In March of this year, there was a major scandal over party funding in the United Kingdom. To some of us, this was an accident waiting to happen. In a country with many millions of voters who are allowed to exercise that vote only once every four or five years, relatively small numbers of people belong to those two or three political parties whose struggles eventually decide which person will eventually hold the power of patronage in the State, give orders to civil servants and have a finger perched precariously over a nuclear trigger (assuming that our ‘ally’ permits the finger to move at all). So there is a great deal at stake in capturing control of a party. Political parties, however, need funds to run themselves and to cover the costs of those who aspire to control the public money that flows in from our taxes. They have three ways of getting those funds: they can persuade ordinary citizens to engage with them and fund them directly or indirectly through an accumulation of small levies; they can isolate out wealthy sympathisers and take their money as donations or credit; or they can leech off the taxpayer by claiming rights to funds as a public service.
Each route or combination of them has its price since nothing can come of nothing. A mass funded party needs to inspire a movement. It is reasonable to suppose that in the 1940s the million members or so in each of the two main parties, combined with trades union and business levies, probably created a reasonable working pot. The price, of course, was that the political parties had to represent those members and then square their preferences with the opinions of a majority of the general public if there was ever to be access to office. This is what most of us who are over a certain age would recognise as politics.
The New Labour revolution of the mid-1990s (a reaction to an earlier Leftist attempt to capture the Movement and so the Party) took what it thought was the easy way out. It disconnected its accountability to its ageing and declining membership base and, with the consent of the trades unions, constructed a highly centralised and opaque system of governance that has removed the incentive for ordinary sympathisers to contribute funds and time. The theory was that, instead of expending funds on a costly constituency system that could not be policed and was at risk of being captured by activists who would drag the Party away from electability, a centralist but populist approach could inspire a million members to return to a youthful, reinvigorated centre-left. The funds could then be used to increase the political strike power of the Leader’s Office and to invest in the sort of advanced marketing techniques that Saatchi & Saatchi had deployed for the Tory Party.
Of course, this did not happen. New Labour’s membership sunk to about 200,000 members, many of them disenchanted, while the Opposition Tories are drifting towards the 300,000 mark. Apart from the so-called Short money, neither political party can currently call on the public purse for much support (unless government access to patronage, and the power to direct funds to where the votes are, are to be classed as tax-payer support). A political class that is increasingly not drawn from its movement has to call on special interests to keep itself afloat.
My experience in the mid-1990s demonstrated that a major opportunity for reform was lost at that time. This experience with the business supporters of the Labour Party and then with the internal democratic movement within New Labour showed that reform of the inadequate old system of party governance might have gone in a very different direction. There was an opportunity for a new constitutional arrangement that might have transformed an old corporatist party engaged in industrial class war into a responsive modern European party of the democratic socialist Left. What actually happened was a ‘coup du parti’ that chose immediate power over long-term sustainability. The democratic reform story is for another time. This memoir is only part of the story, of what happened to a funding philosophy that was originally designed only to serve the leadership but which created a precedent that was used and expanded to fill a vacuum left by the loss of a mass membership base. It cannot be said that there is a direct link between the system that looked after the leaders’ needs before 1997 and the loans scandal of 2006. On the contrary, I would argue that Blair in fact broke with a system that had some inbuilt controls – but it set a precedent for relying on rich men to deal with necessities.(1)
This is a memoir and not a history. As in all memoirs, my memory may be faulty. I write this with as much care as I can muster not to misjudge or be unfair to others; and with as much honesty as I can regarding my own role and motivations. If anyone feels I have been unfair to them, I would be prepared to debate the issue and even concede on the facts in the next edition of this journal.
My story starts with my reading a letter in a newspaper by Sir Sigmund Sternberg. He defended the Labour Party from a business point of view – quite remarkable at that time. I had been involved in Labour politics (on the right of the Party) but had concentrated on a City of London career for the previous decade. I was becoming tired of the City where the work was repetitive if remunerative. This would be in 1991 or early 1992. More to the point, I had earlier had the experience of trying to persuade Tony Benn in his basement office that the Left (with which I retained some sympathy) could better win its battles on defence and foreign policy by associating with liberal middle class anxieties in this area, only to be patronised as only he can patronise. In the event, I was proved right. Social and political changes meant that the old Marxist Left had little to offer the centre-left. Yet modernisation could mean retention of core Movement values if this meant translating them into the language and needs of the wider population. In short, I was a moderniser. Old Labour need not lose its core value system of redistribution, opposition to exploitation, democracy (actually my value rather than Labour’s Old or New), anti-imperialism or internationalism if it changed its language, its outreach to the population at large and its relationship to the market as a tool for wealth generation under a strong centre-left State. Let’s leave it there: although a different model of ‘modernisation’ won the argument in the end, Left-modernisation could have been a strategy of the Party if it had not been led by Neil Kinnock and the Left itself not led by dinosaurs.
