Trade Union and Labour Party Liaison Organisation (TULO) – Written evidence (TUP0006)

Introduction

1. The Trade Union & Labour Party Liaison Organisation (TULO) is the umbrella organisation that coordinates the activities of the 14 trade unions affiliated to the Labour Party.   TULO has campaigned against the whole Trade Union Bill, and we welcome this opportunity to address clauses 10 and 11, which represent the most partisan attack by a governing party on the finances of the Opposition since 1927.
2. In preparing this submission, TULO is mindful of the two principal questions about which the Committee has invited responses:

Will clauses 10 and 11 of the Trade Union Bill have an impact on the finances of political parties?

If the two clauses will have such an impact, how would that relate to the recommendations of the CSPL report and/or party funding reform?

We are also mindful of the subsidiary questions to which the Committee refers in its call for evidence.

Regulatory Framework

3. Trade union political objects are now governed by the Trade Union and Labour Relations (Consolidation) Act 1992, which consolidates the relevant provisions of the Trade Union Acts 1913 and 1984.   The Trade Union Act 1913 was designed to reverse the Osborne judgment, in which the House of Lords held that it was unlawful for trade unions to introduce a levy of their members to finance parliamentary representation[1].   This was a decision that had a devastating impact on the emerging Labour Party, until reversed by the then Liberal government.
4. In restoring the political freedoms of trade unions, the 1913 Act provided that trade unions could incur political expenditure, but only if a number of conditions were met to reconcile the wishes of those who supported political objects, with the wishes of  others who did not.  So:

• members of the trade union in question must approve the adoption of political objects in a secret ballot of the members;
• the union must thereafter establish a separate political fund to be financed by a separate levy of the members;
• political objects, as defined in the Act, may be financed only by payments made from the political fund;
• every member must have the right to opt out of paying the political levy, and not to suffer discrimination or disability for doing so; and
• these various provisions are to be included in the rules of the union approved by the Chief Registrar of Friendly Societies, to whom complaints could be made in the event of their breach.

5. The Trade Union Act 1913 was amended in 1927, by the Trade Disputes and Trade Unions Act 1927 (which applied to Northern Ireland).   The political levy provisions of the 1927 Act were the culmination of a back-bench campaign to change the law, the purposes of which was captured in a memorandum by the Conservative Minister of Labour in 1924, who wrote privately that:

The real point which we have to decide is this.  Do we wish to attack Trade Unions as such or do we not?.....the major part of the outcry against the political levy is not motivated by a burning indignation for the Trade Unionist who is forced to subscribe to the furtherance of political objects which he abhors.  It is based on a desire to hit the Socialist party through their pocket … What I submit is that at least we should not delude ourselves as to our intentions.[2]  

6. As a result of the changes introduced in 1927, the system of opting out was replaced by a system of opting in.   It was no longer assumed that everyone would pay the levy unless they indicated otherwise; it was now assumed that no one would pay the levy unless they indicated otherwise.   The Act affected different unions in different ways, but many experienced a gradual decline in political levy paying members between 1927 and 1946, when the 1927 Act was repealed.  This had an immediate effect on the money available in trade union political funds, which saw a decline in the number of levy payers from 75% of the total TUC affiliated membership in 1927 to 38% in 1945, and a consequent effect on the Labour Party.[3]  
7. The opting in arrangement remained in force until 1946, when the 1913 Act was restored under the Attlee government by the Trade Disputes and Trade Unions Act 1946 (which did not apply to Northern Ireland).   Apart from the Certification Officer taking over the responsibilities previously exercised principally by the Chief Registrar of Friendly Societies in 1976, the position remained largely unchanged until the Trade Union Act 1984:

• extended the definition of political objects to which the legal framework applied, so that more items of expenditure had to be financed from political funds;
• required trade unions to seek approval of their members every 10 years for authority to continue to operate political funds.

