Labour faces cash crisis over cut in union funding

THE Labour Party was facing a financial crisis last night after its biggest source of funds decided to cut its contribution by more than pounds 500,000.

The decision by the Transport and General Workers' Union comes at a time when the party's membership continues to shrink after the failure of a drive to recruit one million new members. Some senior Labour figures said yesterday that the party was on the brink of secular decline as numbers were moving below 250,000.

On Tuesday, Tom Burlison, Labour's treasurer, told a closed executive meeting of the GMB, the general union of which he is deputy general secretary, that unless immediate action was taken it was a 'dying party'.

Council members of the TGWU yesterday decided to reduce the strength of its notional affiliation to Labour by nearly a third over two years - from the present 1,075,000 to 850,000 next year and 750,000 in 1994. All unions pay pounds 1.70 per member.

The move by the TGWU comes amid considerable disenchantment over a fourth successive general election defeat for the party. It has little to do with the union's finances which, despite a decline in membership, are expected to show a pounds 3m surplus this year after stringent cuts. Bill Morris, general secretary of the union, warned Labour that other unions would be taking a similar line.

On Wednesday, a special Labour review group abandoned a plan to retain union influence over party elections. Mr Morris said that this had not influenced the decision, but members of his executive would clearly have been influenced by the arguments of leading party figures who are insisting on one-member, one-vote for leadership elections and in the choice of MPs. This would mean unions had no direct influence in such ballots.

The reduced contribution by the Transport Workers' Union to the Labour Party comes as part of a package in which it is 'refocusing its political and campaigning role', Mr Morris said. One effect of the strategy could mean a reduction in the number of MPs the TGWU sponsored. It is possible that sponsorship of MEPs could withdraw resources from the present complement of 38 TGWU-sponsored MPs.

The executive of the union decided to review, over the next three months, all aspects of the union's political activity, which could include resources being diverted to union members who are also local councillors.

Mr Morris said that it was essential the union took stock of its work in the political arena. 'We must focus our resources on ensuring our voice is heard on behalf of our members wherever decisions are being made which affect their well-being.'

He said the union recognised that politics did not begin and end at Westminster. 'We must make a greater impact in Brussels and the European Parliament, where more and more important decisions are taken and work more closely with our many members on local authorities.'

The second-largest affiliate to the Labour Party, the GMB, is refusing to increase contributions ahead of the rate of inflation and others are expected to follow suit.

The latest research shows that for the first time Labour expenditure on the general election - thought to be pounds 10.6m - approached that of the Tories - thought to be pounds 11.2m. However, three-quarters of Labour's election fund was donated by unions and plans to reduce their contribution would have a critical impact on the party's ability to fight campaigns.