Sir Sigi (for whom I hold the highest personal regard) is a Jewish philanthropist whose wealth came from business and who put a great deal of energy into supporting and promoting an organisation of which I had hitherto heard nothing, the Labour Finance and Industry Group (LFIG). I wrote to him. He introduced me to LFIG and I joined. LFIG was unaffiliated to the Party and, as I later discovered to my discomfort when internal conflict started within it, it used and uses the Labour brand without any control over it being exercised through or by the Party’s National Executive Committee. This seemed to suit both sides. LFIG still exists and still has no affiliated status, operating with direct links to the Party political leadership in Parliament rather than to the Party itself, although it is far more open than it was. (2)
LFIG members were and are decent people who are clubbable, driven by a variety of motivations: by the idea that their policy hobbyhorses can matter to the Labour political elite just because they are Party members (which may be naïve); by the warmth of occasional social access to that elite; by the need to belong to something they feel at home with; by a marginal increase in status or (in a few cases) by the belief that involvement might give them an edge in attracting the eye of the political elite when seats or other benefits can be handed out. My suspicion is that its importance is not great. Since 1997, its policy work has become surplus to requirements because New Labour has had full access to the resources of the State. Still, it retains some campaigning value both at General Elections and more selectively in the regions. Its value within the Party before 1997 was certainly as a source of a pro-Party business and professional voice that could occasionally be rolled out for seminars, events and conferences.
Benign as all this sounds today, the LFIG that I joined was more secretive and more embedded in the Old Labour Right than I had expected. I was twice Deputy Chair and handled all Press interest – my brief being to keep the media’s nose out of the group’s business. I was generally successful. I ran a small pro-Labour business media campaign in the 1992 Election, was on the margins of the fund-raising and saw how blind trusts worked without participating in them.
The LFIG became embroiled in civil wars as it got closer to power. I worked with the ‘old guard’, whose interest seemed to be to keep the group small, linked to the leadership and not averse by any means to being recognised as Noble Lords for ‘political services’, against a group that was far more active in building direct links with the corporate sector through the Industry Forum.
A second civil war was at my expense when I argued that the fund-raising practices and blind trust system, the lack of accountability and transparency within the group and the lack of a strategy for building a membership base in association with the Party was going to result in, at best, irrelevance for the group in government (which is a broadly true prediction) and, at worst, serious public relations problems (which became true only this year but was predictable insofar as the system created by Blair and Levy is merely an extension of practices that had gone back to the Wilson-Callaghan era). By 1996, at the latest, I was out – as part of machinations whose detail I have now forgotten. Despite retaining some good personal friendships even to this day from within the Group, I decided never to get involved again.
So the story is of around five crucial years from just before the General Election of 1992 when Kinnock ‘discovered’ the business vote (even if his office did not impress in its handling of it), through the brief John Smith period to the Blair/Brown pact and the victory of Blair first over Brown and then over the Left of the Party in the Clause IV Campaign. It was no surprise to find prominent LFIG networked individuals emerge in the House of Lords 1997 intake for services to politics because LFIG played a small but important role in that process of transition to what we have today.
Conspiracy theory
Before telling the tale, let’s knock some of the conspiracy theory on the head. I am well aware of how the ‘Zionist machine’ works and how manipulative the Israeli Embassy can be. But even Labour Friends of Israel is no AIPAC. Nearly all the Old Labour Right in the Party were pro-Israel, pro-nuclear armament, pro-EU and pro-US regardless of anyone in the LFIG or at the Israeli Embassy. I recall one dinner with Lord Gilbert, doyen of British Atlanticists, in which the importance of the nuclear deterrent was the main subject of discussion. No mention of Israel was made at any time. This was typical. The Old Labour Right had a ‘package of measures’ and its politicians were as much attracted to the Jewish business element because of these shared values as Jewish businessman might have been attracted to them for their implicit and unquestioned support of Israel. Indeed, Jewish businessmen ‘d’un certain age‘ were not concerned so much with Israel as with anti-semitism. We should recall that most of them were of a generation not only closer to the Holocaust but that they had seen the wave of anti-semitism that took place in this country in the late 1940s as British soldiers were engaged in their war with the Stern Gang, Irgun and Haganah.
One anecdote tells all. In one of the few media interventions against the Group, Peter Oborne of The Evening Standard did a profile that was not entirely flattering of Simon Haskel (later Lord Haskel), Chairman of the Group. Simon rang me in a very agitated state, relatively unconcerned with the text and much more concerned with the cartoon. He interpreted this as anti-semitic along the lines of Der Sturmer. The idea of The Evening Standard being anti-semitic is, of course, currently laughable. The cartoon was simply a caricature – but the reaction was a sign of an underlying anxiety.
