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Beware: Pickpockets operate here

Peter Kenyon challenges the legitimacy of the Hayden Phillips Inquiry

Twelve months ago, the Labour Party's Treasurer, Jack Dromey, astounded journalists and politicians alike by claiming no knowledge of loans to pay for the 2005 Election Campaign. Today, everyone in the Westminster village is waiting for a former civil servant, Sir Hayden Phillips to publish his report on the Review of the Funding of Political Parties. The unsuspecting public should beware. This is no innocent inquiry.

With the sands of time running out ever faster for Prime Minister, Tony Blair, he and his acolytes are getting increasingly desperate about his legacy. One goal that has proved particularly elusive has been reform of the Labour Party itself. Such is the audacity of the Labour leader and his entourage, that instead of acknowledging their role in the loans affair, they opened up a new campaign to wreck the federal structure of the Labour Party (aka the Trade Union Link) and dip their hands in the taxpayers' pocket to pay for their sort of politics. This was absolutely vital to block prying journalists asking difficult questions about how the Labour Party had been kept in the dark in the first place. For Blair and his team events showed all three political parties were having trouble raising money. There was a need to act quickly.

Casting for Oliver, they had no time for a Pop Idol style contest. The task requires deftness. A former distinguished civil servant and Permanent Secretary of the Department of Constitutional Affairs, Sir Hayden Phillips, was plucked from retirement at 24-hours notice. The brief was simple. To conduct a review of the funding of political parties.

In particular:

  • To examine the case for state funding of political parties including whether it should be enhanced in return for a cap on the size of donations;
  • To consider the transparency of political parties' funding; and
  • To report to the Government by the end of December 2006 with recommendations for any changes in the current arrangements.

Sir Hayden Phillips will work closely with stakeholders including, especially, the political parties and the Electoral Commission. He has been asked to aim to produce recommendations which are as much as possible agreed between the political parties with a view to legislation as soon as Parliamentary time allows.

That's one of the beguiling features of the unwritten British constitution. The Prime Minister did not have to ask anyone's permission. This is 'what works'. With a flourish. a treacherous assignment was commissioned. To succeed a more heinous crime than pickpocketing had to be committed. The traditional link between the Labour Party and the Trade Unions – the source even today of 64% of Labour's funding had to be killed off.

In the heat of the moment, the Labour Party National Executive Committee (NEC) including constituency section members of the Centre Left Grassroots Alliance (CLGA) were all distracted. A unanimous NEC statement was agreed on 21 March, including a pledge in response to the Prime Minister's unilateral decision to set up the Inquiry, paragraph 4 stated:

“The NEC will fully co-operate with the Hayden Phillips inquiry. The NEC, in consultation with the Business Board, National Policy Forum and the wider party, will draft the Labour Party's submission to the Phillips inquiry. The recommendations will take forward Labour's manifesto commitments, the government's legislative changes and the discussions on party funding from the January National Policy Forum in Nottingham. The final NEC recommendations will be brought to Annual Conference.”

This was to prove shockingly naïve as evidenced by the need nine months later for an Emergency NEC meeting on 14 December 2006. At the time only a handful of Party members spotted the ploy. Save the Labour Party (STLP) issued a Press Notice on 17 March 2006 the day that the Inquiry was announced calling on Blair to “rebuild membership and not milk the taxpayer”. In a briefing note a month later on 25 April 2006 ahead of the May NEC meeting STLP questioned the wisdom of blanket NEC endorsement. Paragraph 2 stated:

“By agreeing to cooperate fully with the Hayden Phillips Inquiry, the NEC may have fallen into a trap laid by No.10 still determined to break the TU link and do without members.”