8. It is clear from now released Cabinet papers that in taking these steps to change the law in 1984, the Thatcher government also considered reverting to the opt in arrangements operating between 1927 and 1946.  It appears, however, that the Prime Minister vetoed this proposal personally for fear of its impact on the democratic process.   As was recognised by Thatcher, a move to opting in would create ‘great unease and should not be entered into lightly’.[4]    The ten yearly ballots were introduced instead of ‘opting in’, and an agreement was reached between the government and the TUC whereby trade unions would take steps to make the right to opt out more widely known by their members.[5]

Position in Northern Ireland

9. The legacy of the 1927 Act continues in Northern Ireland, to which the 1946 Act was not extended.   So whereas opting out has operated continuously in Great Britain since 1946, in Northern Ireland opting in has operated continuously since 1927.   The legal position is now governed by the Trade Unions and Labour Relations (Northern Ireland) Order 1995, article 59 of which provides for opting in to the political fund, and for the right of an opted in member to give written notice of withdrawal at any time.  The Certification Officer for Northern Ireland (CONI) performs a supervisory role similar to her counterpart in GB, and publishes an annual report with information about contribution levels to political funds by NI trade unionists.
10. According to the CONI’s most recent annual report, there were ‘20 Great Britain trade unions with Northern Ireland members operating political funds at 1 March 2015’, of which 15 had Northern Ireland members ‘contracting-in’.[6]    Only nine of the said 15 unions are affiliated to the Labour Party in Great Britain.  The CONI also reports that in 2014, ‘38,079 Northern Ireland members of these [15] trade unions - representing some 27.8% of the total Northern Ireland membership [of these 15 unions] – contributed £217,468 towards political funds’.[7]    As an appendix to the CONI’s report makes clear, the opting in levels vary from union to union.
11. Thus, the percentage of NI members who are in unions affiliated to the Labour Party in Great Britain, and who pay the political levy in NI varies from 0.7%, to 4.9%, to 14.1%, to 39.6%, to 41.9%, to 42%, to 47%, to 51.1%, and to 73.2%.    The figures in bold represent the five largest unions affiliated to the Labour Party.   It is difficult to provide precise corresponding data about the percentage of members paying the political levy in Great Britain.  We can say, however, that 619,174 members who belong to unions with a political fund do not make a political fund contribution, either because they have claimed exemption or they belong to a category of membership from which the union does not collect.
12. The Certification Officer (for Great Britain) does not provide comparable data to that provided by the CONI.  It is nevertheless possible to provide information about the number of members paying the political levy in the case of the five largest affiliates (that is to say for the unions in bold in paragraph 11 above).   The percentage of members who pay the political levy in Britain in these five unions is 96.1%, 93%, 95.4%, 84%, and 83% respectively.  It is not possible easily to give a precise figure for the overall percentage of political levy payers in all unions (Labour Party affiliated and non-affiliated) with political funds, but a conservative estimate would put it in excess of 85%.
13. It is thus clear that there is a huge difference in contribution levels in GB and NI (27.8% v 85%+).   We do not claim that the regulatory regime is wholly responsible for these differences:   the political culture in NI is different; political party organisation, representation and presence is different; and there are sensitivities on the part of some trade unions about partisan political engagement in a divided community, and as a result a fairly low key approach to the political fund in NI.   But we have no doubt that the regulatory environment provides an important explanation for the different levels of political levy participation in the two jurisdictions, albeit that it is not the only explanation.
14. This is a view shared by TULO affiliates, whose views were sought for the purposes of this submission.   When asked why they thought that the levels of political fund contributions in Northern Ireland were comparatively low, responses included the following:

• ‘In Northern Ireland members have to opt into the political fund and this is not an easy process. Unless members decide to opt in as they join it is very difficult to persuade them to do so’.
• ‘Nationally around 80% of [union’s] members pay the levy, so it is half as many in NI. This is due to the opt-in process’.
• ‘Members are asked to pay an additional amount on top of their membership fee – not part of it as in the rest of the UK where members can choose to opt out.’