In fact, the strong Jewish business element in the Group (and it was not the only element by any means) can be explained without recourse to conspiracy theory. The Group was formed out of the merger of a small group of business interests who had supported the private offices of Wilson and Callaghan with a much broader group of pro-Labour Keynesian academics and economists the sort who were thoroughly dished by Geoffrey Howe’s determination to push through monetarist radicalism at whatever cost in the early 1980s. Wilson’s close relationship with the Leeds Jewish business community and with leading figures like Lord Weidenfeld is well known, as is his sympathy for Israel. In the 1960s, Jewish business was meritocratic in orientation, standing out against the old Tory Establishment that tended to exclude it.
Despite the claims of The Sunday Times, the ‘blind trust’ system was not invented by Lord Levy but arose during this period out of the need for funds by successive Leaders’ Offices who were being forced to compete with the substantially greater resources available to Tory politicians from their business and other financial backers. Though perhaps not entirely satisfactory, they were, at the time, state of the art in terms of good governance.
Indeed, my own quarrel with the system was not that blind trusts were wrong but they were no longer appropriate for the age of mass broadcast media, were increasingly unworkable and were a hostage to political fortune. The problem for New Labour is not that it once had this system (which merely involved trusts wherein the persons giving the funds were not known to persons receiving the funds). Rather that, instead of reforming the system, the Party became so dependent on private funds after Blair’s ‘revolution’ that the leadership extended the system beyond its capability.
By the early-1980s, LFIG virtually went underground because of the drift to the Left but it received a greater blow when some of its non-Jewish (and a few Jewish) members started to shift their funding and political interest to the SDP. By the time Neil Kinnock became Labour Leader, the rump of men with money were Jewish only because Jewish business people remained loyal despite their economic interest. It would seem harsh to criticise them for being the only game in town under these circumstances. It may even be that they have not been recognised enough for this loyalty.
During its brief time in the sun until Blair was in firm control of Party and State, LFIG was constantly torn between the possibility of growing but seeing the power of its dominant group become weakened and remaining small but in control of its claims on any rewards of office. There are issues of personality, of course, but I am not going to discuss these. I saw some pretty sharp moves in my day but I cannot say that I ever saw anyone behaving outside the rules of the game and certainly not corruptly.
It was only at the very end of this period, and no doubt partly in the context of the frustration of the Leadership over internal conflicts just at the moment of victory, that Lord Levy appears on the scene. Despite rumours to the contrary I can state that, at least to my knowledge, Lord Levy was not involved in the LFIG during my period with it. On the contrary, he was seen as being as much a rival to leading figures in LFIG as were the leaders of the Industry Forum which was the brainchild of yet another Jewish business figure, Gerald Frankel. So, any attempt to indicate organisational continuity (other than the general social continuity of prominent Jewish philanthropic figures) between the Jewish circle of Wilson, the LFIG of Kinnock and early Blair and the Levy fund-raising machine of Blair, either on the verge of or in power, falls into the trap of conspiracy theory. (3)
The alternative model is simpler. Jewish philanthropic business figures have often been attracted to the centre-left but from a traditional ‘enlightenment perspective’: each generation has found its own natural leaders interested in the policy process. They have usually been prepared to bring like-minded friends into the endeavour who contribute both funds and ideas. The opacity of this engagement has probably poorly served these business leaders but more should not be read into it than is necessary. It is in the public interest (and I believe their interest) that they should have been more transparent about their political engagement but the fact of their political engagement should not be reason to vilify them. From this perspective, the continuity merely indicates an opportunity, the emergence of a pool of funds which were available to be dipped into by the political leadership without their giving a great deal in return except the prospect of access and honours, presumably for political services and not for the funds.
A coalition
If there is a strong tendency for support for Israel on the Old and New Labour Right, this is part of a general package of policies within a coalition that included non-Jewish Atlanticist intellectuals (briefly the backbone of the SDP), defence-based engineering union leaders, the Catholic element in the Party, and many other groups. Closer analysis of the Group and its friends tends to confirm this analysis. The long time President was Lord Gregson, President of the Defence Manufacturers’ Association (and now succeeded by Lord Kinnock as the Group’s President). Other figures in the circle, past and present, include former senior diplomat, ‘Meta’ Ramsay, who was a strong silent figure at meetings, Sir Peter Heap, KCMG, a former Ambassador rather than a businessman when he was appointed Chair, and Baroness Dean, from the right-wing print-workers’ union, SOGAT.
