Wednesday, January 06, 2010

Is it Unthinkable That Labour Could Go Bust?

Today's Times story about Labour Party finances contains some interesting spin - not surprising in that it is partly written by Tom Baldwin. He quotes David Blunkett bemoaning the fact that Labour hasn't got as much money to spend on the election as the Conservatives. It's true. They haven't. But Labout's finances are in a far worse state than even this story makes out. And all you have to do is examine their 2008 accounts to understand why. I'm no accounting expert but even I can see that they are in very dire financial straits indeed, and their viability as a going concern after the election has to be questioned. Let's look at the figures...

Notionally was up from £32 million to £34 million, so good news, you would think. But not necessarily.

Of this £34 million there was:

  • A one off VAT rebate of £4.6 million
  • £2.5 million ‘donation’ from David Sainsbury – actually conversion of loan ie not cash
  • £300k ‘donation’ from Gulam Noon – actually conversion of loan ie not cash
  • £350k ‘donation’ from David Garrard – thought to be conversion of loan ie not cash

So actual (useable) income was just over £26 million without the VAT (or almost £31 million with it)

In reality, overall:

  • Donations income is down from £11.2 million to £9.5 million
  • Membership income is down £0.5 million (at £4 million)
  • Affiliations income up £100k (at £8 million)

The only major donors were (in addition to the conversions of loans):

  • Ronnie Cohen £250k
  • Nigel Doughty £300k
  • Jon Aisbit £250k
  • Lord Sainsbury £0.5 million (in addition to conversion)
  • Steve Lazarides £121k
  • JK Rowling £1 million
If you take out the conversions of loans (£3.1 million) then they actually got £6.4 million of cash donations.


Up just over £1.4 million (£26.2 from £24.8 in 2007)
Staff costs up £1.4 million (but numbers were down, average 213 staff at end of 2007 and 208 staff at end of 2008)
£1million extra in ‘political activities’ – presumably extra campaigning activity

Net liabilities

Overall liabilities were down £6.4 million (not including pensions) from £18 million to £11.6 million. Overall debt stood at £17.5 million down from £18.9 million:

  • Bank overdraft down £0.5 million to £3.5 million
  • Sainsbury conversion £2.5 million
  • Noon conversion £0.3 million
  • Garrard conversion £0.35 million

So, knowing all of that, let’s do a budget for 2010 ...

Income p.a.
Membership £4 million
Affiliations £8 million
Other £5 million
Donations £6.4 million *

Total £23 million

*This assumes same performance as 2008, ie donation income of £6.4 million

Expenditure p.a.
Running costs (no increase in staffing costs and no extra campaigning costs) £20 million
Interest on loans £1million
Loan repayment £2 million
Other £2 million

Total £24 million

This all assumes no General Election costs. General Election will cost an additional (roughly) £15 million. In other words Labour are are potentially £1 million short this year before they spend anything on a general election and assuming they raised at least £6.4 million extra donation income in 2009. We know from media reports that they got a couple of million recently, but the chances are that they have started 2010 with more debt than they started the year - certainly not any sort of war chest.

There is now a real possibility that Labour will finish the election campaign as a busted flush - both politically and financially. Ironically, it may be that Short Money could be what saves them in the end.


Patrick said...

I expect the unions will keep them from outright bankruptcy - but will then demand that Labour become their absolute poodle.

New Labour is dead.

DomFisher said...

They didn't save for a rainy day.

This Baldwin spin is simply an attempt to raise money for Labour.

Jane said...

Iain, I have heard a delicious rumour that the Labour NEC (including one G Brown) will be personally liable for the outstanding debts if the party goes bankrupt.

Could you investigate? How brilliant that would be!

Alan Douglas said...

Well, at least no one can accuse them of hypocrasy - they do unto themselves exactly what they do to the rest of us.

Well done, Labour, the party of utter integrity !

Alan Douglas

Mark Senior said...

i would agree that Labour finances are pretty dire but a similar perusal of Conservative accounts for Y/E 31/12/2008 are not much better . Ending the year £ 7.46 million in the red a minimal improvement over 2007 when they were £ 7.75 million in the red .
Both Labour and Conservative parties have in fact been technically insolvent for some years .
Is it unthinkable that both Labour and the Conservatives could both go bust after a GE campaign spending money they have not got ?

JuliaM said...


I'm thinking it very, very hard indeed. Hey, it works for Derren Brown! ;)

Cleethorpes Rock said...

This is a potentially exciting opportunity for the Tories. Once elected, they only need to:

- Compel Unions to collect the political fund separately from General subs via an opt-in system.

- Scrap the Communications Allowance (already party policy)

and Labour will be finished.

strongholdbarricades said...

The interview a couple of days ago suggested that the Labour Party had been thinking of going into administration a couple of years ago.

The notes also don't tell you about the "loans" that some donors haven't converted into donations, and still want back

David Boothroyd said...

The situation is not as dire as painted here. First the Labour Party holds its general election fund separately as a sinking fund, so there is cash available to fight the election. I believe payments into it are included in running costs. Second, an iron law of politics is that political party donations always rise at election times - whichever party and whatever the circumstances.

Third, if in your scenario you are assuming that Labour is not in government after the general election, then it gains an additional source of income from Short Money (currently only paid in Scotland). It's been forgotten now but one of the earliest actions of the Labour government in 1997 was to bring in a significant increase in the level of Short Money.

Legally the Labour Party is arranged as an unincorporated association like all other political parties, with the National Executive as its administering body. The legal liabilities involved in an unincorporated association are a fascinating area of law which keeps many lawyers in work.

John said...

So this could be why David Cameron is running a long election run in.

Mark Senior said...

In the last GE year 2005 , the Conservatives spent £ 15 million more than their total Income and their net debt increased from £ 3 to £ 18 million . They did then habe Smith Square as a tangible asset but of course sold that in 2007 .

Anonymous said...

Good news then.

Neopeitha said...

Cleethorpes Rock, you forgot about abolition of the Union Modernisation Fund - which effectively is a means of channelling taxpayers' cash to the Labour party via the Unions.

Gillibrand said...

How are the mighty fallen- and battle has not yet been joined!

Newmania said...

Great post Iian , you are at your absolute best making fiddly things easy to understand ...really you have a sort of genius for it.

JK Rowling eh clearly in real life she supports Voldemort

Colin said...

I wonder if the Co-op bank is as understanding in relation to the overdrafts of its other clients?

George said...

Time for the FSA to investigate the Bankers to the Labour Party, Coop and Unity.
If the debt's are not repayable then the banks must put them on the risk register and then call the debts in. Non payment within 7 days would result in the Banks being forced to place their customers (The Labour Party) in Administration.
Allegedly the FSA have been monitoring Labour's debts for some time now, which explains the inactivity.
The odd political favour being exchanged perhaps.... a whistleblower is needed.

JMB said...

Any chance of adding some equivalent figures for the Conservatives to the tables so they can be compared.

Some of the press portrays the Conservatives as relying exclusively on large donations from millionaires whilst Labour relied on "ordinary" members but it is obviously more complex than that.

Rob said...

Noon conversion £0.3k
Garrard conversion £0.35k

So that would be £300 and £350 respectively - hardly worth mentioning.

lavrentiy beria said...

£1 million donation to NuLabor? Another reason not to buy any of Rowling's crap books.

James D said...

Jane, perhaps he'd try paying them with a rubber Gregory.