Report
Chapter 1: Introduction
Introduction
1.The Trade Union Bill was introduced in the House of Commons on 15 July 2015. It completed its passage through that House on 10 November 2015, and received its first reading in the House of Lords on 11 November 2015.
2.During the second reading in the House of Lords on 11 January 2016, some members of the House expressed concern about the potential impact of clauses 10 and 11 of the Bill, in particular the requirement that in future union members would have to be asked to opt in to contributing to their union political fund, rather than just being given the opportunity of opting out of doing so. There was also concern about the subsequent impact on the relative funding of each of the political parties.1
3.Baroness Smith of Basildon, the Leader of the Opposition in the House of Lords, subsequently tabled a motion to set up a select committee “to consider the impact of clauses 10 and 11 of the Trade Union Bill in relation to the Committee on Standards in Public Life’s report, Political Party Finance: ending the big donor culture, and the necessity of urgent new legislation to balance those provisions with the other recommendations made in the Committee’s Report”.
4.In moving the motion on 20 January, Baroness Smith commented that “our genuinely held concern is that this aspect of the Bill will have a significant impact on the resources of one major political party—my party, the Labour Party. In doing so, that will both disrupt the political balance in the UK and have a damaging effect on the electoral process and on our democracy”. She added:
“These two clauses basically deal with how trade unions raise and spend their members’ money for political purposes. The Government contend that this has no direct bearing on political party funding—specifically, Labour Party funding—but both we on this side of the House and the trade unions contend that it does.”2
5.The Minister, Baroness Neville-Rolfe, responded that “these clauses relate to trade union reform and not to party funding reform”, adding that “Clauses 10 and 11 embrace the good democratic values of choice, transparency and responsibility”. She concluded:
“Our reforms in the Bill look at how trade union members choose to contribute to trade union political funds. We are not looking at how trade unions fund political parties. Opt-ins and opt-outs for trade union political funds have always been a matter for trade union legislation. Party funding and its regulation have always been a matter for party funding legislation.”3
6.The motion was passed on division by 327 votes to 234. The Committee was appointed on 28 January and ordered to report by 29 February. This report is the result of the Committee’s work.
7.The report is structured as follows:
- Chapter 1 sets out the policy and legislative background.
- Chapter 2 considers the likely impact of clauses 10 and 11.
- Chapter 3 assesses the findings of Chapter 2 in the context of the broad subject of political party funding reform.
- Chapter 4 sets out the way forward.
Policy background
Political funds
8.Unlike other organisations,4 a union wishing to engage in political activities or contribute to a political party must for these purposes set up a political fund which is separate from its day-to-day general fund. Political activities might, for example, include campaigns against racism, child poverty and the costs of education.5 Unions which are affiliated to a political party may also make payments to the party in the form of affiliation fees, donations and other support. Iain McNicol, General Secretary of the Labour Party, told us that, out of the £22 million which Labour Party affiliated trade unions raised in political funds in 2014, £10 million was given to the Labour Party.6
9.The union is required to obtain the approval of its members via a ballot to establish a political fund. Once established, members who do not wish to contribute to the political fund can opt out and henceforth be exempt from paying in to the fund.
10.There is a long history to political funds and the question of whether they should be run on an opt-in or an opt-out basis. Following a court judgment7 that union expenditure on political activities was unlawful, the Liberal government brought forward the Trade Union Act 1913. The Act introduced the concept of political funds in order to loosen the legal restrictions on union political expenditure, while also specifying that union members could opt out of contributing to the fund, as is currently the rule.
11.The Conservative Government’s Trade Disputes and Trade Unions Act 1927 repealed the 1913 Act. Though political funds were maintained, opting out was replaced with opting in. This meant union members who wished to contribute to the political fund actively had to give notice to this end.
12.The Labour Government’s Trade Disputes and Trade Unions Act 1946 in turn repealed the 1927 Act. Political fund contributions reverted to the original opt-out scheme from 1913. Unlike the 1927 Act that introduced opt-in, the 1946 Act did not apply to Northern Ireland and, as a result, union members must still opt in to political funds in Northern Ireland.
