THE LABOUR Party faces its worst ever cash crisis. It has debts of more than £8 million. At the end of last month Labour was having trouble paying its daily running costs and called a special meeting of the trade union liaison committee to beg for a £100,000 emergency handout.
Brash Blairites who treat the unions like some embarrassing elderly relative are now forced to beg for money from grandad's wallet. This great financial catastrophe is the result of the New Labour project. Tony Blair and his ideological soul mate Peter Mandelson made a decision in the mid-1990s that Labour should tear itself away from its roots in the unions. New Labour would, they thought, become a 'classless' party appealing at the same time to rich and poor, powerful and vulnerable, businessmen and workers. In practice this has meant business came first.
'Modernisers' recognised there might be a funding gap if the unions got the cold shoulder. But they were confident that new money would flow in from companies and a huge rise in individual new membership. In 1996 Blair confidently predicted that New Labour would soon have a million members.
Instead, as soon as the Tories were out of Number Ten, New Labour's membership slumped. In 1997 it was 400,000. Now it is officially 260,000, and the real figure is probably much less. Individual donations and membership fees have shrunk dramatically. At the same time the pro-business policies of New Labour have angered huge sections of union members.
Pressure from below (plus an element of manoeuvring by some union leaders) has meant that several unions have cut their funding.
The GMB union is cutting its funding by £4 million between 2001 and 2005. Many other unions are following suit. It's a backward step that some union leaders agreed to the £100,000 handout at the end of July. Those involved included Bill Morris of the TGWU and Mick Rix of Aslef.
Apparently some union leaders are now saying that the cash crisis is a chance for unions to win major changes in policy by handing over even more money than they used to. There has never been any sign that Blair has listened to the unions, despite their importance financially. Simply handing over the cash encourages New Labour to continue down its pro-business path.
Every time Labour announces a new corporate subsidy it loses another shedful of cash from its traditional supporters. How much did New Labour lose when it announced that it was accepting money from pornographer Richard Desmond?
Yet the party leaders have learnt nothing. Last week they revealed they had taken £10,000 from Duncan Bannatyne. He had made a fortune from care homes but now wants to move into running casinos.
Bannatyne said it was 'pure coincidence' that his first donation to Labour, of £6,000, came shortly before the government issued a white paper opening the way for Vegas-style casinos.
However, he agreed the white paper had given him ideas for a new business venture that would have been impossible otherwise. The cash crisis is pushing New Labour to consider introducing state funding for political parties.
Blair said recently that he could go for it if the Tories agreed, and the Tories said they would not refuse the cash if it were offered them.
All three major parties already get almost £500,000 each from public funds, plus a range of benefits like free postage and their expenses in the Commons and the Lords. The attraction of state funding for parties like New Labour is that it lessens the pressure to recruit anybody, weakens the need to do what the union leaders would like, and generally makes unpopularity less financially punishing. It should therefore be opposed. If Labour wants to get more money it should do something to deserve it.
State funding would also be yet another obstacle to new organisations seeking to challenge the present rotten parties. The share-out of the cash would almost certainly be based on the performance of parties at the previous general election, with a threshold before you got anything.
This would privilege the traditional players. All other donations and fund-raising outside the state cash would be hedged around with restrictions. So new parties could find it even harder to get cash. The crisis of Labour's money shows what opportunities there are for the Socialist Alliance and the Scottish Socialist Party.
It is a symptom of the break-up of Labour's base that continues unabated. It is a sign of the large numbers of union activists, ex Labour supporters and very grudging only - just Labour supporters looking for a credible socialist alternative to the present mess.
It should encourage us all to redouble our efforts to build that alternative and to push for the democratisation of the unions' political funds.