AS Politics Democracy Parties Unit 1

Blair’s back, backing business but not backing Ed

Tony Blair is back. Until now he has been reserved about directly commenting on the fortunes of the Labour Party. However he has broken his silence with a series of meetings with Labour MPs. Blair’s basic message is that the Labour Party cannot leave the ‘centre ground’ and must keep close to the business community in order to win elections.

His comments echo those of David Milliband who had a similar message in a recent New Statesman article and comes after Labour leader Ed Milliband criticised ‘predatory Capitalism’. So what’s going on within the Labour Party and should the return of the prodigal son from his Middle Eastern adventure be a welcome gesture for Ed?

The Labour Party since Tony Blair became its leader in 1994 has worked hard to readdress its image, especially in the eyes of the business community. This is primarily because in modern democracies party donations are necessary to fund election campaigns. Tony Blair received the services of Lord Levy, his chief fundraiser who between 1994 and 1997 raised over 100m for the Labour Party. Lord Levy was later arrested (but not charged) over the Cash for Peerages scandal where the Labour Party had raised £14 million in loans from private individuals, some of whom were later nominated for peerages. Furthermore, Blair recognised being pro-business would also give him better traction with a then hostile press. The backing of the Murdoch press in 1997 was hailed as a victory for Labour.

This relationship with business was natured not only for fund raising. Many of Labour’s policies reflected the increasing input of business in public services. The flagship Academy schools programme brought in money from business into state schools, in exchange for advertising and a say over what may be taught in the curriculum. Labour introduced foundation hospitals and Strategic Health Authorities that were given the green light to use public funds on private providers if they were better value for patients. Very importantly, Labour encouraged the growth of the City of London’s financial sector, making Britain the preferred city for banks to set up European headquarters in return for ‘light-touch’ regulation. A policy started by Thatcher in 1986.

The problem with relying on big business for funds is that business interests often require a return, in policy-making and influence. Levy’s North London dinner parties were awash with paid guests eager to catch the eye of government ministers. But also businesses switch allegiances very quickly, backing the next winner and those most favourable to their interests. Blair asserts that in 2010 not one Chief Executive of a major company backed Labour. Today Ed Milliband is increasingly more reliant on Trade Union funding (many of whom directly funded candidates in 2010) with insiders claiming there’s a major hole in Labour’s budget for this year.

The Conservatives have been the benefactors of these redirected business funds. Whilst Labour’s erstwhile donors desert them, the Conservatives in 2010/2011 in the 12 months to July received in donations from the financial sector alone 51.4% of the £12.2m of funds received by Central Office. Hedge funds, financiers and private equity firms contributed £3.3m – 27% – while 50 City donors paid more than £50,000. All donors contributing this amount or more become members of the Leader’s Group and qualify for a face-to-face meeting with the prime minister. Hedge funds donated £1.38m (11.4%) in this period. Other major donations came from the defense, insurance and rich individuals.

Lord Mandelson argued recently, Labour must “revolutionise its funding sources” . This is because today almost 90% of Labour’s funding comes from trade union donations. In 1994 trade union funding only accounted for a third. The business community is backing the Conservative Party and Ed Milliband knows it. So his dilemma is either to shun big business or reach out to them. However reaching out requires a similar strategy to 1994, developing policies that ‘reach out’ to big business. Maybe this accounts for current tensions (and contradictions) in Labour policy making.

So how does this link to the Politics syllabus? Well importantly the ideals of a just society are undermined when the influence of money speaks louder. Ordinary people are cast in the shadows and business leaders can buy access and favourable policy-making. Can more limits on donations or even the public funding of parties help? Well there does not seem to be an appetite for this in the time of austerity. But Blair’s intervention will probably be the start of wider schisms within the Labour Party, especially if the trade unions demand more.

As Lester Freamon wisely said in The Wire, ‘follow the money, and you don’t know where the *** it’s gonna take you!’

Mr Patel

 

Further reading

http://www.electoralcommission.org.uk/party-finance/party-finance-analysis/party-funding

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