Ed Miliband's £5,000 party funding cap appears radical - but could the unions bypass it?

By Matthew Barrett
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Ed Miliband appeared on the Andrew Marr Show this morning. The big news to come from the Labour leader's interview was that he appears to want to take the lead on party funding. At first glance, his comments seem to present a fairly radical approach to party funding:

"I’m determined to move on this and it’s going to be uncomfortable. All political leaders will have to make decisions that are uncomfortable for them and here are my proposals. First of all, we’ve got to have a low cap on donations. Not the £50,000 that the Prime minister talks about, £50,000 is double the average wage. I say a £5,000 donation cap, a proper low donation cap. Secondly we’ve got to have much tougher limits on spending, more comprehensive limits on spending and lower limits on spending and, thirdly, parties are going to have to diversify where they get their income from, much more small donations. ... When I talk about a £5,000 donation cap, it’s got to apply to donations from the trade unions. What I say is this; the large donations from the trade unions would no longer happen under this system."

Miliband knows a £5,000 cap would cripple both parties. The Conservatives are too reliant on a relatively small pool of large donors, and Labour are too reliant on big union donations. But Miliband also knows Labour would be able to get past the £5,000 cap. Miliband refused to answer a question about whether the £3 political levy every union member pays should be opt-in, rather than opt-out. Miliband said several times that transparency in Labour spending is more important than whether the levy stays opt-out. We must be suspicious, therefore, of the possibility that the unions would manipulate the individual levy in order to spread the burden of donations. The levy could be raised, even if gradually, to give more funds to Labour, while staying well under the £5,000 cap.

We could see the unions using the American practice of "bundling" - an individual or organisation bypasses donation caps by funnelling lots of money through a number of individuals, who each appear to give the maximum donation. The union bosses could use their most politically committed members to be seen to donate £5,000 individually. This should worry Tories because unions contain far more members (and therefore potential £5,000 donors) than there are donors to the Conservative Party.

Further adding to the unclear messages Ed Miliband gave in the first part of his Marr interview, he also said Labour would have lost "millions" if the cap had been in place last year:

"We’d have lost millions of pounds, it would have been quite significant. Just looking at the last year, and it’s important as a corrective to some of what’s out there, 40% of our income came from our members and about 40% came from the trade unions and the rest from individual donors and others, so we’re talking about a significant change here."

However, CCHQ have issued a rebuttal to this claim, saying Miliband only referred to capping "additional donations" from trade unions, not affiliation fees. CCHQ further claim that this would only have affected £100,000 out of the total of £10,056,682 Labour received from union donations last year - 1%. Baroness Warsi commented "Ed Miliband wants an exemption for the union paymasters who got him elected. His so-called cap would hit just 1% of Labour’s trade union donations. In a week when Unite threatened to bring the country to a halt he wants to make Labour more dependent on union funding and keep it that way. Unless Ed Miliband supports a universal cap on donations people will see these as weasel words from a weak leader."

I could, of course, be entirely wrong, and Miliband could be wholly sincere in his wish to cap donations at £5,000 - but that would seem to require one of three things to have happened. Firstly, he could have fallen out with one or several of the big union bosses, and he might, therefore, simply want to make a show of distancing himself from them. Secondly, he could have misspoken on Marr, and meant to have said that he really does want a cap on all union donations, not just "additional donations". Finally, he could just be being sensible. The first option has not been reported in the press, the second is possible, but the latter seems unlikely. Therefore, we should remain sceptical of his intentions.