This is very much the right of the centre-left – loyalist, not necessarily Blairite, more comfortable with John Smith as a traditionalist member of the Labour Right and so with Gordon Brown. Indeed, two key figures, Lord Haskel and Baroness Ramsay re-emerge as trustees of the Smith Institute widely seen as the coming think-tank of the Gordon Brown administration-in-waiting.(4)
I would argue that LFIG was always very much Old Labour and instinctively more inclined to Brown as party leader in the 1990s. There appeared to be far more social contact with people who would later be associated with Brown than with Blair. It is probably no accident that volume fund-raising activity shifted sharply from the Group to new sources (such as the Levy circle) once Blair was firmly in power.
So, how did the fund-raising side actually work in the mid-1990s? First of all, it has to be seen as an inherited system that operated outside the LFIG itself, albeit with many of the same personnel, and so I would only see it from the margins. My ‘evidence’ is that of listening in to conversations when I was trusted and of being invited to give advice when the system broke down or, in the case of the Common Campaign adventure, when something new was attempted to raise funds for a cash-starved party.
The ‘blind trust’ system
The ‘blind trust’ system has been described in outline. A Trust took donations and then granted them without the donors being known to the recipients. This was a project of some vintage whose sole purpose was initially support for the Leader’s Office(5) and possibly that of others if funds allowed. But there were a number of flaws in the system that had political effects.
First, the number of donors came from a very restricted circle and it was near impossible for these donors not to be recognised as such by the recipients, nor for any third party to be sure that undue influence would not be exercised by a director of the trust speaking privately to a politician, especially when so much was at stake. I have no evidence that the system broke down in this way but the looseness of the system around the trusts suggested that it was more than possible; and this risked creating the sort of doubt that we have seen in the ‘loans scandal’.
Second, the sums involved were probably actually rather small compared to the millions involved under the later Levy regime. This meant that a lot of work went into getting funds to cover second-rate personnel and paperclips when the modernisation of the Party required much greater resources than this. This became more difficult at election time (in 1992 and in the run-up to 1997); and, in the latter period, resources were spread between two right-wing leaders (Brown as well as Blair) just when resources were also required for internal Party struggle (as in the Clause IV campaign).
Third, as rumours grew that blind trusts and other donation funds were moving from one Leader to a slightly broader group of right-wing political networks, political jealousy drove other leading figures in the Party either to demand their share of the cake (which was too small to share more widely) or to seek alternative fund-raising models involving the private sector: Robin Cook was said to be resentful of the LFIG’s lack of largesse in his direction and Jack Cunningham’s solution was to engage vigourously with the Industry Forum.(6)
In other words, the demands of modernisation under Kinnock and Brown-Blair required engagement with the private sector for campaigning and even policy purposes; but also required increasing amounts of funds. The LFIG network, which could cope with the secretive business of funding the Leader’s Office on a limited basis and on terms which could be criticised but were at least intended to be ethical, was faced with increased expectations from leaders who would one day have the patronage that LFIG leaders so clearly wanted to access.
Expectation and reality
LFIG was a hybrid, involved as much in lobbying for members’ policy hobbyhorses as a quasi-civil service in opposition. The mid-1990s saw a policy struggle within the Group between those who favoured investment in science and manufacturing (traditional right-wing national planning) and those who saw the future in international services (the modernisers). Needless to say, the latter won the argument (quite rightly in my view). But it meant that LFIG had to be very careful not to speak on issues of policy until the same debate had been won within the Party.
A first sign of tension between expectation and reality came as early as the 1992 General Election when I was asked to see if I could get some media coverage which would promote business support for Labour. The truth was that there were a number of businessmen prepared to say that they would back Labour but they were largely marginal figures. Chris Haskins of Northern Foods, later Lord Haskins, was an exception. Equally, none of the most prominent figures were very active in LFIG even if they were members and it was probably true that most had not met each other, even socially. There was not, in short, a body of pro-Labour business figures who were active and trusted to discuss policy other than through the LFIG in 1992.
Nevertheless, the arts of the spin doctor resulted in my placing a major back page feature in The Sunday Telegraph with a nice little line drawing of the most prominent names chatting around the table as if this had happened and would happen in the future. I reckoned this was about the best we could get because it is an axiom of the profession that you don’t push the truth beyond the grounds of credibility.
Unfortunately, I soon realised that we had accidentally persuaded the Kinnock team that what we presented was a true reflection of affairs and, completely inexperienced as they were in business matters, to our horror they suddenly got excited by the possibility of bringing cameras and business supporters into a reception where the Leader could wander around glad-handing prominent business supporters and reassure the middle classes. A reception was hurriedly arranged with a three-line whip on our members and on every business figure who might have had the slightest connection with the Party. The Leadership was pleased and there were sighs of relief all round. But I knew what they did not: most traditional City folk would have considered some of the guests to be in the ‘query basket’. The impression was given that our business support was worse than non-existent, it was a bit spivvy. There was a long way to go before Labour could look credibly business-sympathetic.
