How can Labour avoid the ‘union paymasters’ jibes? By banning all large donations

The Labour party is “under the thumb” of its trade union paymasters and its strike settlements are payback for the union millions that funded its election campaign. So say some Tory leadership contenders and their press loud hailers, a constant reminder that despite the Tories’ extreme unpopularity causing their worst ever election result, and despite Labour’s colossal majority, the media keep blasting out the messages that voters so resoundingly rejected. Labour governments swimming against this perpetual tide of hostility, which is often mindlessly mimicked by broadcasters, need to keep their nerve: this boombox is not the voice of England, let alone Britain.
Labour’s new deal for working people is a popular policy; it ends forced zero-hours contracts and fire and rehire, and creates a fair pay agreement for care workers. Despite the effect on the NHS and other services, many strikers, including nurses, doctors, teachers, firefighters, ambulance staff and postal workers retained public support; there was less for travel disrupters, not helped by Aslef’s misguided new strike. Misrepresentation of “inflation-busting” pay settlements ignores how public sector employees still lag 2% on average below their 2010 pay, while private sector pay has risen by 5% on average, according to the IFS.
These anti-union rants ignore the underlying state of pay. The UK has seen pay as a share of GDP fall from 72% in 1975 to just 60% in the first quarter of 2024 – surely not unrelated to the halving of union membership since 1979. Labour believes in restoring wages to support national growth and productivity. It’s calumny to dismiss that intent as obeying union paymasters. But mud sticks in an era when trust in politicians has fallen to a record low, and when only 60% turned out to vote in July’s general election.
The UK has fallen to the bottom of 28 countries in trusting government and institutions. Trust in politics has been undermined by stories of cash for peerages and crony donors being given lucrative contracts, and by rampant payment for lobbying, such as in the cases of Owen Paterson for Randox and David Cameron for Greensill.
There is no comparison between Labour’s entirely transparent funding from the unions that founded the party and the murky semi-covert donations from private sources that traditionally back the Tories. But nonetheless, to many it all smacks of buying influence.
More than half of Labour MPs received £1.8m between them in union funding during the 2024 election campaign, and more in previous years. Why don’t all Labour MPs get equal union funding? Angela Rayner, says the Mail, has received the highest total union donations among the Cabinet in the five years since 2019, at a time when she is the guardian of Labour’s key working rights policies granting new trade union access to workplaces to recruit, and lower legal barriers to strikes.
The idea that Rayner, who came up through the union movement, is swayed by £13,000 in donations to help her local party fight the election is preposterous, but it would be better if Labour shut the door on these cheap jibes that diminish its reputation and good intentions.
Keir Starmer, just after he won the election, said: “The fight for trust is the battle that defines our age.” That fight to restore confidence in politics will define him, so he should start right here by using this row to cleanse big money from politics. To meet the challenge of these Tory smears about Labour’s union funding by banning all large donations to political parties.
The danger of corruption comes from the mega-donors – mainly to the Tories – from often unknown original sources with unknown purposes, rewards, influence or expectations behind them. Murky unincorporated associations again donated to the Tories this year, without revealing donor names, reports the Electoral Reform Society (ERS). Was the money earned in the UK, the ERS research director, Jessica Garland, asks?
British politics relies more on donations than similar European countries, where the state funds the cost of democracy to avoid the stink of corruption. The UK state provided just 18% of party funding from 2001-11, leaving donors to do the rest. OpenDemocracy research shows a £3m gift to the Tories virtually guarantees a peerage. Under Boris Johnson, just 10 super-donors paid 25% of the party’s funds.
Johnson eviscerated the Electoral Commission as watchdog, by abolishing its power to bring prosecutions over illegal donations. Sunak raised the amount that can be given without declaring who donated it to £11,180 – and the total that a party can spend by 80%, from £19.5m to £35m – in time for the last election, perhaps assuming it would benefit him (wrongly, as it turned out).
Instead, we now see a rapid shift of money away from the failing Tories towards Labour, with some of the same big donors suddenly converted to social democracy. It looks unsavoury. What do they want in return? Just good government, or something more?
“The increase of money flowing into Labour is a stark change of trend for UK party financing,” reports the ERS. In the first quarter of this year the Tories received more funds than Labour, but the switch during the election was remarkable, with Labour taking £6.7m from mega-donors, making up 68.5% of its total prepoll tally. The tide turned in the final weeks of the campaign, as Labour drew in £9.8m worth of donations by election day – five times more than the Tories. Good news if that’s mainly small donations, less so when it’s mega-donors chasing power.
Labour’s present fundraising success would make this the perfect time for Starmer to put down that marker in his “fight for trust”. The Committee on Standards in Public Life and every other report on donations has called for state funding, with only modest donations from private donors. The Tories will be wrong-footed if they oppose it, after their noise about “union paymasters”.
The most creative suggestion for reform came from the Power inquiry chaired by Helena Kennedy: to distribute state funding without stifling democracy, voters at elections should tick a box to allocate a state voucher to any party. They might vote tactically for one party, but wish to give their funding allocation to the party of their heart, or to a new venture.
It’s shocking but unsurprising that 90% of people believe that MPs “very often” or “sometimes” decide what to do based on what their donors want. The new government has a mountainous agenda, but among many pressing constitutional reforms, this relatively simple act would send the loudest, clearest signal that Labour is cleaning up politics. Labour should set up a quick review now to start shovelling out Westminster’s Augean stables.