The Potential Costs of Ed Miliband’s Plans to Change the Labour-Union Link

The Labour leaderships sweeping reforms to its relationship with its affiliated trade unions, announced in the wake of the Falkirk selection controversy, hold the potential to significantly reduce the party’s income and put it at an electoral disadvantage. In the week of the Labour Party conference, Justin Fisher argues that, while risky, the changes may open the door to meaningful reform of party funding – provided a damaged Ed Miliband can see them through.

Ed Miliband (Credit: bisgovuk, CC BY-NC-ND 2.0)

Ed Miliband fielding questions from journalists (Credit: bisgovuk, CC BY-NC-ND 2.0)

Earlier this year in the wake of the row over candidate selection in Falkirk, Ed Miliband announced that he wanted to reform the relationship between Labour and its affiliated trade union members. As I noted in a previous post for the PSA, this was a bold move. Indeed, while many referred to it as a ‘Clause IV’ moment, I suggested that if successful, it would be more significant than that; fundamentally changing the relationship between Labour and its affiliated unions and giving Miliband the upper hand in future discussions about party funding reform. That is still the case, even if I now regret using ‘Clause IV moment’ in the title as this is fast becoming a British politics version of the American ‘gate’ suffix – just as ubiquitous, but nearly as meaningless through overuse.

The advent of conference season has brought fresh focus on Miliband’s plans, and on the eve of the TUC Conference, the GMB, one the four largest affiliates to the Labour Party, withdrew £1.2 million from its affiliation payments. Coverage at the TUC conference (which also represents many unions that are not affiliated to Labour) focussed strongly on Miliband’s plans and whether they meant potential financial ruin for Labour. After all, if affiliated union leaders were opposed to Labour’s plans, what was to stop them following the GMB and withdrawing support? And, even if the plans went through without such withdrawals, many argued that Labour would still face financial ruin if trade union members had to make a positive individual decision to support Labour rather than ‘contracting out’ of the collective decision as is the case presently (for details of the existing relationship and the proposals, see my last blog).

There is some historical precedent for this. When ‘contracting in’ to the political levy was introduced in the 1920s, around a quarter of trade unionists stopped paying the levy, though the impact on Labour’s finances was lessened by the raising of the affiliation fee. More recently, the 2010 British Election Study shows that only 47% of all trade union members voted Labour. Although that figure includes members of unions who are not affiliated to Labour, the indicative message is clear: a change from a payment to Labour ‘by default’ using ‘contracting out’ to a positive decision to support Labour is likely to lead to a decline in income to the Labour Party from affiliation fees. Indeed, the reduction in the GMB’s affiliation payment was based on the union’s estimate of how many of its members would opt in to contribute to Labour under Miliband’s proposals – 7.7% of its membership. It should perhaps be said that this is an odd way of seeking to oppose the changes since it is based on a strange logic that argues that the Labour-Union link must be preserved in its current format, while estimating that only a tiny proportion of members would actually positively commit to joining Labour.

Notwithstanding, at this point, it’s worth analysing how financially dependent Labour is on trade unions. The answer is not a simple one. The proportion of Labour income from unions fluctuates over time, and there have certainly been periods when Labour dependence has been much lower – particularly in the early Blair years. This was less to do with any decline in union generosity, and more to do with Labour’s ability to raise substantial income from other sources. In 2012, Labour received just under £8 million in affiliation fees – around 24% of its total central income. So the idea that Labour would be left without any income if affiliated trade union members stopped contributing on the scale that the GMB figures suggest is evidently an exaggeration. However, trade unions do not just contribute to Labour through affiliation fees – they also make donations – and cash donations from trade unions declared to the Electoral Commission (which include affiliation payments) constituted over 80% of Labour’s private donations in 2012. The crux, then, is whether donations over and above affiliation payments would continue if Miliband’s reforms were introduced.

So in pure cash terms, there is no question that there is a risk attached to Miliband’s strategy. Unless Labour secures significant income from alternative sources, the party would certainly lose income. But the scale of any potential loss is less certain. The reasons for this are threefold. First, just as in the 1920s, the fees for those trade unionists who wished to join could be increased to mitigate the loss. Second, the fact remains that if unions ‘divorce’ Labour as a result of these changes they are unlikely to be involved with any other party on any major scale. So while on the one hand, unions that stopped contributing to Labour would have large sums with which to campaign politically (but independently from Labour), they would lose a significant proportion of the influence they currently enjoy with a major party.

Moreover, it remains the case that affiliated unions would prefer Labour to be in power than the Conservatives or a Conservative-led coalition (even if their members may not always vote Labour). Although Labour did lose some affiliates under Tony Blair (the RMT and FBU), residual support remains. In short, when Labour has been in financial trouble previously, affiliated unions have stepped in to keep the party afloat. Labour cannot take union support for granted, but historically, unions have opted to support the party rather than let it collapse as the alternative for them is less edifying. Thirdly, as I explained in my PSA blog, Miliband’s reforms will remove the main stumbling block to party finance reform for the Labour Party, leaving the door open for cooperation with the Liberal Democrats to cap donations from all sources and introduce enhanced state funding as an alternative income source.

The difficulty for Ed Miliband, however, is that his authority may be slipping in advance of this decision being taken. Throughout the summer, many in the party were publicly complaining that Miliband had no message. Coupled with the continuing row over these proposals, his authority in the party may well be undermined, despite the gains that he arguably will make if he is successful. Secondly, while the reaction to the vote on intervention in Syria was initially positive towards Miliband, this hasn’t been reflected in any subsequent polls. Indeed, ratings of Miliband’s leadership show signs of getting worse, rather than better. Third, vote intention polls do not suggest that the Labour lead is robust, despite the government’s difficulties. So the question is whether Ed Miliband will risk such a bold move in a potentially weakening position. His plans have public support – polling evidence from YouGov suggests that that there is a solid majority across supporters of all parties for his proposals – and if successful, his internal authority will be significantly enhanced. But if he fails to deliver on these proposals, his standing will surely slip further, and could be terminal for his leadership.

Note: this post was originally published on the Political Studies Association (PSA) blog. It represents the views of the author, and not Democratic Audit or the LSE. Please read our comments policy before posting.

Justin Fisher is Professor of Political Science and Director of the Magna Carta Institute. He is joint editor (with Christopher Wlezien) of the Journal of Elections, Public Opinion and Parties . In recent years, he has acted as an advisor and consultant to the Electoral Commission, the Committee on Standards in Public Life, the Council of Europe, the Hayden Phillips review of Party Finance, and the Public Administration Select Committee.