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Miliband's party funding sacrifice has opened the door to real reform

If Labour can hold its nerve, Miliband's plan could finally get big money out of British politics.

Ed Miliband delivers his speech on reforming the Labour-trade union link at The St Bride Foundation in London earlier this week. Photograph: Getty Images.

The GMB’s decision to slash its affiliation fees to Labour – by top-down decision rather than by asking their members – certainly might seem to support George Eaton’s fears about Ed Miliband’s proposed changes to the union link. Eaton fears the Tories and Lib Dems may even impose statutory change on us. A different view would be that Miliband has started a process which, if we can hold our nerve, could finally get 'big money' out of British politics.

Every attempt to reform party funding has been blocked by two golden rules. First, change must be agreed, not unilaterally imposed by the governing party. Labour observed this scrupulously during its long years of huge majorities. Second, no one party would weaken its own position without getting concessions from the others. Between them, Paul Kenny and Ed Miliband have torn up the second rule.  It’s this which opens the door to change.

Contrary to briefings from Nick Clegg’s office, the recent cross-party talks did not fail, let alone collapse due to Labour intransigence. Texts of a possible draft agreement on principles were still being exchanged when Clegg unilaterally ended the talks. His dishonest decision to switch attention to union funding is a political tactic which suits both the Lib Dems and the Tories. And it may well be that they will try to use the Lobbying Bill to impose changes on Labour’s relations with the unions.

But consider Labour’s current position. Labour is committed to getting big money out of politics. (So, according to the Coalition Agreement, are the Tories and the Lib Dems). Trade union money has very different origins to that of wealthy individuals but discretionary union donations must be seen as big money. Today’s events have surely driven home that union leaders are among the few hundred powerful individuals who effectively determine how much money British political parties get and what they get it for. With his recent initiative, Ed Miliband has said he wants members of union political funds to positively affirm that they want their money to go to Labour. But for over a year he has been also saying he is willing to limit discretionary donations from union general secretaries or political committees – as part of an overall agreement to limit donations from individuals, companies and unions to £5,000 per annum. In other words, Labour has a tough and credible position which really would take big money out of politics.

This leaves the Tories defending, in principle, big private donations as the best way of funding democracy. Their idea of a limit is £50,000 per annum, or £250,000 per individual every Parliament, which only goes to show that the Tory idea of what constitutes big money is completely out of touch with the average voter. And most voters find the Tories' immersion in the vested interests of private donors far more offensive than Labour’s public and historic union links. While Labour’s union link is at root political and will survive whatever the financial links, Conservative dependence on private finance goes to the core of how its supporters see power and influence operating in government. Labour should ruthlessly expose this central weakness in the Tories’ DNA.

It’s always been assumed - in the Hayden Phillips negotiations, the Kelly Report and the cross-party talks – that donations could only be capped if large sums of public money came in to compensate. The unpopularity of that idea has been the reason parties have used to keep things as they are.

We now have a chance to change that logic and campaign straight forwardly for an unconditional £5,000 donation limit. To win the politics, the risk has to be taken that we give up big money and make do with much less. This logjam has blocked reform for too long and Ed Miliband’s initiative has changed the rules of the game. Maybe the public would be more open to support finance for a functioning democracy if they first knew we were determined to wean ourselves off big money and all it represents.

Meanwhile, if the coalition do impose change on Labour they will have set aside the first golden rule – proceed by agreement. If they do, they could hardly complain if Labour campaigned on a manifesto promise to impose a £5,000 donation limit and much tighter controls on spending. 

John Denham is the Labour MP for Southampton Itchen and a former cabinet minister