13.The Trade Union Act 1984 substantially altered trade union law in the UK. The Conservative government at the time considered either adopting an opt-in model for political levies (as individual payments into political funds are known) or imposing a 10 year ballot requirement for political funds, whereby a union’s political fund would lapse after 10 years unless the union re-balloted its members to obtain their agreement to its continuation. In the end, the Government agreed to preserve the opt-out model in exchange for the unions increasing the level of awareness among their members of the opt-out provisions. The Government also introduced the 10 year ballot provisions.8
14.Political funds are currently regulated by sections 71-84 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“the 1992 Act”).
15.Under the 1992 Act “The funds of a trade union shall not be applied in the furtherance of the political objects” unless there is in force a political resolution and the payments come from of a separate fund.9
16.Section 72(1) defines “the political objects” as the expenditure of money:
(a)on any contribution to the funds of, or on the payment of expenses incurred directly or indirectly by, a political party;
(b)on the provision of any service or property for use by or on behalf of any political party;
(c)in connection with the registration of electors, the candidature of any person, the selection of any candidate or the holding of any ballot by the union in connection with any election to a political office;
(d)on the maintenance of any holder of a political office;
(e)on the holding of any conference or meeting by or on behalf of a political party or of any other meeting the main purpose of which is the transaction of business in connection with a political party;
(f)on the production, publication or distribution of any literature, document, film, sound recording or advertisement the main purpose of which is to persuade people to vote for a political party or candidate or to persuade them not to vote for a political party or candidate.10
Non-political activities can be funded through a general fund.
17.Political funds and the rules governing them are overseen by the Certification Officer, the statutory authority tasked with overseeing trade union administration. His other responsibilities include ensuring compliance with the statutory requirements for annual returns and determining complaints concerning union elections and ballots. He approves, collates and publishes all annual returns received from unions on his website. 11
18.Out of the 163 listed unions in the UK, 25 have political funds.12 Of these, 15 are affiliated to the Labour Party. Those 15 are marked with an (*) in Box 1.
Box 1: Trade unions with a political fund
|
Source: Certification Officer, Annual Report 2014–2015 (July 2015): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/449387/CO_Annual_Report__2014–2015_.pdf [accessed 29 February 2016]
Political levies
19.Members contribute to the political fund by paying a political levy. The size of the levy is determined by the individual union. Unions like USDAW and the FBU apply a weekly, fixed levy to all their contributing members while UNISON calculates the levy as a percentage of the individual member’s union membership fee. These fees vary depending on the individual’s income.13 Figure 1 below illustrates the average political levy paid by members of the individual unions in the 2013 reporting year. This simple average does not consider internal variances in levies in unions like UNISON. Across the 25 unions, the average political levy is £4.84 per year (just over 9p per week).14
Figure 1: Average weekly political levy
Source: Certification Officer, Annual Report 2014–2015 (July 2015): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/449387/CO_Annual_Report__2014–2015_.pdf [accessed 29 February 2016]
20.Currently, most union members pay the political levy by default unless they have actively chosen to opt out. As Appendix 4 shows, some 89% of members of the 25 unions with political funds—4,954,606 in total—had not opted out of the political levy in the 2013 reporting year.15
21.Under section 84 of the 1992 Act, the trade union is obliged to inform its members that “each member has a right to be exempted from contributing to the union’s political fund”. The union must also inform the member that a form of exemption notice can be obtained from the union or the Certification Officer.16 A member may give notice in the form provided by the union or in a form to the same effect. On giving such an exemption notice, a member must be exempted from contributing to the political fund. The means by which the union should inform its members about their right of exemption are not specified.
Affiliation Fees
22.Unions can affiliate themselves with a political party. Historically the Labour Party was formed as a federation of affiliates—mostly trade unions—and the structure of the Party still reflects that system. Affiliation to a party is a matter of union policy and requires approval by the union conference.17 Out of the 25 unions with political funds, 15 are affiliated with the Labour party.18 These are marked by an (*) in Box 1. No unions are affiliated to the Conservative Party or the Liberal Democrat Party.