After that election, Kinnock resigned and John Smith became Leader. John Smith, who was genuinely charismatic on a personal basis, then died and the most interesting period for the LFIG circle started. It would be fair to say that John Smith represented LFIG’s natural base and this is reflected both in the subsequent shared personnel with the Smith Institute (see above) and the cultural preference of the LFIG Leadership for Gordon Brown with his particular combination of social democratic values, pragmatism and progressivism.
John Smith had also gone on the ‘prawn cocktail’ circuit of meeting the finance sector and calming City nerves. It represented a triumph of the ‘international services’ economic model over the full employment manufacturing model represented at that time by Brian Gould. This journey around the City was a Leadership, and not an LFIG, initiative. It marked a turning point in which it became a career-enhancing move to be seen as both a Labour Party supporter and someone with knowledge of how the private sector worked.
Groups started to pop up like the Smithfield Group, founded by Jon Norton, later partner of Mo Mowlam, which were more symbol than reality but helped set the tone for modernisation. The Fabians started publishing pamphlets that called for engagement with the Southern middle classes, most notably by Giles Radice MP. Private sector figures were involved in discussion of Party reform and the million member party. I was involved in constructing a private/public partnership model of organisation for the new think tank Demos (see Lobster 46). Private money started to pour into centre-left think tanks.
PR monkeys
LFIG’s new rival, the Industry Forum, also took off. I attended as guest a meeting for Jack Cunningham with a room full of Directors of Public Affairs. I suspect that Cunningham’s team wanted the organ grinders of the FTSE-100 but got their PR monkeys instead. This was a sign that New Labour still did not understand how the system worked: big business was going to stay aloof until it was clear that Labour would win. Even then it would delegate all but the most important contacts to their lobbyists; but the road to Drapergate and to avowedly New Labour lobby firms was beginning to be laid.
What is startling about British party finance when compared to that of the US is how little serious corporate money goes into either party. Both parties rely on donations and loans from private entrepreneurs, mostly with some connection to each other or to a politician, not from the major publicly quoted companies. This is unlikely to change because, ironically, large corporations feel uncomfortable about giving their shareholders’ money to people they cannot influence.
In fact, it is hard to exaggerate the enormous ignorance of private sector values and ethics within the Labour leadership at that time. This had the unfortunate effect both of New Labour romanticising private enterprise’s role in economic regeneration and losing its own Labour or socialist ethic without internalising the equally stern ethic of capitalism. It fell between two ideologies. The repeated ethical falls from grace of the Blair Government are more a sign of ignorance than corruption. What politicians think it is all right to get away with in politics is not so acceptable in business. Political conduct often horrifies a middle class that has quite puritan notions of principled behaviour.
In the early days Labour politicians were also unable to draw a distinction between different types of private sector personnel: so a glib second-rate loyalist might get the ear of politicians in place of a taciturn first-rate adviser who might be more critical of policy. Above all, Labour politicians rarely knew how to frame the right questions to get the best answers.(7) Another anecdote helps to demonstrate this ignorance of an elementary private sector principle conflict of interest which guides the ethic of all but the most dodgy of businesses.
I had a row with Mo Mowlam in a policy meeting about her commitment to raising funds for the Party from the sale of financial services to the membership. She clearly saw affinity marketing to the Party as analogous to that of, say, the National Trust or RSPB. I pointed out that she, as Minister for Financial Consumer Affairs, might be in a position where she had to make judgements on the regulation of those financial service industries in which she had a fund-raising interest as a Party leadership figure. This was a potential conflict of interest. This argument could not be understood. She was not alone. I am deeply sorry that she is not here to reply.
The mood of the time, however, was towards engagement with the private sector as suitor in the search for both credibility and electability. Anything that cut across this engagement, especially after John Smith died, was not acceptable. I recall a policy meeting with Clare Short, then Shadow Transport Minister, at which an idea for converting the substantial state subsidies being given for the rail infrastructure was proposed. Subsidy could be converted into equity so that the rail system could revert to public ownership to the degree that the taxpayer sustained the system by the back door. This market-driven bit of socialism (which struck me as perfectly reasonable and a precedent for using taxpayers’ subsidies as equivalent to equity) clearly upset someone. I recall a subsequent attack on Short in the press from a rival New Labour anonymous source which did not refer to this idea but which was clearly designed to destabilise her position at Transport. I arranged (fortunately without consulting too many people) for a swift supportive response from LFIG.