Likely Effect of the Trade Union Bill

15. It seems clear from the experience of the Trade Disputes and Trade Unions Act 1927, and its continued operation in Northern Ireland, that there will be a sharp decline in the number of trade union members paying the political levy if the Trade Union Bill, clause 10 is enacted.  Existing data suggest a fall from in excess of 85% to 28% - 38% levels of participation.   There are two reasons to believe, however, that this may significantly over-estimate the levels of participation under the proposed new regime.
16. The first is the more intense regulatory structures in which trade unions operate, including in particular the new powers in the Trade Union Bill relating to the Certification Officer.   These will enable the CO – as well as trade union members - to bring proceedings against a trade union that fails to comply with the new regulatory demands.   The Bill’s proposal that the CO will be able to bring a complaint before the CO is of course a constitutional solecism, hopefully the subject of examination elsewhere, and likely to be the subject of intense litigation in due course.  
17. But it does mean that trade unions are unlikely to have the soft landing that the more lax regime permitted in the 1920s and 1930s.   Some trade unions were thus able to mitigate the impact of the 1927 Act for a short period in ways that would not be tolerated today.  Unions were in effect thus able to manage their own transition to the new regime:

• By adopting a lengthy implementation, perhaps because of the high levels of support for political activity in the union. This was the practice of the giant Miners’ Federation of Great Britain until the Chief Registrar of Friendly Societies intervened in 1936.
• By aggregating the general and the political levies, with opted in members paying a smaller general contribution than those who had not opted in; the Chief Registrar found this practice to be unlawful in 1928, though a number of unions continued with the practice until the 1930s.

The foregoing did not of course exhaust the ingenuity of unions as they struggled to meet the law’s new demands.

18. But it is not only greater regulatory supervision that will depress contribution levels.  So too will the regulatory content of the Bill.   There are a number of factors that are relevant here.   The first is the prohibition of the check off in clause 14.   This is predicted to lead to a loss of trade union members, which in turn will lead to a loss of political fund income.  Second, the method by which opting in is to take place is deliberately calculated to make it harder for unions to recruit political membership.
    This is because it will not be possible to opt in online (at the point of joining the union), but only manually in the manner prescribed by the Bill.
19. It will of course be possible for trade unions to devote resources to the manual collection of subscriptions generally and political levies in particular.   But the nature of the workplace has changed greatly since the 1920s, 1930s and 1940s.   Membership is scattered and branch secretaries do not have access to members at unorganised sites.   And even if they do, few employers will welcome regular visits from trade union officials – lay or full-time – on a mission to sign up members to the political levy.   Nor is it likely that members themselves would appreciate visits at home from trade union officials collecting political levy funds, even if the human resources were available on the part of trade unions to make such visits.
20. The other major difference of course is the five yearly renewal requirement in the Bill.   There was no corresponding provision in the 1927 Act, and no corresponding requirement in Northern Ireland.   It is hard to see what purpose this serves, other than a malign one, particularly given the ongoing existence of the 10-yearly political fund ballot.   So far as the Bill is concerned, members who opt in will be free to opt out at any time, simply by giving notice in writing to the union (Clause 10(5),(6)).   Having opted in they are not bound in perpetuity to pay the political levy.  The five year renewal requirement could only be justified – if at all – if members who had contracted in were legally bound to pay the political levy indefinitely.

ECHR and Practice Elsewhere

21. The right of trade unions to engage politically is recognised by the ILO Committee of Experts (in relation to ILO Convention 87),[8]  and acknowledged by the ECHR, which accepted in ASLEF v United Kingdom that

Historically, trade unions in the United Kingdom, and elsewhere in Europe, were, and though perhaps to a lesser extent today are, commonly affiliated to political parties or movements, particularly those on the left.  They are not bodies solely devoted to politically – neutral aspects of the wellbeing of their members, but are often ideological, with strongly held views on social and political issues.[9]