23.Affiliated unions pay, from their political fund, an affiliation fee to the chosen party on behalf of their members. The affiliation fee is generally paid at £3 per contributor to the political fund, but there is no obligation on unions to pay the full sum which this formula implies. TULO told us that between 2010 and 2015, the Labour Party received around £6 million per year in affiliation fees.19 The affiliation fees are distinct from donations to the Labour Party, though trade unions are also able to make such donations from their political funds.
24.In 2014, the then Labour leader Ed Miliband commissioned Lord Collins of Highbury to conduct a review of Labour party reform. The Collins Review into Labour Party Reform recommended that the Party should “ask all levy payers, current and future, to make a positive individual choice over the payment of affiliation fees to the Labour Party”. The report recommended a five year transition period to implement the change.20 The recommendations on affiliation fees were adopted at a Labour Party conference in March 2014.21 Whilst collective affiliation of unions is retained, after the transition period the level of that affiliation will depend on the number of individuals making a positive choice to be an affiliated member of the Party. This is usually referred to as ‘opting in’ and resembles a recommendation of the 2011 report of the Committee on Standards in Public Life (see below).
Trade Union Bill
25.Clause 10 of the Trade Union Bill specifies that it would be unlawful for a union to collect a contribution to the political fund from a member unless that member has “given to the union notice in writing of the member’s willingness to contribute to that fund”. Unions would thus only be able to collect political levies from members who had actively opted in to the political fund. The onus would be on the member actively to give notice in writing that they wished to contribute. This opt-in notice would expire after five years unless “it has been renewed by notice in writing (a “renewal notice”)”.
26.Clause 10 would grant the unions a three month transition period from commencement, at the end of which they must cease to claim political levies from all members who have not given notice of their opt-in.
27.Clause 11 of the Bill would require unions to publish detailed information about their political fund expenditure, if this exceeds £2,000 in a year, in their annual reports to the Certification Officer. The annual return must include a detailed description of the amount spent on each of the political objectives stipulated in section 72(1) of the 1992 Act.
Sources of party funding
28.Political parties in the UK have consistently increased their expenditure in elections. Lord German, the Treasurer of the Liberal Democrats, remarking on the increase in total cross-party spend from £31.53m in 2010 to £37.29m in 2015,22 told us that “The spending race has no end in sight.”23 This expenditure is financed through different means, including donations from private donors, party members, unions, businesses and other organisations. There are also substantial state grants.
Donations
29.Political parties must provide the Electoral Commission with quarterly reports on donations and loans which they have received and accepted. The four largest Westminster parties, the Conservative Party, the Labour Party, the Liberal Democrats and the Scottish National Party, each have a distinct donation base, as shown by Figure 2 below and Appendices 6 and 7. For the purposes of this graph, affiliation fees from trade unions have been treated as donations.
Figure 2: Donations received and reported by political parties 2010–2015
Source: Written Evidence from the Electoral Commission (TUP0030)
30.Appendix 6 gives a more detailed breakdown of the Electoral Commission’s figures for donations to all political parties from 2010 to 2015. In that period, unions made donations of £64.8m to the Labour Party. Figure 3 below shows the amounts donated by the five highest-contributing unions, including affiliation fees. In the same period, other organisations gave a larger total of £83.1m to various parties but predominantly to the Conservative Party.
Figure 3: Labour Party funding from the five highest-contributing unions 2010–2015
Source: Written Evidence from the Electoral Commission (TUP0030). See Appendix 7 for details.
Public funding
31.Public funding is available to parties to assist in the performance of their parliamentary functions in both Houses of Parliament. In the House of Commons it is called Short Money and in the House of Lords it is known as Cranborne Money. In 2014/15, Labour received a total of £6.68m in Short Money and £572,717 in Cranborne Money.24 The Chancellor announced in the November 2015 Spending Review that he proposed to cut and then freeze the level of Short Money. Political parties are also eligible for public funding through Policy Development Grants amounting to £2 million a year. Policy Development Grants are available to parties which are registered with the Electoral Commission, and which have at least two sitting Members of the House of Commons.
