Labour money woes no surprise

I AM NOT surprised to hear the Labour Party has financial problems. It is a familiar story. Labour ran up debts of £8m in the last general election campaign and still has a big overdraft.

There is a world of difference between spending billions of pounds of taxpayers' money and doing one's own housekeeping. Ask anyone in business. Chancellor Gordon Brown is no doubt much too busy running the economy and thinking up new ways to tax us to bother with such trivial details. But it raises important questions about the way political parties manage their money.

Labour could once count on trade unions, but they are no longer willing to stump up the cash without significant concessions. Some have warned they may cut funding, for the party and the MPs they sponsor.

There are two obvious alternatives. One is to get more from party members. Trouble is, numbers have been falling for some time - by 10% in the past year alone, according to the general secretary. Membership stands at 280,000 and Labour admits it has difficulty attracting young voters. The other course is to put the arm on business leaders, who have traditionally seen advantage in supporting whichever party is in power.

Like trade unions, they expect something in return - government contracts, protection from regulators or simply a gong. The problem is that companies have become less enthusiastic about political donations and are under more pressure to justify contributions to shareholders.

The fuss over the Bernie Ecclestone affair, in which the Government struggled to defend exempting motor racing from a tobacco ban after Labour accepted £1m from the Formula One boss, scared a lot of others. Now the scandal over failed US energy firm Enron and its alleged links to our Government has created new doubts about the wisdom of getting involved. No-one wants bad publicity - it damages companies and individuals.

Labour had hoped that transparency would placate its critics, but the result is that its friends in business are reluctant to come to the rescue. It is of little consolation that the Tories are finding it even harder to get financial support.

It was entirely predictable, in the circumstances, that Labour's new officials would start to get enthusiastic about State funding for political parties. Let taxpayers foot the bill and all problems are solved. The Tories and Liberal Democrats would readily agree, because they have nothing to lose.

Prime Minister Tony Blair has expressed doubts over public reaction to such a move. He was right to do so, given the cynical view most of us take of politicians and the widespread lack of interest in politics. Why should we be required to pay when so many of us cannot even be bothered to vote in a general election? How many parties would argue that they qualify for funding?

This is an issue that is high on the agenda in other countries, notably the United States, where big business has always played a more significant role. There are no easy answers, but it is certainly worth debating where we go from here. Meanwhile, I would love to be at Labour's next meeting with its bank manager.