Labour funding crisis: Jewish donors drop 'toxic' Ed Miliband

The leader's 'principled' stance on Palestine deters backers, forcing party 'to go to unions with begging bowl'

The Labour party is facing desertion by Jewish donors and supporters because of Ed Mili-band's "toxic" anti-Israeli stance over Gaza and Palestine. In a fresh headache for the Labour leader, it is understood that Mr Miliband has been warned that Jewish backers are deserting the party in droves over what community leaders perceive to be a new, aggressive pro-Palestine policy at the expense of Israeli interests.

One prominent Jewish financial backer, a lifelong Labour supporter, said he no longer wanted to "see Mr Miliband in Downing Street or Douglas Alexander as Foreign Secretary".

A senior Labour MP warned that Mr Miliband now had a "huge if not insurmountable challenge" to maintain support from parts of the Jewish community that had both backed and helped fund Tony Blair and Gordon Brown's election campaigns.

At the same time, a former cabinet minister privately admitted that Labour's fundraising efforts were in disarray. The former minister said the party would struggle to raise anywhere near the £19m a party is entitled to spend under electoral law in the run-up to next May's poll. "We will have to pass the begging bowl round to the unions," they said. "That would send a bad signal. In return, they [the unions] would demand to call the shots on policy."

Donations from the Jewish community have been worth hundreds of thousands of pounds a year to the Labour Party. Several previous donors told The Independent on Sunday that they and others are now very unlikely to support the party. They spoke on condition of anonymity.

"There aren't that many donors to the Labour Party these days, and certainly not the same number of Jewish donors. There is a lot of worry," said one. "I have been a Labour supporter all my life and I would like to see a Labour government, but, on the other hand, I'm not entirely sure I want to see Ed Miliband in Downing Street or Douglas Alexander in the Foreign Office."

A Labour source insisted that Ed Miliband had taken a "principled stance" on both Gaza and Palestine and had always been clear that Israel had a right to defend itself. They added that it showed that Mr Miliband was prepared to take decisions he believed to be right and would never allow political donations to influence party policy.

But Jewish supporters say that the previous Labour policy on Israel was principled – and that it is Mr Miliband's changes which are affecting Jewish support.

Another previous donor said they had been asked by the party to arrange a fundraising dinner for Jewish Labour supporters but had found no takers. "Miliband won't get that [money], I can tell you that now," he said. "I was going to do a couple of dinners and invite prominent members of the community, who are quite wealthy, to raise funds. They just wouldn't touch it. It was too toxic for them to even consider. There is a lot of reluctance to support Miliband financially, unfortunately."

Last week, the actress Maureen Lipman (below) announced that she was ending five decades of support for the Labour Party over its new foreign policy.

Several other Jewish supporters, who have given substantial sums to Labour, are understood to be reconsidering their relationship. "When I supported them, this hadn't happened," said one. "I'm deeply concerned. I'm not at all sure what I'll do."

Another said: "I speak to people. I know what's going on in the party. And they are finding it tough going. Look at their reports on what's raised and look at what they're getting from the unions. They are finding it very difficult raising money."

Prominent Jewish supporters say problems started in the summer with Mr Miliband's aggressive condemnation of Israel's ground incursion into Gaza last August, which he described as "wrong and unjustifiable". He accused David Cameron of being wrong not to have condemned the land operation and claimed that Israel was "losing friends in the international community day by day". This was followed by a decision to whip a vote calling on the Government to unilaterally recognise Palestine – against long-standing British and Labour policy that recognition should only be part of a negotiated two-state settlement. That decision was opposed by a number of senior Labour MPs – including at least two shadow cabinet ministers – who warned it would haemorrhage Jewish support.

One said yesterday: "There were no phone calls, no meetings, no discussions, nothing. Ed Miliband and Douglas Alexander simply decided to abandon the even-handed, bi-partisan approach we followed for 13 years in government. Electorally, that will be significant in a few seats but, much more importantly, it sends a signal that Miliband is prepared to play politics with an issue where he should be even-handed and fair."

A number of Jewish former Labour supporters also compared Mr Miliband's stance on Gaza unfavourably with David Cameron's, which, they suggested, had been calibrated to ensure that prominent Tory Jewish supporters stayed on board.

Miliband's EU warning

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Maureen Lipman

David Cameron's threat to leave the European Union represents a "clear and present danger" to Britain's future prosperity, Ed Miliband will tell business leaders tomorrow.

In his speech to the Confederation of British Industry, Mr Miliband will contrast Labour's policy of engagement with Mr Cameron's threat to walk away if he is unable to renegotiate UK membership.

The speech, to be given the same day that Mr Cameron also addresses the CBI, is intended to allay fears that a future Labour government would be anti-business.

"I will never risk your businesses, British jobs, or British prosperity by playing political games with our membership of the EU," Mr Miliband is expected to tell delegates.

"It would risk billions in lost profits. It would risk millions of jobs. It would make Britain weaker... It is a clear and present danger to our future prosperity."

Oliver Wright