Reviews of political party funding
32.Several attempts have been made to review party funding in recent times.
33.In 2007, Sir Hayden Phillips was commissioned by then Prime Minister Tony Blair to conduct an inquiry into party funding. The report recommended adopting a cap on donations (Sir Hayden suggested £50,000), increasing the degree of public funding and enhancing the transparency of political funds. The report suggested that an opt-in model for affiliation fees could increase transparency, and that such affiliation fees could, if opted in to, be treated as individual donations, circumventing the overall cap proposed.25 The subsequent cross-party talks to review party funding broke down. The then Lord Chancellor and Justice Secretary, Jack Straw, went on to publish a White Paper drawing on a Committee on Standards in Public Life report and the Phillips review. The White Paper led to the Political Parties and Elections Act 2009.26 In 2011 the Committee on Standards in Public Life (CSPL)27 published the report which is referred to in our appointment motion, Political Party Finance: ending the big donor culture. This report recommended that:
- A limit of £10,000 should be placed on donations from any individual or organisation in any year to any political party with two or more elected representatives in Westminster or in any of the devolved legislatures.
- The cap should apply to donations from all individuals and organisations, including trade unions. But it would be possible to regard trade union affiliation fees as a collection of individual payments, to which the cap applied individually, by requiring the individuals on whose behalf the payments are made to opt in to the fee. It would also be necessary to meet certain other conditions to ensure that undue influence cannot be exerted.
- The existing limits on campaign spending in the period before an election should be cut by the order of 15 per cent.
- Existing public support to the political parties should be supplemented by the addition of a new form of public support paid to every party with two or more representatives in the Westminster Parliament or the devolved legislatures. The public funding should depend on the number of votes secured in the previous election, at the rate of around £3.00 a vote in Westminster elections and £1.50 a vote in devolved and European elections. Income tax relief, analogous to Gift Aid, should also be available on donations of up to £1,000 and on membership fees to political parties.28
34.The CSPL report said: “It is important that [these] proposals are regarded as a package. Failure to resist the temptation to implement some parts, while rejecting others, would upset the balance we have sought to achieve.”29
35.Following the publication of the 2011 CSPL report, Nick Clegg MP, then Deputy Prime Minister, convened a series of cross-party talks to facilitate agreement among the three largest parties in Parliament. The group met seven times in the course of 2012 and 2013, but ultimately failed to reach agreement.30
36.In April 2013, an unofficial cross-party working group published a draft bill31 based on the recommendations of the CSPL report, and consulted widely on its options, but no further official negotiations produced consensus before the 2015 General Election.
37.The Labour Party subsequently took steps in the direction of some of the CSPL recommendations with the Collins Review and changes to the process of affiliating union members to the party. Appendix 8 sets out what has happened in respect of each of the CSPL recommendations since 2011.
38.The Conservative Party, the Labour Party and the Liberal Democrats all committed themselves to further party funding reform in their 2015 General Election manifestos. The Conservative Party stated that “We will continue to seek agreement on a comprehensive package of party funding reform”32 whereas the Labour Party indicated that “Labour remains committed to reforming political party funding and taking the big money out of politics by capping individual donations to parties.”33
39.The Liberal Democrats, for their part, stated that they would “Take big money out of politics by capping donations to political parties at £10,000 per person each year, and introducing wider reforms to party funding along the lines of the 2011 report of the Committee on Standards in Public Life, funded from savings from existing government spending on politics.” They also pledged to: “Protect the rights of trade union members to have their subscriptions, including political levies, deducted from their salary, and strengthen members’ political freedoms by letting them choose which political party they wish to support through such automatic payments.”34
40.Lord Bew, Chair of the Committee on Standards in Public Life, wrote to party leaders after the 2015 General Election about making progress on party funding. But, Lord Bew told us, in spite of the manifesto commitments expressed by all three parties, “it would be wrong for me to say to the Committee that I was detecting enthusiasm to move the situation forward”.35 This was confirmed by the Government when Minister John Penrose MP indicated to the Committee that it would be for the political parties, not the government, to initiate such talks.36 We return to this issue in Chapter 3.