22. As the ASLEF and other cases make clear, trade unions have Convention rights which are in addition to the Convention rights of their members.   The Trade Union Bill, clauses 10 and 11, clearly violate the ECHR, articles 10(1) (freedom of expression) and 11(1) (freedom of association), together with article 14 (discrimination in the application of Convention rights).   These restraints will have to be justified as being proportionate restrictions for one of the prescribed purposes set out in ECHR, articles 10(2) and 11(2).  Having regard to the already tight restrictions on trade union political funding, recent developments in other jurisdictions suggest that this may not be straightforward.
23. There are two issues here that have troubled courts in comparable jurisdictions.  One is the excessive regulatory burden on political freedom.   This was an issue in the United States where federal law prohibited corporations and labor unions from engaging in partisan electoral activity, insisting that such activity should be financed only by corporate or union (as the case may be) political action committees.  The latter are the functional equivalent of trade union political funds, and are financed under an opting in procedure by shareholders and employees (in the case of companies) or members (in the case of unions).
24. In the landmark decision in Citizens’ United v Federal Election Commission, these provisions were ruled unconstitutional as imposing an unacceptable burden on free speech.   As the Supreme Court pointed out:

PACs are burdensome alternatives; they are expensive to administer and subject to extensive regulations,  For example, every PAC must appoint a treasurer, forward donations to the treasurer promptly, keep detailed records of the identities of the persons making donations, preserve receipts for three years, and file an organisation statement …..[10]    

It is true that PACS are not identical to trade union political funds.   But they are close enough.    More recently still, the High Court of Australia has shown a similar impatience, this time with political funding legislation that not only imposed excessive regulatory burdens but was transparently partisan, the legislation in question banning trade unions from contributing to the ALP.    Unions NSW v New South Wales is the first time that Australia’s highest court has used its implied power to strike down legislation violating the freedom of political communication since that power was ‘created’ by the same court in 1992.[11] 

25. In essence the NSW legislation was found to be bad because it imposed ‘a restriction upon the funds available to political parties and candidates to meet the costs of political communication by restricting the source of those funds’.  If the legislation was to survive, it would have to be justified.   But the government was unable to provide any justification for the restriction in the legislation ‘other than its achievement’,[12] and the offending provisions of the Act were struck down.  In other words, the legislation’s ‘objective’ was not a ‘justification’.   Again, the NSW legislation is not identical to what is being proposed in the Trade Union Bill; but the pungent partisan smell – which clearly offended the High Court – is the same.
26. The comparative jurisprudence suggests that clauses 10 and 11 will need compelling justification.  But none has been provided.  Nor has the government provided any justification for the discriminatory treatment of trade unions, as required by ECHR, art 14, which applies to trade union rights as it does to other rights.[13]    No other organization is subject to even the current levels of restriction on trade union political freedom.   There is no reason why trade unions should not now assert their Convention rights, in relation to both clauses 10 and 11.  So far as the latter is concerned, if reporting to the Electoral Commission alone under PPERA is good enough for everyone else, it is good enough for trade unions.

CSPL Report and its Implications

27. The trade union political levy was one of a number of questions considered by the CSPL in 2011.[14]    The Committee made wide-ranging proposals to reform political party funding, including a change in the way in which trade unions affiliated to the Labour Party.   Instead of the system of collective affiliation, the Committee proposed that trade unions should only affiliate those members who had chosen to ‘opt in to the affiliation fee’ (para 11.38).  Although it is not altogether clear, it appears that this would create three classes of trade union members:   Labour Party affiliated political levy paying members; non affiliated political levy paying members; and opted out members.
28. While not dealing with an identical issue, there are a number of points about the CSPL’s report that are relevant for the Select Committee’s current examination.  The first is that in proposing a system of opting in for Labour party affiliation fees, the CSPL was aware of potentially damaging implications for the finances of the Labour Party.   Thus we are told that the changes proposed by the Committee ‘would be likely to have a significant impact on payments to the Labour Party’, indicating that it was ‘possible that fewer, perhaps, considerably fewer, members will be prepared to make a positive decision to be affiliated than the number currently not opting out of the political fund’ (para 11.43).
29. So how many fewer members would opt in?   It is clear that the CSPL had no clue whatsoever, disarmingly stating that the likely effect was ‘impossible to quantify’:

At one extreme affiliation fee payments could be reduced to a fraction of their current levels.   At the other they could be relatively unaffected.   Our assumption is that the result will be somewhere in between. . . . But that can be little more than a guess at this stage (para 11.44).

