Unions withhold £40m donation to Labour because of fire dispute

Union leaders are refusing to sign up to a desperately needed £40m donation to the Labour Party because of the Government's failure to compromise in the firefighters' dispute.

As talks continued in an attempt to avert two 48-hour strikes by members of the Fire Brigades Union (FBU) next week, sources in the labour movementsaid there was no question of giving the money unless ministers reached an accommodation with the FBU.

Representatives of the party's big union affiliates are angry at the Government's insistence that the FBU must agree in full to the Bain report, which Andy Gilchrist, the FBU general secretary, believes could lead to 4,500 job losses.

A senior source at the GMB general union, one of Labour's biggest donors, said: "The deal has virtually been done but the reality is that the only obstacle at the moment is Downing Street's intransigence in relation to the firefighters' dispute.

"Politically we cannot give a commitment to sign off £40m of trade unionists' money at a time when the Government is trying to rub Andy Gilchrist's nose in the dirt."

Under the provisional plan, unions will end annual contributions and instead guarantee funding over the five-year lifetime of a Parliament. In exchange, the Government would drop the idea of state funding for political parties.

The party hopes that the deal – and a settlement to the fire dispute – can be agreed long before Labour's local government conference, which begins on 14 February in Glasgow.

Meanwhile, the Deputy Prime Minister, John Prescott, announced plans for a shake-up of the service that includes selling town centre fire stations and relocating them near motorways and on council estates. The proposed reforms would result infewer fire stations and a smaller workforce as well as new shift patterns.

Negotiations aimed at resolving the dispute were adjourned yesterday and will resume again today.