1 HL Deb, 11 January 2016, cols 12–128
3 HL Deb, 20 January 2016, cols 778–780
4 Other organisations are not required to have a political fund and therefore the issues of opting in and opting out do not arise for them.
7 Amalgamated Society of Railway Servants v Osborne [1910] AC 87
9 Trade Union and Labour Relations (Consolidation) Act 1992, section 71
10 Activities that are likely to be regarded as having political objects go wider than donations etc. to political parties or candidates. Many union campaigns are therefore financed out of the political fund.
11 For further information, see https://www.gov.uk/government/organisations/certification-office [accessed 29 February 2016]
12 Certification Officer, Annual Report 2014–2015 (July 2015) p 9, p 68: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/449387/CO_Annual_Report__2014–2015_.pdf [accessed 29 February 2016]
14 See Appendix 5 for more detail
15 Certification Officer, Annual Report 2014–2015 (July 2015) p 68: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/449387/CO_Annual_Report__2014–2015_.pdf [accessed 29 February 2016]
16 1992 Act, Section 84(2)
17 House of Commons Library, Political party funding: sources and regulations, Briefing Paper, 7137, January 2016
18 See http://www.labour.org.uk/pages/trade-union-and-labour-party-liaison-organisation-tulo [accessed 26 February 2016]
20 Lord Collins of Highbury, The Collins Review into Labour Party Reform (February 2014): http://action.labour.org.uk/page/-/Collins_Report_Party_Reform.pdf [accessed 29 February 2016]
21 ‘Labour approves union membership reforms’, BBC (1 March 2014): http://www.bbc.co.uk/news/uk-politics-26381922 [accessed 26 February 2016]
22 The Electoral Commission, ‘Political party spending at previous elections’ 2001–2015: http://www.electoralcommission.org.uk/find-information-by-subject/political-parties-campaigning-and-donations/political-party-spending-at-elections/details-of-party-spending-at-previous-elections [accessed 29 February 2016]
24 House of Commons Library, Political party funding: sources and regulations, Briefing Paper, 7137, January 2016
25 Sir Hayden Phillips, Strengthening Democracy: Fair and Sustainable Funding of Political Parties (March 2007): http://webarchive.nationalarchives.gov.uk/20080726235533/http://www.partyfundingreview.gov.uk/files/strengthening_democracy.pdf [accessed 29 February 2016]
27 The CSPL advises the Prime Minister on ethical standards across the whole of public life in the UK. The Committee was established by the then Prime Minister, John Major, in 1994 in response to growing public concern about the conduct of political life.
28 Committee on Standards in Public Life, Political party finance: Ending the big donor culture, Cm 8208, November 2011, p 9: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/228646/8208.pdf [accessed 29 February 2016]
29 Ibid., p 89
31 Funding Democracy: Breaking the deadlock: http://fundingukdemocracy.org/ [accessed 29 February 2016]
32 Conservative Party, Manifesto 2015, p 49: https://s3-eu-west-1.amazonaws.com/manifesto2015/ConservativeManifesto2015.pdf [accessed 29 February]
33 Labour Party, Manifesto 2015, p 63: http://www.labour.org.uk/page/-/BritainCanBeBetter-TheLabourPartyManifesto2015.pdf [accessed 29 February]
34 Liberal Democrats, Manifesto 2015, pp 131–132: https://d3n8a8pro7vhmx.cloudfront.net/libdems/pages/8907/attachments/original/1429028133/Liberal_Democrat_General_Election_Manifesto_2015.pdf?1429028133 [accessed 29 February 2016]