Miliband’s party funding gambit reveals the need for a real leap of faith
As an opening gambit, Ed Miliband's party funding proposal doesn't look too bad. As a final offer, it doesn't stand a chance.
The Labour leader made a big deal of the self-sacrifice he appeared to be making in his blog on the issue yesterday.
"I believe it is only fair that a cap we want to impose on companies and individuals should also cover donations from trade unions," he wrote.
"This will cost Labour millions of pounds but I also believe it is these kind of difficult decisions which are necessary to make change happen."
It will cost Labour, in fact, something in the region of £2.5 million. That was the amount the committee on standards in public life, which looked at the issue last year, estimated Labour gained from its unions through their donations between 2001 and 2009.
A significant amount, yes. But it doesn't cover the £7.5 million Labour received from union members over the same period.
Affiliation fees are the real bread and butter of the Labour party's funding. Donations to the party come and go, but it is all those £3s that Miliband needs more than anything else. The political levy on union members, the Labour leader has made clear, is definitely NOT on the table.
If agreement is to be reached then the present system of affiliation fees has to be changed. No deal will be reached unless political levies are put back in play.
However much Labour argues the opposition, the truth is they are just not the same as other donations to political parties. There is not a positive decision made to pay parties the money, as an opt-out option is the only way to avoid paying the fee. The opt-out isn't always clearly available. And the individual member is not the member of the Labour party – the union itself is. It makes all the decisions, it has all the power.
These problems can be fixed. The committee on standards in public life came up with ways of doing so: it wanted to iron out these problems by ensuring the 'positive decision' takes place and clearly setting out information like the different rate payable for political levy payers.
Obviously, many members might decide to keep that extra £3 when confronted with the option. We don't know how many union members currently paying the levy would decide, on consideration, that they'd rather not. Yet this is the leap the Labour party – indeed, both parties – must consider making.
Here's why. A deal on party funding has to overcome one massive obstacle: any change to the status quo must have roughly the same effect on both Labour and the Conservatives. If one party loses 90% of its funding and the other 20%, cross-party consensus is going to be very elusive.
That was broadly the state of play before the cash-for-access scandal brought the parties back to the negotiating table last week for the latest round of talks. The committee on standards in public life had proposed a £10,000 cap on individual donations. Under this the Tories would have lost 76% of their funding. The Labour party would have lost 91%. No deal.
What Ed Miliband proposed yesterday involves keeping affiliation fees. This changes the equation: for a cap of £7,500, the lowest considered by the committee, the Conservatives lose 80% of their funding compared to just £47% for Labour. Again, a huge disparity. At £5,000 the gap would be even bigger. No wonder the Tories poured scorn on Miliband's thinking.
Reforming affiliation fees, however, changes the balance. If Labour managed to persuade half of its affiliation fee payers to keep paying up, the party's total percentage of donations lost would be much closer to the Tories'. That long-sought parity would finally be achieved. A deal might actually become possible.
The problem is no-one really knows what the impact of such a change would be. "It could usefully help to balance out the financial flows to the parties, but that can be little more than a guess at this stage," the committee's report noted. It acknowledged the matter could be decisive in making the change "reasonably even-handed", the most important goal of all.
It's not clear whether either party could be convinced to take the implicit gamble such a reform would involve. Labour, the party's future at stake, has too much to lose. But at least it would have the ability to try and squeeze around the current system; the Conservatives would be forced to look on and watch as this critical process plays out.
The Tories will be less inclined to agree if they are forced to submit to the proposed £5,000 cap on funding proposed by Miliband. As the Conservatives rely the most on big-ticked individual donations, this hits them the hardest. It would cost them something like 84% of their funding – ouch!
Miliband's blog points the way to a potential solution, but on its own terms it is hopelessly flawed. Its audience is the public, its purpose to kick off the public propaganda battle but conceal the real negotiations.
Behind closed doors, the numbers are being weighed up in a more hard-headed, pragmatic way. There the possibility of using reformed affiliation fees to break the deadlock is being considered.
If a real change is to be achieved, it will come because both parties are prepared to gamble.
