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Questions About How the Tories Fund Their Politics Aren't Going Away

This week Ed Miliband heralded the biggest Labour Party reforms for a generation to strengthen the connection with millions of individual working people... In marked contrast, and using language that is a throwback to the old Tory party, David Cameron offers nothing but an attack on Labour's trade union links.

This week Ed Miliband heralded the biggest Labour Party reforms for a generation to strengthen the connection with millions of individual working people. And in doing so, he has re-ignited and led the debate about how we reform the funding of all political parties and how we open up our politics more to the public.

In marked contrast, and using language that is a throwback to the old Tory party, David Cameron offers nothing but an attack on Labour's trade union links. The truth is the Tories positively hate the unions. Despite the fact that six and a half million hard working people - including some of the lowest paid workers in Britain - rely on their union for basic employment protection, Cameron spits out the words "trades unions" from the despatch box of the House of Commons with a venom born out of ignorance, privilege and malice.

But with Ed Miliband's bold and comprehensive reform plans for Labour, the spotlight will now inevitably fall on the Tories and how they fund their politics. The ball is now firmly in Cameron's court. The question is: will Cameron be prepared to act and finally take big money out of politics?

In his speech this week, Ed Miliband declared that Labour would work to build a closer relationship with the millions of working people affiliated to the party through the trade union link. This means moving away from automatic affiliation fees to a system where trade union members choose, as individuals, to join Labour. It builds on the 'Refounding Labour' reforms that opened up Labour to wider supporters. And it is about opening up politics to the public and ensuring that our politics is firmly rooted in our communities.

In recent years, there has clearly been a growing disconnect between the general public and the politics of Westminster. Ed Miliband was right to act swiftly and decisively to take tough new action in light of the uniquely shocking allegations in Falkirk. But as part of the process of re-building public trust and confidence, as well as the need for a more inclusive politics, we also need big changes to the way politics is financed.

This is why, as part of his announcement last Tuesday, Miliband called for renewed cross-party talks on party funding and repeated his offer to discuss implementing a cap on all donations from individuals, businesses and trade unions.

Sir Christopher Kelly's independent report into party funding (published back in 2011) recommended a £10,000 annual cap on individual donations. Ed Miliband has gone even further, proposing a cap of £5,000. But Cameron has so far been unwilling to agree to a cap of less than £50,000 - that's twice the national average yearly wage.

The problem with a cap of this magnitude is that it would mean wealthy individuals would still be able to donate a quarter of a million pounds over the course of a parliamentary term - leaving "big money" still very much part and parcel of politics.

Whilst the biggest source of Labour's income is from our membership subs and small donations - with even union affiliation accounting for less than a quarter of our revenue - the Tories are mostly funded by a small group of very rich donors. Indeed, recent research by the London School of Economics found that more than half of the Conservative Party's donations between 2001 and 2010 came from just 50 "donor groups".

In particular, the Tories rely heavily for their funding on individuals and companies associated with hedge funds. In recent years, for example, 18 people associated with hedge funds have donated more than £22million.

What is the influence of this small group of multi-millionaires who are bank rolling the Tories? There have been questions, for example, about what influence the hedge fund owners of Circle Health (the first private hospital operator in the NHS) have had on the Government's health policy, given that they have donated £863,000 to the Tory party and have been able to gain access to Cameron through private diners.

Interestingly, every single one of the 18 hedge fund donors mentioned above have attended private dinners with the Prime Minister or senior ministers. It must have been a complete coincidence, of course, that George Osborne decided to abolish stamp duty reserve tax on funds in his latest Budget - a £145million give-away to hedge funds.

But this is not the worst of it. The Conservative Party has also pulled in millions of pounds from hidden donors through a loophole that allows wealthy backers to fund the party while keeping their identities secret.

Unincorporated Associations are legal entities that do not have to publish accounts or other financial details. This mechanism has been utilised in Tory constituencies across the country so that people can donate anonymously. For example, the Principal Patrons Club has donated over £40,000 to David Cameron's Whitney constituency Conservative Party association since 2010. And in Michael Gove's constituency, the Magna Carta Club has donated £22,000.

Trade union donations are legally required to be open and transparent, but with these Unincorporated Associations, there is no way of knowing who is actually donating the money. This clearly needs to change.

And all of this of course comes on the back of the Government's decision to give a tax cut of £100,000 to 13,000 millionaires, at the same time as the average family is set to lose £891 this year from tax rises and benefit changes.

Cameron thinks that if he spends the next two years simply attacking the unions, a general election victory for the Conservatives is in the bag. But the issue of Tory party funding is not going to go away. This week, Ed Miliband has put his marker down and has shown that he is willing to face up to the big challenges in reforming the way Labour does our business and funds our politics. There is no doubt that the changes could be hard for Labour, but they are clearly the right thing to do.

It's now time for Cameron to step up to the plate and show some leadership. When it comes to party funding, we all desperately need a new way of doing things. Business as usual will just not do. It is time we took big money out of politics for good. Will Cameron rise to the challenge? I very much doubt it. But the questions about how the Tories raise their money isn't going to go away any time soon.

Michael Dugher is MP for Barnsley East, shadow minister without portfolio and Labour Party vice-chair

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