Why Miliband should support an opt-in system for trade union donations

It would give greater legitimacy to Labour funding and force trade unions to make a positive case for supporting the party.

Ahead of Ed Miliband's speech tomorrow on the Labour-union link, one change rightly under discussion within the shadow cabinet is reforming the funding system so that members of affiliated unions are required to opt-in to paying the political levy (a portion of which goes to Labour, with the remainder spent on campaigning and other causes), rather than having to opt-out. 

At present, of the 15 unions affiliated to Labour, Unison is the only one to allow new members to choose whether or not they contribute to the party. Only two others, the Musicians’ Union and USDAW, mention the existence of a political fund (but do not mention Labour) and six affiliated unions, including Unite and the GMB, don’t mention Labour on either the "about us" or membership sections of their website. As a result, while all members have the right to opt-out of paying the levy, it is not easy for them to do so and many will not even be aware of its existence. It is this arrangement that allows the Tories to argue that unions such as Unite (just 37.5 per cent of whose members vote Labour) dupe their members into subsidising Labour.

In recent party funding talks, Labour has opposed an opt-in system, principally due to concern that it would lead to a fall in donations (the party receives around £8m a year in affiliation fees). But if Ed Miliband's support for transparency and accountability is to be consistent, it can no longer do so. (Similarly, shareholders should be required to give approval to company donations to the Conservatives and other parties.) In a post last year on Labour List defending the opt-out system, Luke Akehurst pointed out that workers could join a non-affiliated union, that they are balloted every 10 years on whether to maintain a political fund and that they can bring disaffiliation motions to their union conferences. All of which is true, but hardly represents a model of transparency. 

But as well as right in principle, an opt-in system would have political benefits for Labour. It would make it easier to justify exempting union affiliation fees from the £5,000 cap on donations proposed by Miliband on the grounds that they should be treated as an aggregate of individual members' contributions, rather than as one lump sum, removing one of the stumbling blocks to cross-party agreement. As a Labour source told me: "It would allow us to frame the Tories as the party of big money and us as the party of millions of working people." 

Requiring trade unionists to opt-in would also force unions to make a more explicit and positive case for supporting Labour, with the possibility of greater engagement with the party. In the 2010 leadership election, turnout among trade unionists was just 9 per cent, with 15 per cent of ballots spoilt, in most cases because workers failed to state that they agreed with "the aims and values" of the party. Partly for this reason, another reform under consideration is to make those who pay the political levy full members of the party, rather than merely affiliated ones. At a stroke, this would dramatically increase Labour's total membership (around three million pay the political levy) and would make it impossible for the Tories to dismiss trade unionists as the plaything of the union "barons". It would be a logical continuation of the "one member, one vote" reforms introduced by John Smith in 1993. 

After the worst week of his leadership since 2010, Miliband needs to recast the relationship between the unions and the party and redefine the terms of debate in Labour's favour. These two reforms would be a good place to start. 

Ed Miliband addresses TUC members in Hyde Park at the end of a march in protest against the government's austerity measures. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.