Labour could lose up to £8m a year as a result of the government’s changes to trade union funding, the party’s general secretary has revealed.
Iain McNicol, Labour’s most senior official, said the new restrictions will “immediately and seriously undermine the Labour party’s finances”.
It will combine with cuts to public funding of opposition parties – known as Short money – to cripple Labour’s traditional methods of financing.
McNicol told a House of Lords committee: “Our own estimate is that a change to trade union political funds, as proposed, could reduce the Labour party’s income by up to £8m a year. That will have significant consequences.”
The committee is examining party funding after Labour, the Lib Dems and other peers passed an amendment forcing more scrutiny of the bill’s consequences.
Some senior Tories, including Michael Forsyth, a peer and former Scottish secretary, have warned the move is unwise and ultimately could backfire.
“It will take away funding from the Labour party at a time when the Labour party is perhaps not at its strongest ... our parliamentary system does depend upon having a strong and effective opposition,” he told the Lords last month.
McNicol said the proposal was “unfair and ill thought through” and went against a long-established principle that funding issues should be addressed on a cross-party basis.
“The bill is, in effect, party funding legislation but is only partial reform in that it impacts solely upon the Labour party while not addressing issues such as donation caps or spending limits,” he said. “It is, in effect, a partisan attempt to smuggle reform in through the back door.”
The bill changes the way trade unionists pay into their union political fund, the only source from which unions can give money to Labour.
The changes mean each union member will have to agree in writing every five years to opt into paying the political levy, as opposed to opting out via the current system. The rules will apply to all existing 4 million political levy payers in unions affiliated to Labour and those that are not.
At least 14 unions affiliate to Labour but a huge bulk of the funding comes from five unions that together in 2014 affiliated 2,032,297 political levy paying members who provide the party with £5.55m in annual income.
In addition, unions draw on their political funds to provide one-off donations mainly at election times, amounting to about £12m. The unions provide on average about a third of Labour’s funding over the course of a parliament.
A government impact assessment concluded that probably the same number of union members would continue to affliate, which McNicol said was “so inaccurate as to be palpably absurd”.
He said: “Experience from Northern Ireland, the examples of Britain in 1927, conclusions by the committee on standards in public life all suggest there would be considerable reduction in the number affiliated. Our own estimate is we could see a reduction of up to 90%.”
This article was written by Rowena Mason Political correspondent, for theguardian.com on Thursday 4th February 2016 12.39 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010