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The bankruptcy of Labour

With the cynical attempt to draw a readership with an ambiguous headline out of the way, I move on swiftly to John Prescott’s warning that Labour might go bankrupt, and that he should be made Treasurer to save it. 

It’s an interesting piece, as much for what it doesn’t say as about what it does.  It’s mostly about how tough he’ll be on cutting costs, and not as much about creating revenue as I hoped it would be. 

Now I know a thing or two about being close to bankruptcy, having helped dig quite a few organisations out of perilous financial holes over the years, so I took up John Prescott’s offer to comment on his plans and wrote to him.  Here, tidied up a bit, is what I wrote:


Dear John 

I am the leader of the Labour group on West Lancashire Borough Council, and know a thing or two about grassroots politics.  

From what passes as my professional life, I also know a thing or two about helping organisations avoid bankruptcy. 

While I enjoyed your article on why you want to become treasurer, and the words on possible bankruptcy are laudibly straightforward, there is also an overemphasis on smart, cost-effective campaigning – important in itself, certainly.  

Conversely, there is not enough emphasis on how we create bigger revenue into the party. It is on this that I want to have my say. 

Most organisations facing bankruptcy must face up to the fact that cutting costs, however radically, will probably not be enough if that is not matched by increased revenue, at least if the organisation is to carry on delivering its main service/product. Of course, if it doesn’t carry on delivering its main service/product because of cuts in expenditure, existing revenue will dry up.   Creditors are therefore often more interested in strategic plans for growth in revenue than they are in cost-cutting plans.

The Labour party is no different; if we don’t deliver on our promises to members and to sponsor unions, this income will decline. 

I don’t have access to Labour’s books, but I’d hazard a guess that the ‘deficit plan’ of the NEC identifies increased revenue coming in, without detailing exactly how these additional revenue streams will be tapped, and what resources will be needed to tap them in the first place. 

This may well be because they are based on projections for larger donations which may or may not happen, or on membership increases/increased union input that we haven’t yet agreed on, or have a plan for agreeing. 

I suspect we need to think radically, and soon, about how to generate this additional membership/union income. 

There are, I contend, two main ways in which we can increase revenue through the enhancement of party/movement democracy and a consequent increase in our activist/membership base. 

Both are radical but logical steps in power devolution of the type all leadership candidates now say they espouse (though details are scant on how this will be acheived), and both will increase membership/union input substantially if they are implemented properly and in good faith. 

First, the financial flows within the party need to be totally reversed. 

All membership money and donations, barring a very small top slice for absolutely essential national administrative functions, should be distributed to CLPs (and possibly branch level in time) on a pro-rata basis according to membership numbers. The CLPs, thus resourced, will then be open to ‘business plans’ from MPs/PPCs and from regional party structures/the NEC etc. which they can approve, ask to see amended, or reject as they see fit. Under your guidance, CLPs should have a mind to ensuring the smart, cost-effective campaigning you advocate. Initially, the task facing CLPs may seem overwhelming, and some central support from the top slice may be necessary. 

In time, all parliamentary monies paid to MPs for running their constituency office should have automatic sequestration by CLPs and this should then be subject to the business planning process indicated above. Beyond this, MP salaries might also be taken down the same route (as would councillor allowances), with local decisions made on how much MPs are worth paying (of course, we would expect to see Labour MPs form their own union to negotiate collectively). 

This devolution of power over the party’s resources will, in a fairly short space of time, create a major incentive for people to join the party, in the knowledge that they now have a local say over how the party’s resources are spent i.e. on what campaigns. In effect, local party members become Trustees of their own local party, with the MP and councillors (and other staff) acting as employees. 

When back in government, Labour should also consider passing legislation which imposes the same ‘bottom-up’ funding model on all political parties with parliamentary representation in respect of all monies paid by government to parties e.g. Short monies. This funding pro-rata to membership, with memberships of the various parties then having real financial clout, will create a virtuous circle of local input-increased membership of parties-increased local input. 

These proposals are set out more fully here , here  and (in respect of legislation for all parties) here. There are more thoughts on the localisation of PPC selection here

Second, and closely related to the first radical step, the new Treasurer and the NEC should commence work with trade unions to encourage them to disaffiliate from Labour nationally and to re-affiliate to local parties. 

Funding should be allocated to these local parties on the basis of satisfactory ‘business plans’ (an extension on the way in which unions already fund specific campaigns with MPs). 

Again, this will enhance local input into decision making and increase party/union membership in time, creating scope for additional revenue into the party. 

Clearly there will be a need to agree a transition plan which caters for the fulfilment of exisitong obligations to creditors and reassures them that this move towards localised funding arrangements will provide better guarantees of debt repayment because it creates both better revenue and better understanding within the membership of the party’s current financial obligations, leading to an enhanced willingness to contribute, fundraise and recruit. 

More details are here

Membership and union involvement needs to increase dramatically.  This is the best way towards long term financial stability and further growth.  Empowering the existing membership and union supporters is the way to do this. 


Categories: Labour Party News
  1. August 24, 2010 at 11:45 pm

    I assume you’ve sent these proposals to the other candidate for Treasurer? I’m not aware that the debate on finances is as detailed as you go into here.

  2. paulinlancs
    September 3, 2010 at 2:12 pm

    James, yes I did.

  1. August 24, 2010 at 2:58 pm
  2. March 26, 2012 at 10:29 am
  3. July 8, 2013 at 11:04 pm

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