the context of the rise of the SDP\Liberal Alliance. All the ballots which have since occurred under the 1984 Trade Union Act have given the unions massive majorities for their levy and fund. It is seen by most members as supporting the unions' political representation, rather than as expressions of individual members' political preferences.

So, Billy Hayes' comparison of Miliband's proposal with Baldwin's in 1927 seems valid. However, closer reading of the Labour leader's speech at the London St Bride's Foundation suggests that he is proposing not to end the 'opt out' principle of the 1913 Act. Rather, he seems to be moving to change Labour Party rules. This would require unions to affiliate only those members who positively opt-in to be a member of the Labour Party. They would still be able to make a levy and use the balance of the fund for separate political donation purposes. No wonder Unite's Len McCluskey sounded content with this fudge! But as always, the devil is in the detail. All parties will study this microscopically, when a fuller proposal is published. And of course the unions, who still hold 50% of the Labour Conference vote, have to agree any changes. That block vote and the electoral college arrangements under which Ed Miliband was elected may also be changed.

Miliband's decision to take on the unions (his equivalent of Tony Blair's 'Clause IV moment') seems less significant than his declaration might suggest. Nevertheless, it could be momentous in the context of the now stalled all-party talks on the future of party funding. The Coalition Government still has the power to change the 1913 Act to an opt-in and Nick Clegg has indicated his intention to bring forward proposals. Miliband seems to be signalling that Labour would not oppose such a legislative change provided they secure in return a lower cap on individual donations to all parties.

Times have changed, with just a dozen or so major unions today (and just four mega-unions) compared with over 100 in 1913. But in correcting the tendency to abuse this power, Miliband must be extremely careful that he is not removing the last union protective power of working people, at a time of rampant individualism and weak unions.

Please note: Views expressed are those of the author.


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