The Committee was, however, aware that the move to opting in could lead to unfairness between the parties and for that reason proposed that the matter should be reviewed both at the point of implementation of the proposed legislation and two years thereafter (para 11.45).

30. Putting to one side the fact that this is hardly sound evidence-based policy-making, it is nevertheless notable that in proposing an opting in system for the affiliation fee, the CSPL did not prescribe the means by which the opt in notice would be given.  And again unlike the Trade Union Bill the CSPL did not recommend that opt in notices should be renewed every five years.   On the contrary, the Committee was generally sensitive to the need to minimize the bureaucratic burden that any new legislation would create, and sensitive as well to the costs that the move to a new system would involve, proposing that ‘there may need to be some flexibility about the way these costs are recovered’ (para 11.46).
31. The other important recommendation of the CSPL was that there should be a late implementation date to adjust to the new regime.   This is important, as no thought seems to have been given to the mechanics of a move from opting out to opting in. Post-enactment, the Certification Officer will be required to produce new model political fund rules, trade unions will have to amend their rules in accordance with their (contractually binding) rule-book procedures, and the revised rules will have to be approved by the CO.  

This will require a long transition time before commencement, while post-commencement it is simply unreasonable to expect a union of over one million members to sign everyone up within three months.   

32. It is not only that the detailed requirements of the Bill (method of opting in, renewal, and implementation) have no counterpart in the parallel proposals of the CSPL.   They appear also to compound the partisan nature of the attack on trade unions and the Labour Party by making the move from one system to another as difficult as possible.   Although the Trade Union Bill does not directly implement a CSPL recommendation, it does gratuitously and deliberately affect one political party, and as such runs counter to the point made by the CSPL that

It is important that proposals are regarded as a package [sic].   Failure to resist the temptation to implement some parts, while rejecting others, would upset the balance we have sought to achieve (para 15.3).

Churchill Convention

33. In the 1948, Sir Winston Churchill (then Leader of the Opposition) said that:

it has become a well-established custom that matters affecting the interests of rival parties should not be settled by the imposition of the will of one side over the other.[15]

This is a sound principle, though given Churchill’s role as one of the architects of the 1927 Act, it would have been surprising to have heard it from his lips.   Nevertheless, a few years later Quinton Hogg (later Lord Chancellor in Thatcher governments) said that

'it is repugnant to the feelings of all decent people … to use the power of a Party majority in the House of Commons to force a division on something which is designed solely to do political damage to their opponents about a controversial matter concerning the machinery of election and party administration'.[16] 

34. This convention has been accepted and applied in recent years, and was generally followed during the Labour governments between 1997 and 2010. The major reform to party funding introduced by the Political Parties, Elections and Referendums Act 2000 (during a period of Labour government) was the product of a report of the Committee on Standards in Public Life, to which all the major political parties made submissions. It is notable that in their evidence to the latter Committee, the Conservative party said that

The question of trade union funding of parties is not of direct concern to the Conservative Party.   We recognise the historic ties that bind the trade union movement with the Labour Party . . . The Conservative Party does not believe that it is illegitimate for the trade union movement to provide support for political parties.[17]

It is not clear what has caused the Conservative Party to have changed its mind, other than a desire to abuse political power for partisan advantage. 