Membership itself was seen under threat following the launch at the Labour Party Spring Conference of the Labour Supporters' Network, a free eMail registration service offering anyone signing up access to Labour Party events and online policy debate. Immediately after the May NEC a party consultation on the Party's submission to Hayden Phillips was opened with a 31 July deadline for submissions. Political campaigning started to focus on the TU link. An ad hoc group of MPs, trade unionists and party activists, including your correspondent, published a tract, “Funding Political Parties – a principled approach”, which was distributed to all CLPs and affiliated trade unions in June. The tide of opinion throughout the Party swung heavily in favour of retaining the link. The call for no donations cap was clearly set out. This is also code for 'keeping the link'.The Labour Party's official response to Hayden Phillips was put to the 2006 Annual Conference and approved. The Party HQ continues to refuse to publish all submissions to its consultations. There was no evidence of No. 10 actively campaigning to win support to break the link. That's not how they operate. If there had been the slightest sniff of interest among CLPs in breaking the link, No 10 would have made sure we would have known about it well before Conference.

No. Instead, No.10 waited until after Conference to make its deft move. The main players for the Party were Hazel Blears, the appointed Party Chair, No. 10 staffers, John McTernan and Matthew Taylor, and the Party General Secretary Peter Watt.

Hayden Phillips published an Interim Report on 19 October. Surprisingly there was no reference to the Labour Party Conference position, which uneqivocally opposed limits on donations to political parties. What was said by Labour's representaves to Hayden Phillips? Alarm bells started to ring more loudly following proposals circulated in private to the three main political parties by Hayden Phillips. How could he be talking about any donation cap in the light of the position democratically agreed by the Labour Party's sovereign policy making body?

The answer is in the last paragraph of the statement issued after a rare Emergency meeting of the National Executive Committee on 14 December 2006. It read:

“Officers and officials of the NEC will continue to vigorously pursue the Labour Party's position in all discussions with Sir Hayden Phillips.”

Excuse me. What are they paid to do in the first place? Is it usual to have to remind staff and party officers to do their jobs? Is it reasonable to speculate that there was treachery afoot in the discussions with Hayden Phillips hitherto?

Hayden Phillips in his original terms of reference was due to report by the end of December 2006. On 19th December, the Inquiry website said that he would report at the end of January 2007. The latest posting on 31 January talks of “continuing discussions”. Phillips claimed

“In a number of areas there is a clear prospect of common ground:

  • increased transparency;
  • reducing campaign expenditure for a General Election;
  • refreshed and reformed regulation; and
  • some additional public funding.

There are two key issues which need more work:

  • cap on donations; and
  • continuous regulation of campaign expenditure.”

This suggests that there is a consensus among the three main political parties that there should be “some additional public funding”. Time for all taxpayers to keep a hand on their wallets. Could it be that someone close to No.10 has found some “wriggle-room” in the Labour Party position on donation caps, that would not be a threat to the Trade Union Link, but would open the door to millions of taxpayers money for Labour, Liberal Democrats and Conservatives?

In the interests of openness, and transparency, Hayden Phillips should publish all the position papers circulated to date, so that the public can judge for itself whether there is a justification for any increase in public funding should a consensus emerge.

The public should be deeply concerned about the whole Inquiry, why it was necessary in the first place and the circumstances under which it was set up. I asked Lib-Dem leader Ming Campbell about this at the Power Inquiry Conference last May to be told there was a crisis in political party funding. True! But whose fault is that?

The Electoral Commission (EC) set up by Parliament to regulate political parties in Britain published a report on the Funding of Political Parties in December 2004, just 15 months before Hayden Phillips was appointed. Why was it necessary so soon after for another Inquiry? Would it be too cynical to suggest that the EC came up with wrong conclusions from No. 10's point of view. Could it be that the EC's refusal to back increased state (aka taxpayers') funding posed a problem? Worse, was it that the EC had the temerity to suggest that political parties should try and recruit more members? Were these the real drivers behind Hayden Phillips appointment?

If the Conservatives and the Liberal Democrats want to risk voters' wrath by condoning petty crime, that's their choice. Given the relative success of the Conservative's rebuilding of their finances through the sale of their former Party headquarters in Smith Square, and increased donations in the wake of David Cameron's election as their Leader, Labour needs to very wary. But what's the Lib-Dem game? Is Ming Campbell playing Nancy to Blair's chosen Oliver?

Peter Kenyon is chair of Save the Labour Party: www.savethelabourparty.org