Len McCluskey speaks at the Labour conference in Brighton last year. Photograph: Getty Images.
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Unite's £1.5m funding cut means Labour will need to bargain with McCluskey

The union is prepared to reduce the shortfall but will expect policy concessions in return.

It looks like Labour might be needing that "large donation" from Tony Blair (which I revealed speculation about yesterday). After Ed Miliband's party reforms were passed at the weekend, Unite's executive has announced that it is reducing its annual affiliation fee from £3m to £1.5m. The cut is the automatic result of its decision to reduce the number of members it affiliates to Labour from one million to 500,000 (each contributes £3 a year). With the party now requiring all union levy payers to opt into donating, Len McCluskey rightly felt that it was "untenable" to continue to affiliate one million members when polls suggest no more than half of Unite members support Labour.  Following the GMB's earlier decision to cut its funding from £1.2m to £150,000, the total financial hit from Miliband's reforms now stands at £2.55m.

But significantly, Unite makes clear in its statement that it is prepared to reduce the shortfall through one-off donations from its enlarged political fund. It said: "The Executive Council is, however, also aware that we are now just a year from a General Election, in which it is vital that the British people are offered a clear political alternative to the ruinous economic and social policies of the Coalition government. It is not in the interests of democracy itself for Labour – the only Party which can offer such an alternative – to contest the election without the resources required to make the contest a “fair fight” against the parties of global capital and the super-rich.

"Bearing in mind the tight timescales in which decisions may need to be made over this next period, it therefore authorises the General Secretary to respond to any requests for additional financial assistance, beyond the affiliation fee, which may be made by the Labour Party, after first consulting the Executive Council or the Finance & General Purposes Committee."

The two key questions are how much Unite will provide in discretionary donations and what it will demand in return (although it is worth noting that the unions have always had the power to reduce the number of members they affiliate). As McCluskey said in his speech following Miliband's announcement of the changes last summer, he will (perfectly reasonably) no longer tolerate those who "welcome our money but don't want our policy input" and expects the union to have "enhanced" influence under the new system because "our voice and our votes are looked at as legitimate". On another occasion, he told the Guardian that while he was not "looking to bankrupt the party", future funding would depend on "the policies Labour themselves are adopting, and in the context of whether we would give donations that would be determined by my executive and my political committees. It is a collective decision".

McCluskey's policy wishlist includes an end to public spending cuts, the repeal of the benefit cap, and the building of a million extra homes. The challenge for Miliband will be adopting measures radical enough to satisfy the unions while also ensuring Labour sticks to its tough deficit reduction targets.

Alongside this, the party will obviously seek to attract more private donations - and that means welcoming money from Blair and other wealthy Labour supporters. The left of the party might complain (although it is worth remembering Miliband's pledge to introduce a cap of £5,000 on all donations), but when you're preparing to fight a general election against a well-funded Conservative machine, you can't be choosy. Until party funding reform is finally achieved, Labour can't afford to unilaterally disarm.

Here's Unite's statement in full:

"The decision of the Labour Party Special Conference on March 1 to adopt the proposals of the Collins review sets the collective relationship of Unite and other affiliated unions with the Party on a new course.

"The union will rapidly prepare a plan to ensure that we maximise the number of our political levy paying members who express support for our continuing collective affiliation, and who take advantage of the possibility of becoming associated members of the Party. Our representative on the Implementation Committee which will oversee the introduction of the agreed reforms will, among other things, work to ensure that the interests of our members are protected in the forthcoming selection process for Labour candidate for London Mayor and in any leadership election that may occur before 2020.

"When the Leader of the Party announced his intention to seek changes in the Labour-union relationship in summer 2013, he made it clear that he did not think it appropriate that the Party continue to accept affiliation fees from those who had not actively assented to such payments. Unite accepted that principle at the time.

"By the conclusion of the transitional period in 2020, it will be clear how many members of Unite and other unions actively support their political levy being used to affiliate to the Labour Party. Unite will work to make that number as large as possible. It is inevitable, however, that the final total will be considerably less than the present one million members affiliated. Opinion polling evidence suggests that, while Labour is by some way the most popular choice for Unite members at the ballot box, no more than half the membership in Britain vote Labour at present (many of the others not voting at all).

"The Executive Council therefore agrees that Unite’s affiliation will need to be reduced over the five-year period to 2020 to reflect this reality. It will therefore affiliate 500,000 members to the Party for 2014, and will review this number annually.

"The Executive Council is, however, also aware that we are now just a year from a General Election, in which it is vital that the British people are offered a clear political alternative to the ruinous economic and social policies of the Coalition government. It is not in the interests of democracy itself for Labour – the only Party which can offer such an alternative – to contest the election without the resources required to make the contest a “fair fight” against the parties of global capital and the super-rich.

"Bearing in mind the tight timescales in which decisions may need to be made over this next period, it therefore authorises the General Secretary to respond to any requests for additional financial assistance, beyond the affiliation fee, which may be made by the Labour Party, after first consulting the Executive Council or the Finance & General Purposes Committee."

George Eaton is political editor of the New Statesman.

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Brexit is teaching the UK that it needs immigrants

Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past.

Why did the UK vote to leave the EU? For conservatives, Brexit was about regaining parliamentary sovereignty. For socialists it was about escaping the single market. For still more it was a chance to punish David Cameron and George Osborne. But supreme among the causes was the desire to reduce immigration.

For years, as the government repeatedly missed its target to limit net migration to "tens of thousands", the EU provided a convenient scapegoat. The free movement of people allegedly made this ambition unachievable (even as non-European migration oustripped that from the continent). When Cameron, the author of the target, was later forced to argue that the price of leaving the EU was nevertheless too great, voters were unsurprisingly unconvinced.

But though the Leave campaign vowed to gain "control" of immigration, it was careful never to set a formal target. As many of its senior figures knew, reducing net migration to "tens of thousands" a year would come at an economic price (immigrants make a net fiscal contribution of £7bn a year). An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent. For the UK, with its poor productivity and sub-par infrastructure, immigration has long been an economic boon. 

When Theresa May became Prime Minister, some cabinet members hoped that she would abolish the net migration target in a "Nixon goes to China" moment. But rather than retreating, the former Home Secretary doubled down. She regards the target as essential on both political and policy grounds (and has rejected pleas to exempt foreign students). But though the same goal endures, Brexit is forcing ministers to reveal a rarely spoken truth: Britain needs immigrants.

Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. On last night's Question Time, Brexit secretary David Davis conceded that immigration woud not invariably fall following Brexit. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (while sounding rather unconvinced), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

The UK’s vote to leave the EU – and May’s decision to pursue a "hard Brexit" – has deprived the government of a convenient alibi for high immigration. Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past. Brexit may have been caused by the supposed costs of immigration but it is becoming an education in its benefits.

George Eaton is political editor of the New Statesman.