Better off without a bankroll: The Labour Party could never survive without union money, handed over in return for tame MPs and block votes. Or could it? John Torode thinks the unthinkable

JOHN SMITH's proposals for democratising the Labour Party were modest: Omov; or one member, one vote in the selection of candidates and future party leaders. The trade union response was brutal. The Labour leader has aroused the fury of virtually the entire union establishment.

John Edmonds, leader of the GMB union (block vote 650,740), said: 'We support the party, we pay for the party and we have a right to democracy in the party.'

By democracy, Mr Edmonds meant the undemocratic, collectivist practices that give him such power and ensure that his menacing utterances are front-page news. Mr Edmonds is regarded as the thinking man's general secretary. He claims he is a reformer and one of Mr Smith's most enthusiastic supporters. God knows what the unthinking, unreconstructed members of the TUC General Council, who do not have much time for the current party leader, are saying in private. But their message is clear: 'He who pays the piper calls the tune.'

The unions do indeed pay. In 1991 union affiliation fees accounted for pounds 4.3m out of a basic income of pounds 4.9m. Labour is a federal party that makes no secret about multi-million-pound payments into party funds by affiliated trade unions. Add to that the parliamentary grant of pounds 338,000 and almost pounds 917,000 described rather vaguely in the party's annual report as fundraising and donations, and the party's total income was pounds 6.9m. Like the Tory party, it overspends.

So the unions loom large. Labour's funding system works - attention Tory critics - under legal safeguards introduced as part of the union reform package of the Eighties. The law requires members to be balloted every five years to determine whether they wish their union to maintain a political fund. The unions that do are then required to ensure that individual members are asked whether they wish to pay the political levy. They are not asked how the money should be used. As a result, union members may vote for the maintenance of a political fund without wishing all (or, indeed, any) of it to go to the Labour Party. But that, in practice, is what happens.

Once established, a political fund is at the disposal of the union's bosses. They use most of it to buy large blocks of votes at Labour conferences. The rest is used to subsidise individual 'sponsored' MPs. These procedures are the source of union power, and, as Mr Smith is learning, they are used ruthlessly.

One Labour MP who accepts pounds 600 a year from a trade union to fund constituency work was recently asked to justify to his benefactors his voting record and public comments. He is now considering whether it is worth compromising his integrity for such a trivial sum.

The Labour Party could not survive without the money served up through the political levy and handed over in return for the block vote at conference and a substantial say in the choice of MPs, the party's leader and its policies. Or could it?

Lord (Bill) Rodgers was one of the so-called Gang of Four who broke away from Labour and founded the Social Democratic Party in 1981. The split came in part because of distaste for the way in which a previous generation of union leaders exercised their undemocratic power. This is why the SDP was so wedded to Omov in its own affairs.

Lord Rodgers served as chairman of the SDP's finance committee until the party merged with the Liberals in 1988. So he has more experience of politics on a shoestring than most. Yet he looks with scorn at the bloated and inefficient nature of the two big parties and believes that Labour would survive and prosper without union affiliation.

'The SDP never had any money by Labour's standards,' he said yesterday. 'But we were not unhappy about our shortage of money. In spite of the systematic generosity of David Sainsbury, most of our funds always came from membership fees and small donations. Even so we were never seriously strapped for cash and we had absolutely no problem about doing the things we wished. The Alliance (Liberal and Social Democrats) fought the 1983 election on pounds 1.5m while Labour spent pounds 4.5m and the Conservatives pounds 5.5m. Ours was a very good and highly effective campaign. Labour's wasn't'

According to Lord Rodgers, political expenditure provides 'very sharply diminishing returns'. In other words, the more money a party has, the more it spends - and the less effectively it spends it. The SDP was, he claimed, the most efficient party in the country because it had to be. 'We applied the latest management techniques and were highly cost-efficent.'

Self-congratulation aside, Lord Rodgers is surely correct. The most important market-place in which parties operate is the market for ideas. It mattered relatively little that the SDP lacked an expensive infrastructure or union sugar daddies as long as it had a Big Idea to sell. Vast bureaucracies and flashy think-tanks are no substitute for inspiration. Moreover, the necessity to get out on the doorsteps and raise funds generates excitement, involvement and thus more supporters. It also helps to keep parties in touch with the real world. Large cheques from Mr Edmonds and the rest of the union barons are a poor subsitute for ideas, enthusiasm and action.

Come election time, the parties are presented - free of charge - with more air-time on television and radio than they can handle. In addition to party political broadcasts, which are under the editorial control of the parties, spokespeople are given endless opportunities to state their case on meticulously balanced programmes. It was not lack of money that made Neil Kinnock's triumphalist Sheffield rally at the last election such a vote-loser.

So perhaps a major political party can live poor. But if Mr Smith saw off the block vote, would poverty loom? Probably not. Even without the traditional quid pro quo, unions still would want to support the Labour Party financially.

Most union leaders contacted yesterday refused to discuss this proposition. But one of the most far- sighted, Gavin Laird, leader of the engineers and electricans, said that while he was adamantly opposed to a breach, he had no doubt most unions would continue to stump up: 'Absolutely. Oh, absolutely. No doubt about it.'

If Labour and the unions were to split, it would probably increase the financial pressures on the party. But, as Mr Laird indicated, most unions would continue to donate, just as their American counterparts make contributions to the Democratic Party. And, indeed, the Democratic Party, which relies on donations from business as well as unions, is the sort of model to which Labour should be looking. But the fact that Labour has been mandated by the unions to pursue their policy line precludes the possibility that business can contribute in a large way to party funds as it once did to the SDP. It is unhealthy and intellectually constricting for one party to be the party of labour and one the party of capital.

But with true emancipation and democratic reform, Labour could move to a position where, either through enthusiasm or as insurance, the idea of business contributions to its funds came into play. A Labour Party not beholden to the unions would be intellectually freer, healthier and more attractive to the electorate. Mr Smith has no reason to fear thinking about the unthinkable.

(Photograph omitted)