Ed Miliband can't retreat from his battle with the union bosses | Andrew Rawnsley

Victory for the Labour leader would be good for him, bad for the Tories and best for the way we do politics

One Labour MP with a sense of irony puts it this way. How typical it is of his party to inflict an unprecedented defeat on the government on an issue over which it is on the same side as most of the public, only for Labour then to plunge into a dark night of the soul about what it has done.

This is the paradoxical upshot of Ed Miliband's accidental parliamentary coup over military intervention in Syria. On one reading, this ought to have been a great moment for him and a success he needed after a squally August in which the seasonal domestic news vacuum was filled by his internal critics. Over Syria, the Labour party looked relevant: its votes in parliament altered the course of international events; they may even have been a factor in the constitutional innovation of an American president seeking congressional approval before launching military action. Seeming relevant has been difficult for Labour in this parliament, as it often is for an opposition. Labour also aligned itself with a solid majority of voters, which is another thing it frequently struggles to do.

Yet in the days since, many Labour people have been wandering around wearing the miserable face of a punter who thought he'd won a fortune on a horse only for it to be disqualified by the stewards. I am not just talking about the minority of Labour MPs who disagreed with the position taken by their leader. Even among those who thought he was broadly correct, there is queasiness.

Part of the reason is that the Tories have been quite artful with their spin. They have sought to flip a parliamentary humiliation for the prime minister into an attack on the character of the leader of the opposition as untrustworthy, opportunistic and incapable of taking tough decisions. Mr Cameron presents himself as the moral victor – effectively saying: "I may be a loser, but at least I am a loser with principles" – while casting his rival for No 10 as a man who "won" by being weak. "The Tories have played a bad hand rather well," sighs one of Ed Miliband's allies. "We have played a good hand rather badly." More disturbing for them, the Tory line of attack has been echoed by people who are sympathetic to Labour – or claim to be.

There is certainly no discernible "Damascus dividend" for Mr Miliband. In the Opinium poll that we published, Labour's lead has shrunk, not advanced, and his approval rating remains stubbornly dismal. What he could do with now is an issue on which he can be unquestionably brave and undeniably principled and clearly willing to do the right thing even if it appears to be against his self-interest. Fortunately, just such a cause is at hand. That issue is trade union funding of the Labour party.

This is another battle that the Labour leader got into more by accident than design. It was in frantic reaction to allegations of candidate-fixing in Falkirk that he declared he would dramatically reform the Labour-union link. So it is obviously embarrassing that an internal inquiry has concluded that there was no wrongdoing in the Scottish seat after complainants changed their evidence. Two utterly predictable responses have followed. The Tories are portraying this as proof that Mr Miliband is too feeble to "stand up to his union paymasters". On the Labour leader's other flank, voices of the left are saying he should now retreat from reform. More of that will be heard at this week's TUC. This is a crucial challenge for Ed Miliband. If he scuttles away from it, and thus proves the Conservatives correct, it will be a disaster for him.

This has always been about something much, much bigger than one candidate selection in Falkirk. If he needs reminding why, Mr Miliband only has to reread the rather good speech he made back in July in which he declared that in future Labour should only take money from trade unionists if they have made a positive choice to donate, rather than being merely invited to opt out. "In the 21st century, it just doesn't make sense for anyone to be affiliated to a political party unless they have chosen to do so." Not only does it make no sense, it is indefensible. Alan Johnson, a former leader of the Union of Communication Workers, put it well when he said recently that Labour "can't go on living the lie with these millions of people signed up as levy-paying members of the Labour party. I call them the ghosts in the machine".

Why has this lie been so long-lived? The answer may surprise you: because it has suited the Conservative party to let it continue as much as it has the Labour party. There is a decades-long bargain between the two of them over money, a pact that is as grubby as it is unspoken. While pretending to be outraged that a clutch of union bosses controls so much of Labour's cash, the Tories are secretly delighted with the arrangement. So long as Labour harvests the "affiliation fees" of millions of union members who have never been actively asked whether they want their money spent this way, the Tories can press their claim that Labour is "in the pocket" of the union barons. This suits them so well that the Tories have never legislated to stop it.

They also know that were they really to challenge Labour on its financing, Labour would retaliate by making a comprehensive attack on the Tories' dependency on a tiny number of hyper-rich donors. At least we broadly know what union leaders hope to get for their money: policies that favour their members. We have to hazard a guess at what a Mayfair hedge fund is after when it throws an enormous bung of cash to the Tory party.

Periodically, usually when a scandal erupts, Labour has raised a clamour about the way in which the Tories are financed. But Labour has never actually tried to end it, thinking that it helps their claim that the Tories are "in the pockets" of the very rich. No Labour government has legislated to stop big money by putting a tight cap on the amount any one individual or organisation can donate to a political party. That, of course, would hurt Labour's financing too, so long as it takes lumps of cash from unions.

So by finally addressing this corrupt bargain between Labour and the Tories, Ed Miliband does more than try to end an archaic and indefensible practice by his own party. He also calls time on the squalid deal between the two biggest parties that has long poisoned our politics.

The gambit is not without hazards, but then most things worth doing in politics involve some risk. If he is successful in giving union members who desire it an individual, direct relationship with Labour, the unrepresentative power of the union bosses will be shattered. Their 50% block vote at Labour conferences will have to go. Into history will also disappear the weird and unfair electoral college, to be replaced by proper, full one-person, one-vote in leadership elections. Threatened with having their grip broken, it is not exactly surprising that union bosses are not happy. The GMB union has just slashed its affiliation fees to Labour from £1.2m to £150,000.

The timing has bewildered the Labour leadership: Ray Collins, the former Labour general secretary, has yet to publish his interim report on reforms. Some wonder if the union is a bit skint and was looking for an excuse to reduce its contributions. Most see it as a crude play "to put pressure on Ed to back down". Precisely because it looks like an attempt to intimidate Mr Miliband, it makes it even more imperative for him to stand firm. By its clumsy behaviour, the GMB may even have done the Labour leader a favour. The decision to snap shut its cheque book was made by the union's executive, not by a ballot of the 370,000 members to whom this money actually belongs. It illustrates exactly what is rotten about the current setup.

If every union imitates the GMB, it will cost the Labour party about a quarter of its annual income. That level of loss would be extremely painful in the short run, but it needn't be terminal. Much of the money that political parties spend – all those silly billboard posters – is wasted. Even if the unions went on a total funding strike – and that I very much doubt – Mr Miliband can't blink.

The negative reason is that retreat would be murderous for his reputation. The positive reason is that you can't call a man weak or unprincipled if he is prepared to confront his largest donors and risk a previously guaranteed income of £8m a year to reform the way we do politics. Individual affiliation also opens the way to Labour rebuilding itself as a mass membership party. If just 10% of trade unionists choose to say yes, it would roughly triple membership. Pull this off and Ed Miliband will earn the right to call out the Tories on how they are funded and make it possible for a Labour government finally to purge politics of big money by imposing a donations cap. It is not just for his own sake that this is a battle he has to win.


Andrew Rawnsley

The GuardianTramp

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