Ed Miliband's decision to introduce a new opt-in system for donations to Labour from members of affiliated trade unions was spun as a move to reduce the power of union general secretaries but in his interview in today's Guardian , Len McCluskey shows why it could achieve the reverse.
With the party likely to lose around 90% of the £8m it currently receives in affiliation fees (Miliband aims to recruit 300,000 of the 3 million political levy payers to Labour), it will likely fall to unions like Unite to make up the shortfall through separate donations from their political funds (which are unaffected by Miliband's plan). And this, as McCluskey signals, has increased his bargaining power. He tells the Guardian that he is not "looking to bankrupt the party" but adds that future funding will 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". His wishlist includes the repeal of the bedroom tax, a rejection of the benefit cap, a break with "austerity spending", 1m extra homes and a £1.50 increase in the minimum wage.
Depending on your political persuasion, McCluskey's increased power may be viewed as no bad thing (all of the policies I listed above are ones Labour should support) but it leaves Miliband vulnerable to the Conservative charge that his party is more dependent on the "union barons" than ever and undermines his pledge to take big money out of politics.
It's for this reason that the Labour leader desperately needs a deal on party funding reform. His proposed donation cap  of £5,000 would apply to unions as well as individuals, eliminating any danger that McCluskey and others could hold the party to ransom. But while Miliband has removed one obstacle to a deal by promising to introduce an opt-in system, the Tories and the Lib Dems want him to go much further. As Nick Clegg outlined  following Miliband's speech, he would like the political levy to be reformed so that union members are given the choice to donate to other parties. After all, as McCluskey concedes in the interview, Unite's own internal polling demonstrates that "a large chunk" of his members vote for parties other than Labour (the union's June 2013 political report stated "We can estimate that around 35-40% of our members voted Labour at the last election, with around 50-55% voting.")
Whether Miliband is prepared to go this far, at least without significant concessions from the coalition parties, remains unclear, but without a deal he could face an unpalatable choice between "bankruptcy" or another trade union bail-out.