Labour’s march on the unions must lead to real reform

Inside Westminster: Labour and the Lib Dems are now on the same page on a growing list of issues

The trade unions are back. In the headlines, at least, if not in the workplace. When Margaret Thatcher became Prime Minister in 1979, more than 12 million people were union members. Today the figure is 6.2 million, only one in four of the workforce.

It is not evenly spread. In the public sector, 56 per cent of workers are in unions. In the private sector, the figure is just 14 per cent. The spending cuts are bound to widen this divide. The Office for Budget Responsibility predicts that the number of public sector workers will fall by 1.2 million between 2011-18, while private sector employment will rise by 2.6 million.

The one place where the unions still enjoy much of their previous clout is the Labour Party. True, John Smith dismantled the block vote in 1993. But despite shrinking in the real world, the unions still have 50 per cent of the votes at Labour’s annual conference and a 33 per cent share in the electoral college which chooses the party leader, the same proportion as MPs and party members. This allowed David Cameron to tell Mr Miliband during a heated session Prime Minister’s Questions: “They give you the money, they buy the votes, they buy the leader, that’s how it works.”

At first glance, Mr Cameron is on a roll with this line of attack and it can only damage Labour. But the two leaders were much more evenly matched than when the Prime Minister wiped the floor with Mr Miliband over the union link a week ago. In the meantime, Mr Miliband has belatedly tried to modernise the party-union link. When he became party leader, he raised the prospect of reforming the relationship but decided to let sleeping union dogs lie. They repaid this favour by waking up and biting his bottom, in the full glare of publicity over alleged malpractice as Unite tried to install its favoured name as Labour’s parliamentary candidate in Falkirk.

Now Mr Miliband is biting back. His plan to make union members “opt in” to paying £3 a year levy to Labour, rather than having to bother to “opt out” as at present, is more radical than changing the rules of a tennis club. It potentially opens the door to long-stalled, much-needed reforms of the way political parties are funded.

Labour’s reluctance to end automatic “opting in” was one reason why cross-party negotiations on funding reform were formally abandoned last week – a coincidence of timing.

Although all three main parties inevitably looked after their narrow interests, a workable blueprint was drawn up by the independent Committee on Standards in Public Life in 2011. The only way to “take the big money out of politics”, it concluded, was a cap on individual donations. The committee proposed a £10,000 limit. Labour favoured a £5,000 ceiling (and said it should include one-off donations by unions). The Conservatives, which have the most wealthy donors, favoured a £50,000 cap. No surprise there.

Labour’s refusal to upset the unions by switching to “opting in” gave the Tories some cover. Today Mr Cameron had to change horses, arguing that a donations cap would require taxpayer-funding of political parties to make up some of the lost income. The committee suggested an eventual £23m a year – 50p a week for each voter. Although hard to justify in the age of austerity, it’s a price worth paying for a cleaner politics.

“The Tories didn’t really want a deal,” said one Lib Dem involved in the talks. “Having no cap suits them and they want to play the union card against Labour.”

The Lib Dems would benefit most from state funding. They lost most of their grants for opposition parties in 2010 and so had to sack 20 staff, the most painful part of joining the Coalition. Yet the Lib Dems have learned to raise money from individual donors – £6.5m in the past two years. Labour might learn a trick or two from that as it weans itself off the unions’ drip feed.

Mr Miliband should also back legislation on “opting in”, which Labour argues is not necessary if an in-house deal can be reached with the unions. A law would put his Falkirk-inspired conversion on firmer ground, and show voters his reform was based on more than expediency. It would shoot another Tory fox.

The funding row highlights something else. It is difficult for the Lib Dems to admit this while they are in coalition with the Tories, but Labour and the Lib Dems are now on the same page on an ever-growing list of issues, with the Conservatives in a different place. Party funding joins the 2015-16 departmental spending ceiling; a big boost for capital spending; Europe; House of Lords reform; and the Leveson report on press regulation, which broke the ice between Mr Miliband and Nick Clegg. If the voters deliver another hung parliament in 2015, these common policies make a Lib-Lab coalition more likely than another Lib-Con one if the numbers add up.

“The barriers are coming down, one by one,” a Labour source said. “The Lib Dems are running out of excuses.”