Labour's friends in the north

The Labour funding scandal prompts Martin O'Neill to recall the T. Dan Smith case

T. Dan Smith is now a curiously forgotten figure, but his ghost seems to hover over the current Labour Party funding scandals.

Smith, a charismatic and imaginative politician, was leader of Newcastle City Council from 1960 to 1965. During his period in charge of Newcastle, Smith did a great deal to clear the city of its notorious slums, and to develop new housing within the city.

Indeed, he was something of a visionary, imagining the creation of a shining new city – a 'Brasilia of the North' – that would be a regional city to rival Milan or Barcelona. But T. Dan Smith is now remembered, if he is remembered at all, mostly through the prism of his fictionalized appearance as the venal and sinister ‘Austin Donohue’, as portrayed by the grizzled Geordie actor Alun Armstrong in the classic BBC TV series Our Friends in the North.

Despite his achievements, and his core of visionary idealism, Smith cut corners and wasn’t averse to lining his own pockets. He received £156,000 (an astronomical sum in the 1960s) from the firm of architect John Poulson, in return for contracts on a number of Newcastle housing projects. Smith was eventually jailed for bribery in 1974, along with the leader of Durham Co, Andy Cunningham (father of former New Labour minister Jack Cunningham). While Watergate was dragging American politics into the gutter, T. Dan Smith’s corruption trial provided a shabby British counterpoint.

Nothing in the current brouhaha about David Abraham’s donation of more than £600,000 to Labour via a series of proxy donors seems to involve wrong-doing or corruption in anything like the T. Dan Smith style. But what does seem striking is that the tone of the whole affair shares something of the murkiness of that case. Both seem to suggest that Labour’s way of doing business in its North East heartlands involves rather too much in the way of nods and winks rather than following pristine procedure, and that a few powerful individuals are allowed to bend the rules as they like when it comes to how Labour functions.

Now, no-one has suggested that one of Mr Abrahams’s planned developments was nodded through by the Department of Transport under the face of prior objections, simply because he was a substantial Labour donor. But there was at least a very significant possible conflict of interest insofar as the beneficiary of the decision was himself one of the Party’s largest donors. And that conflict of interest was even more problematic given that it was hidden from public view by virtue of Abrahams’s system of proxy donors.

The important normative issue lurking behind this shoddy business is, of course, the matter of how, in a democratic society, political parties should be funded. In an inegalitarian society like the one we inhabit, there are clearly good reasons to try to limit the degree to which rich individuals should be able to influence the political process. Otherwise, there is every worry that an inegalitarian economic structure can lead directly to a corrupt form of politics that serves the interests of a small elite of party donors and media owners, at the expense of the interests of the country in general.

At the absolute minimum, citizens of a democratic society are surely entitled to know who is bankrolling the party political activities of our politicians, whether those individuals are a Lord Ashcroft or a David Abrahams. We need to be able to assess the decisions and behaviour of our politicians in light of full information about where the money all comes from.

Gordon Brown’s attempt to defuse the Abrahams affair has involved calling for root-and-branch reform of party funding. The elements most mentioned are: (i) introducing an individual donation cap of something like £50,000 on party donations, in keeping with the recommendations of the Hayden Report, and (ii) increasing the scope of state funding of political parties. It seems to me that there are excellent arguments for the introduction of a funding cap, whereas the case for state funding is on much shakier ground.

A funding cap is profoundly democratic, insofar as it is one mechanism whereby inequalities of power within the economic sphere are prevented from ‘crossing over’ into becoming inequalities of power and influence within the political sphere.

The political philosopher Michael Walzer, in his important 1983 book Spheres of Justice, argues that economic inequalities are at their worst when they are easily translatable into inequalities of political power, educational attainment, or of access to healthcare. In other words, economic inequality is much worse in a world where money can buy everything, rather than in a world where the economy is insulated from the political sphere.

A cap on individual donations, although no doubt an imperfect mechanism in many ways, at least has the advantage of providing some degree of insulation from the corruption of politics by money. It is thus to be applauded on both egalitarian and democratic grounds. Indeed, I have no doubt that the cap on individual donations should be well below the suggested figure of £50,000. A tenth of that figure would be a good place to start.

State funding of political parties is usually argued for on the basis that, if one were to introduce a cap on individual donations, the shortfall would have to be made up in some way or another. But this argument is specious. Politics is as expensive as it is in large part because the main parties are engaged in a political arms-race, whereby they need to compete with each other on expenditure on advertising and organization at election time.

This suggests that there is no reason why party politics could not be done much more cheaply than it is at the moment. It is plausible to think that cheaper politics might also be better politics. Less expenditure on focus groups and consultants, less mindless billboard advertisements and, instead, more of the sort of cheap retail politics that has no option but to rely on the power of arguments, whether in public meetings or on the door-step.

Style is expensive in politics; but substance can be done cheaply. A financially poorer politics, with rigorous limitations on individual donations, would no doubt be less stylish. But it might leave us all better off.

In The Eighteenth Brumaire of Louis Napoleon, Karl Marx famously suggested that "history tends to repeat itself: the first time as tragedy, the second time as comedy". Proper reform of party funding would not be enough to save us from the tragedy of cases like T. Dan Smith’s, where idealism was short-circuited by the lure of cash. But it would at least do something to save us from the dull and shabby comedy of the Abrahams affair.