Labour-Tory funding gap at record level

There is now an unarguable case for state funding

David Blunkett has emerged as a refreshingly blunt figure in recent weeks. After first admitting that Labour had to be careful to avoid bankruptcy after the election, he declared that it would be a "miracle" if Gordon Brown beat David Cameron (it would be, but senior MPs aren't meant to say this sort of thing).

Now he's revealed that Labour needs to raise £10m in just three months to give it a chance of competing with the Conservatives' £18m war chest. As I reported earlier this month, donations from the rich individuals who bankrolled election campaigns in the past have all but dried up, leaving the party increasingly dependent on the trade unions for money.

By contrast, in the 2005 election, Labour spent a record £17,939,617 -- £87,000 more than the Tories' £17,852,240. The Conservatives outspent Labour in 1997 and 2001, but only by about £2m. Data on election spending since 1910 suggests there has never been a funding gap this large between the two main parties (see graph below).

 

Election spending graph 

As I've argued before, Labour should run a John Major-style soapbox campaign in response to this disadvantage, resurrecting the effective slogan "Not flash, just Gordon".

In the longer term, however, there is now an indisputable case for state funding. The situation may not be as troubling as the US, where Michael Bloomberg spent $100m of his personal fortune to win a third term as mayor of New York, but it's still unsustainable.

It is unhealthy for Labour to be so dependent on a few big unions (Unite accounted for 25 per cent of all the party's donations in 2009), but it's also unacceptable for the Tories to rely on a figure as dubious as Lord Ashcroft.

Unfortunately, in the wake of the expenses scandal, almost no politician is willing or able to make an effective case for state funding.

 

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George Eaton is political editor of the New Statesman.

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What type of Brexit did we vote for? 150,000 Conservative members will decide

As Michael Gove launches his leadership bid, what Leave looks like will be decided by Conservative activists.

Why did 17 million people vote to the leave the European Union, and what did they want? That’s the question that will shape the direction of British politics and economics for the next half-century, perhaps longer.

Vote Leave triumphed in part because they fought a campaign that combined ruthless precision about what the European Union would do – the illusory £350m a week that could be clawed back with a Brexit vote, the imagined 75 million Turks who would rock up to Britain in the days after a Remain vote – with calculated ambiguity about what exit would look like.

Now that ambiguity will be clarified – by just 150,000 people.

 That’s part of why the initial Brexit losses on the stock market have been clawed back – there is still some expectation that we may end up with a more diluted version of a Leave vote than the version offered by Vote Leave. Within the Treasury, the expectation is that the initial “Brexit shock” has been pushed back until the last quarter of the year, when the election of a new Conservative leader will give markets an idea of what to expect.  

Michael Gove, who kicked off his surprise bid today, is running as the “full-fat” version offered by Vote Leave: exit from not just the European Union but from the single market, a cash bounty for Britain’s public services, more investment in science and education. Make Britain great again!

Although my reading of the Conservative parliamentary party is that Gove’s chances of getting to the top two are receding, with Andrea Leadsom the likely beneficiary. She, too, will offer something close to the unadulterated version of exit that Gove is running on. That is the version that is making officials in Whitehall and the Bank of England most nervous, as they expect it means exit on World Trade Organisation terms, followed by lengthy and severe recession.

Elsewhere, both Stephen Crabb and Theresa May, who supported a Remain vote, have kicked off their campaigns with a promise that “Brexit means Brexit” in the words of May, while Crabb has conceded that, in his view, the Leave vote means that Britain will have to take more control of its borders as part of any exit deal. May has made retaining Britain’s single market access a priority, Crabb has not.

On the Labour side, John McDonnell has set out his red lines in a Brexit negotiation, and again remaining in the single market is a red line, alongside access to the European Investment Bank, and the maintenance of “social Europe”. But he, too, has stated that Brexit means the “end of free movement”.

My reading – and indeed the reading within McDonnell’s circle – is that it is the loyalists who are likely to emerge victorious in Labour’s power struggle, although it could yet be under a different leader. (Serious figures in that camp are thinking about whether Clive Lewis might be the solution to the party’s woes.) Even if they don’t, the rebels’ alternate is likely either to be drawn from the party’s Brownite tendency or to have that faction acting as its guarantors, making an end to free movement a near-certainty on the Labour side.

Why does that matter? Well, the emerging consensus on Whitehall is that, provided you were willing to sacrifice the bulk of Britain’s financial services to Frankfurt and Paris, there is a deal to be struck in which Britain remains subject to only three of the four freedoms – free movement of goods, services, capital and people – but retains access to the single market. 

That means that what Brexit actually looks like remains a matter of conjecture, a subject of considerable consternation for British officials. For staff at the Bank of England,  who have to make a judgement call in their August inflation report as to what the impact of an out vote will be. The Office of Budget Responsibility expects that it will be heavily led by the Bank. Britain's short-term economic future will be driven not by elected politicians but by polls of the Conservative membership. A tense few months await. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.