By 1995, election fever was beginning to take hold and LFIG was gearing up to support the Party with a bit more confidence that there could be substance to claims of business support, albeit with the emergence of all sorts of fly-by-night rival organisations. Activity concentrated on two questions : could it move beyond the ‘blind trusts’ and raise money for campaigning? And what was the role of the ‘blind trusts’ when the new Leader was engaged in an internal war against his Left opponents and he shared power with a Shadow Chancellor who might want equal call on funds? Concerns about preparedness to run the State and the economy were important to anyone who saw a tyro team in New Labour who had never run anything significant during eighteen years of Tory rule.
The successful resolution of these issues and continued work on policy formulation in an area where the one-eyed LFIG was very briefly king over their blind political masters, suggested that a few Lordships could be on the way without their being any need to be so crass as to purchase them. After all, the Leader would not only want to reward his advisers for political services but would want some loyal private sector voices in the House of Lords to offset Tory bleating. And why not? I recall being stopped outside the Athenaeum by one prominent LFIG figure, later a Lord, who was so pleased by mywork that he said that I could expect to be sitting on the red benches myself if I carried on like this. I rather startled him by saying that I had no interest whatsoever in sitting on said benches and that I did it because I was still, in my heart of hearts, a democratic socialist. It gives you a sense of the mood of a time when office was being smelt in the future, when power seemed so much more important than why we wanted that power.
The solution to the campaigning funds question was to show LFIG just how Blair had moved beyond the traditional methods of the Labour Right. What we did not know was that not only had he met Levy and was in the process of constructing an alternative and bigger ticket approach to fund-raising, but that his Shadow Communications Agency was making irregulars like me redundant.
Blair was introduced to Jonathan Powell at the British Embassy in Washington; Alastair Campbell was earmarked for media management; Mandelson and Gould were constructing the machinery of mass communications; and Social Democrats, who had walked out of LFIG and the Labour Party, were coming back by the back door with an entire baggage of revisionist Atlanticism, Europeanism and global free market theory. This network was ideologically keen to work with Blair but they had reasonable expectations not only in terms of their own salaries but in terms of the efficiency of their office environment and of the management systems they would work within. This needed serious money and proper budgets, not the hand-to-mouth subsistence operations of the Gaitskell and Wilson eras. Ramshackle Old Labour ways were about to be pushed to one side in favour of centralisation of power, a closed advisory elite and an almost Leninist discipline over communications and message. (8)
Oblivious to all this, LFIG personnel set up a company, Common Campaign Ltd, designed to raise funds for more traditional election advertising. By this time I knew this was absurd because not only had political marketing moved far beyond this level of technique but Blair was clearly streets ahead of all his predecessors in taking advice on new methods. Common Campaign was (I was told) seed cornfunded by a prominent former SDP figure. I suspect he was not a member of the Party at this time. This person was worried about being exposed as its initial funder and this made me uncomfortable, but my instinct that the operation would fail anyway kept me silent. The Board comprised a number of LFIG-connected personnel, including myself and the late Jenny Jeger, but it was wound up without raising a further penny. Fund-raising had moved on.
The second question, how blind trusts were to be used under new conditions, is more problematic. Because I was more distanced from the actual facts on the ground, I have to be cautious in making unsubstantiated claims. Nevertheless, I became increasingly concerned on a number of fronts and made that concern known. My concerns were never countered with facts, despite repeated questioning, and led me to believe that my supposition that the system was beginning to corrode under pressure was correct despite my knowledge that Lord Gregson in particular was an absolute stickler for propriety. It seemed to me at the time, as today, that the lack of transparency and the political intensity of the Blair coup against the Party was creating an atmosphere in which the system was not only in danger of being stretched to the limit but of creating opportunities for negative publicity as we got closer to the election (I was wrong about the latter). I remind the reader that the sums available from donors were not in the ‘Levy league’: relatively small sums could be used to great effect in an internal Party environment in which most activity was funded on a shoestring.
On the Right of the Party, organisations like Progress developed into the shock troops of modernisation. There were increases of private funding into a number of think-tanks in preparation for a possible change of Government, increased courting of the private sector by the Party itself and the creation of a variety of new modernising organisations, such as Demos and Nexus. These groups at least appeared to have some seed corn funds from the private sector, although funding of the parallel structures of soft power influence in support of modernisation were generally as opaque as everything else is in British politics.
On the other hand, funds drained out of the Left as the trades unions themselves began to conserve resources, concentrate on membership issues and dedicate their direct political funding to the next election as campaign funding. Modernising trades unionists also diverted interest into organisations like Unions 21 and into matching private sector interest in some left think-tanks; as my experience with Catalyst showed, funds for traditional left-wing causes virtually dried up and very quickly.
Who funded the Clause 4 campaign?
