Labour fears income drop of £25m over this parliament

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Labour is set to lose more than £6m a year as a result of rule changes by the Conservative government in this parliament alone, in what party members see as a deliberate attempt to hamstring the opposition.

Last week George Osborne, chancellor, revealed plans for a 19 per cent cut in the “short money” that goes to all opposition parties. That alone will rob Labour of about £1m a year from its existing £6m of taxpayer support. Katie Ghose, chief executive of the Electoral Reform Society, said the plan was “bad news for democracy” given that the UK spent only a tenth of the European average on funding parties.

At the same time, Labour is braced for a huge drop-off in income from changes to the rules governing trade unions.

Until now, workers automatically paid into their unions’ political funds on an “opt-out” basis — requiring them to actively choose not to contribute. Under the Trade Union Act, all 6m UK union members will now have to sign up every year to pay into political funds.

The government says the new system will be more democratic. Senior figures in Labour believe the opt-in system will lead to a withering of union subscriptions by at least 90 per cent.

During the Labour leadership contest, only 200,000 union members signed up as “affiliated supporters” despite being bombarded by emails, texts and phone calls. Opting in to political funds requires even more effort because it involves proactively signing documents, according to union officials.

The party typically receives about £6m a year through these subscriptions, topped up by regular donations worth millions by general secretaries.

Under the party’s calculations, that figure could drop to as little as £600,000 a year. As a result there are expectations that Labour could have to embark on a programme of belt-tightening by the end of next year, with redundancies expected.

Without the government’s recent interventions Labour would be enjoying full coffers thanks to a surge in membership fees from the nearly 200,000 members who have joined since May. The party has more full members than the Conservatives, Liberal Democrats and the Scottish National party combined.

The additional income from the new members — assuming they stay — is worth up to £5m a year at an average annual payment of about £25.

The current membership figure of 380,000 excludes 260,000 “affiliated members” and “registered supporters” who took part in the summer leadership race for a £3 one-off fee.

In theory, that extra membership income could make up much of the shortfall to the cuts in short money and union fees. However, officials are nervous about whether many of those new members will remain given that many signed up amid a surge of “Corbyn-mania” during the summer.

Labour, which is engulfed in a row over going to war in Syria, is facing tough electoral challenges — starting with the Oldham West by-election on Thursday. The party is expected to lose a swath of seats in Holyrood in next May’s local elections. It could also lose its majority in the Welsh Assembly in Cardiff and faces a tough fight in the London mayoral elections.

Meanwhile, Labour has abandoned plans to move into an office block on High Street Kensington. Instead, the party will occupy Southside, on Victoria Street, in office space previously occupied by Edelman, a PR agency.

The building is a regular site for demonstrations by pro-Palestinian protesters targeting G4S, which has offices in the building. The company provides services to some prisons in Israel. “It is ironic that Corbyn will now have to work his way through anti-Israel protesters,” said one person familiar with the move — in a reference to the Labour leader’s history of campaigning for Palestinian rights.

The FT has also learnt that the Lib Dems will leave their headquarters in Westminster by next summer in a sign of the party’s straitened financial circumstances.

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