35. Further evidence of this Convention is to be found in the important report of the House of Commons Constitutional Affairs Committee in 2006[18],  which is book-ended by the need for consensus.   Thus at para 13:

Party funding and the maintenance of a system of parties that compete fairly within the British polity is an issue of central political importance. It is imperative that the Government take a considered and measured view of any proposals for reform and that reforms command a wide consensus among political parties. Failure to undertake reform, or the promulgating of reforms which are seen to be of a partisan nature, will serve only to alienate the public and damage rather than revive political parties in the eyes of the electorate.

And again at para 146, the Committee recommended that any proposals for the reform of the system of party funding ‘should be based on the following key principles’, one of which is that ‘Every effort should be made to attract a consensus among the major political parties’.

36. More recently, the Churchill convention is to be seen operating in the inquiry conducted by the Committee on Standards in Public Life in 2011.[19]   On this occasion (under a Coalition government), the recommendations of the Committee were not implemented, mainly because they were unacceptable to the political parties. Consistently with the spirit of the Churchill convention, the package collapsed.  This is not to claim that the Churchill convention should be regarded as giving one party a veto over all changes to party funding and election administration. But there would have to be strong and compelling reasons to justify an attack on the opposition, undertaken unilaterally by the party of government.
37. One possible justification would be that the existing regulatory framework (where one exists) is ineffective. But this is self-evidently not the case in relation to trade union political funds, and would in any event invite only a proportionate response to address an identifiable mischief.   Many have looked for evidence of regulatory failure, but no one has been able to provide it: 

• ‘He [Mr Robert Carr] thought that he might be able to supply cases of specific cases [of abuse relating to opting out of the political levy] if given the time - an expectation apparently not fulfilled ’.
• (Royal Commission on Trade Unions and Employers’ Associations, 1965-68, Report, Cmnd 3623, para 923 ).
• ‘(Frank White MP) … have you any evidence at all to put before this Committee that that people are paying a political levy unwillingly?(Dr James McFarlane, EEF) Not anything I think you would recognise as evidence, no’. (HC 243- i (Select Committee on Employment, 1983-84).
• ‘We have received no evidence to suggest that the legislation is not working satisfactorily, and no case has been made out for any reform. We do not propose any change in the law in this respect’ .
• (Committee on Standards in Public Life, The Funding of Political Parties in the United Kingdom , Cm 4057-1, 1997, para 6.23 ).

38. There is no evidence of any problem to justify the Trade Union Bill, clauses 10 and 11.   When pressed, the government has singularly failed to provide any convincing explanation for the change proposed, reinforcing the view that this is a measure which is being promoted exclusively for reasons of political self-interest, a conclusion which is reinforced further by the Chancellor’s announcement in 2015 to cut the Short money to the Opposition parties, causing even greater disadvantage to the Labour Party.  When Labour was in government in contrast, Short money was greatly increased at a time when after the 1997 general election the Conservative Party was financially embarrassed.   The money was accepted with alacrity, but subsequently used in circumstances questioned by the Public Administration Committee. [20]

Conclusion

39. It is clear from the evidence that clause 10 will lead to a decline in trade union political fund income.   Historical experience and current experience in NI suggest that the number of political fund contributors will fall from existing levels of about 85% to between 27.8% - 38%.   As explained above, we believe that the actual take up will be substantially lower than this, given the restrictions in the Bill about the opting in procedures, and the requirement for renewal (which was not a feature of the 1927 Act, nor a feature of the current arrangements in NI).   But whatever happens, clauses 10 and 11 will clearly have an impact on the finances of the Labour Party.   The only contestable question is how big that impact will be.
40. One prediction is that the changes proposed by the Trade Union Bill will lead to a decline in contributions to the Labour Party of about £6 million annually, this representing around £35 million or more over a parliamentary cycle once additional contributions in a General Election year are factored in.   At a time when the Conservative Party already enjoys a significant financial advantage, this is both politically unacceptable and democratically unsustainable.   In addition, the government’s proposals raise questions of compatibility with Convention rights; they violate one of the key recommendations of its own CSPL; and they breach the terms of the Churchill Convention, which discourages governments from launching partisan attacks on rival political parties.

9 February 2016