This left one important funding gap in the system. Who would pay for the dramatic campaign for Blair to seize the political high ground by demanding the removal of Clause IV from the Party constitution? How this was funded has never been clear. Was it done on a shoestring? Whose shoestring?
Until this point, ‘official’ fund raising organisations were concerned with the war on the Tories, either by supporting elected leaders or the campaigning in elections. Now, a new sort of campaigning emerged which was not between factions but by the leadership against its own internal party opposition. And it was not defensive and rhetorical, like Kinnock’s against Militant, but aggressive and organisational. In fact, it was a continuation of the campaign to become leader that had arisen after the death of John Smith and the famous Granita pact between Brown and Blair. This was political blitzkrieg and if anyone had funded an aspirant to office who hitherto had only funded an elected leader, then it was logical that they might be asked if they could help complete the victory.
I recall snippets of conversation that disturbed me. I recall snippets of conversation that disturbed me. There were too close contacts for comfort between those being advised and those associated with the blind trusts. It appeared that those persons associated with funding, whether policy or politicians, were also in the circle supporting one side in the intra-party struggle. The LFIG prided itself on being the Party’s policy civil service but it was becoming more overtly linked to the Leadership’s internal revolution. Things were becoming grey and moving very fast. Choices had to be made. Everything may well have been above board but the lack of transparency and an atmosphere which stated that a test of loyalty was that nothing be questioned and that authority be trusted rang alarm bells.(9)
Conclusions
So what conclusions can be drawn from this picture of the Labour Party’s modernisation as seen from its only membership business organisation? We are, of course, only taking a snapshot of five or six years, from Kinnock’s poorly handled election of 1992 through the return of the Old Labour Right and the transformation of the Party under the leadership of Tony Blair.
The first conclusion is that those who see the arrival of Tony Blair in 1995/6 as the beginning of a coup d’etat against a movement are absolutely right. This coup, while riding on the backs of and rewarding the traditional Labour Right, represented something entirely new. New Labour, as a centralised quasi-populist party designed to capture control of the State, is distinctive from anything that had gone before.
Second, the traditional Labour Right has not been a dominant element within New Labour by any means but it was essential to its founding and development. Gordon Brown still represents the potential for this strand of thinking to become dominant once again within the Labour Party. Blair, certainly, could not have become Leader without the tacit support of the Old Labour Right and he has responded to some of its primary concerns (especially on defence and the economy) but many would have swallowed hard as former Marxists and SDP renegades emerged as central to ‘the project’.
Third, the combination of a ‘sofa leadership culture’ and the need for radically increased funding not dependent on either the membership or the trades unions resulted in a refinement and extension of traditional funding methods that eventually prepared the ground for recent scandals. The recent sleaze scandal was not only an accident waiting to happen but an accident predicted as inevitable as long ago as 1996. The only surprise, in a tribute to the collusive nature of the political process and the media, is that it took a whole decade to come to the public’s notice.
Fourth, Old Labour methods of fund-raising were, in fact, ethical by the standards of the time but the closed circle approach in which there seemed to be an unhealthy overlap between fund-raising networks and networks that included persons going to the House of Lords suggests that if the Labour Party may not have been corrupt, then it either became cynical or was very stupid. Doubt about the integrity of the Party’s leadership has crept in because the system was and is opaque. It may once have been based on total integrity but no-one is sure any more. Certainly, the electorate may not want a Party of the centre-left that appears to be corrupt, cynical or stupid.
Fifth, donor influence on policy of these networks was surprisingly small. The modernising elements in the Party and their Social Democrat and Labour Right backers already had a fixed set of values and policies. These were prior to anything being offered by business supporters who were merely exploited for their campaigning value and funds. The aim of the exercise was to capture the State. Those fixed values and policies and donors were simply tools to achieve that aim.
Sixth, the dynamic of the private sector’s relationship with New Labour has never been fully understood by commentators. Real commercial and financial power has never engaged with New Labour with any seriousness and the Labour Movement and Party has never truly understood the nature of the private sector. If it did, it would not countenance the penumbra of slightly rum second division advisers lurking between the two.
The two sides, business and Party, are operating in parallel without any real connection except through favoured lobbyists. The deal is that New Labour constructs an environment in which business can operate with minimal interference and then it skims off the surface tax funds to sustain what is left of its social programmes. Blair seems to have a romantic and ignorant view of how markets operate which helps to explain the worrying state of the public services but Brown does not: he understand his Faustian Pact with the private sector only too well and runs his side with consummate skill and efficiency.
