A Question Of Class.(World Affairs)(Labour Party)

Byline: WILLIAM Underhill

While Blair befriended tycoons, Brown is turning back to union support--perhaps to Labour's peril.

AS MANAGER OF BRITAIN'S FINANCES, Gordon Brown earned a reputation for careful accounting. Whether it was deserved is an open question, but his party's bookkeepers are clearly struggling. Labour's debts total more than [pounds sterling]20 million, and donations are tumbling along with the party's fortunes at the polls. Without a bailout, bankruptcy looms.

For Brown, that's more than just an embarrassment. As private donors turn away, Labour has become more reliant on its traditional backers, the trade-union movement that founded the party more than a century ago. In the first quarter of 2008, union contributions accounted for 80 percent of the party's [pounds sterling]3.1 million in donations, up from just half of the [pounds sterling]5 million collected in the same period last year. Already the renascent Conservative Party is gleefully warning of a corresponding rise in union influence. "Mired in debt, the Labour Party is being held over a barrel by union leaders," says Conservative shadow minister Francis Maude.

Certainly, Labour is in need of generous friends. It must repay up to [pounds sterling]14 million in loans from banks and wealthy supporters before Christmas. Membership has been halved to about 200,000 since the late '90s, and while its donations dwindle, the Conservatives saw a [pounds sterling]2 million jump in donations in the first quarter. Worse, Labour's constitution leaves the members of its supervisory body--including Brown himself--personally liable for its debts.

To understand how this happened, look back to the '90s, when Tony Blair wanted to attract middle-class voters. He knew financial ties to the unions were a reminder of the party's socialist roots. So fund-raisers courted left-leaning millionaires, like publishers and property magnates, ready to be charmed by a charismatic prime minister. Sidelined in policymaking, union leaders could no longer expect their regular invitations to Downing Street. "Under Blair, the relationship [with the unions] was always prickly and distant," says Sunder Katwala of the Fabian Society, a center-left think tank. "There was a certain lack of mutual understanding and respect."

But dependence on private cash also brought dangers. Donors that will open their checkbooks for ...