One of the LFIG leaders with regular access to Brown at the time once got unusually excited about how ‘we’ would manage affairs when ‘we’ were in power. He said that we would not do it through planning but through, ‘regulation, regulation, regulation’. The idea was that, once the economic framework for the mixed economy was in place, the private sector would be co-opted into social engineering through regulatory action. And this is broadly what has happened. To do this, New Labour does not have to understand business but only to listen to what business thinks it can bear from government and what his economists tell him the global market will permit him to do. Brown is wiser than his partner, even if the strategy may prove to be wrong-headed in the long term.
So where next? Matters have moved on a great deal since 1996. Labour came to power on a wave of enthusiasm and is now sinking in the public estimation as tired, corrupt, less than competent and arrogant; or rather the Prime Minister and his circle are seen in this way. One decade on and some chickens have come home to roost. Blair’s revolution was a genuinely new departure because it faced the electorate with the brutal reality that power is all a fact intimated by Thatcher but never taken to the same extent of offensive war overseas, restriction of ancient liberties and refusal to brook alternative foci of power.
On the other hand, the Tories are seen as little better. Indeed the entire political system appears distant and slightly dodgy; although Gordon Brown, who at least has the virtue of perceived competence, has not yet become fully tarred by the Blairite brush. Brown is still a traditional Labour Right Leader in his instincts and LFIG has (quite rightly) not only not been embroiled in scandal but ticks along, quite capable of becoming whatever the Party, the Leader or its governing Executive Committee want it to be if they can garner enough imagination amongst themselves. So, maybe, just maybe, with a cleaned up fund-raising act, the last decade will be seen as no more than an interregnum and it will be business as usual for Labour when Blair is finally kicked on to the American lecture circuit. The question is whether there will be a base left in the country for Labour and its two hundred thousand members when this era is over.
Notes
[1] Similar problems at the Conservative Party show a general bankruptcy, possibly actual as well as figurative, if a grip is not acquired soon, of a system that, far from being new and reinvigorated, is the last desperate gamble of a second rate political class in the face of social and political changes that they have neither understood nor wanted to understand.
[2] It has a web site at <www.lfig.org>. As you read this, bear in mind that this is a historical memoir of a particular period in time, from around 1991 to around 1998 at the latest. The LFIG should not be assumed to be in any way other than it presents itself on its website. In fact, it probably is now what it was then, a rather small voluntarist collection of business and professional figures, a political club rather than a mover and shaker.
[3] The Old Labour Right, taken as a whole, always included Jewish Labour sympathisers as part of their fairly extensive club. It was fully sold on support for Israel as a bastion of democratic socialism (as they saw it) not because of alleged baksheesh from some sinister Zionist lobby. Nor is this illogical: rich Arab conservatives have tended to support the Tory Party and the Labour Left has tended over time to develop its own package of measures supporting Palestinian rights, unilateral disarmament and anti-imperialism (which is where I tend to sit, albeit with a highly critical eye on my comrades).
[4] <www.smith-institute.org.uk>
[5] I note the Office Trust frequently referred to in Bernard Donoughue’s Downing Street Diary (London: Jonathan Cape, 2005, reviewed in Lobster 50), but whose precise workings are never revealed. The diaries suggest the involvement of a fairly tight group of largely Jewish business figures and some funding of policy research.
[6] The Industry Forum has also transformed itself in the intervening years and is now the centre-left equivalent to the Tories’ Enterprise Forum. It has a web site at <www.industry-forum.org>. It asserts that it is non-Party but its Honorary Presidents include Margaret Beckett, Peter Hain and Helen Liddell. Policy research funding has (I understand) been replaced as an aim of the Forum with policy dialogue a far less contentious approach.
[7] The one exception to this general criticism was Brown himself who seemed to have a very sure grasp of City and economic issues, if not commercial issues. My only experience of him, however, showed a different weakness. He surrounded himself with good advisers who ensured that he never had access to views that were not their own. Fortunately, he seemed able to ask the right questions and probably to have chosen the right advisers. Nevertheless, what works in economic affairs may be more problematic in Number Ten and it is interesting to see this same criticism re-emerging as he gets closer to the Prime Ministership.
[8] I was caught in the middle of the battle for an alternative vision of democratic modernisation within one group [LFIG] which I later extended to the Party through Labour Reform and the Grassroots Alliance, before giving up in 1999 when it was clear that the battle was lost. From 1996, my story shifts to a new battleground of democratic reform within the Party.
[9] Although expelled and intending never to get involved again, some senior members of LFIG were keen that I re-engage with the Group, possibly understanding that my critique was in good faith and loyal. I resisted this except on one occasion. I was then blackballed by certain persons despite assurance of a consensus that I should rejoin. There should have been no reason for any Labour Party member in business to be refused membership. The lack of NEC control of the Rules by which such Labour-branded organisations function and the lack of a right of appeal to expulsions and refusals of entry is an ongoing political and administrative failure and failure of natural justice within the Party.