For all the civility and lip service paid by Labour and the Conservatives to the review of party funding led by Sir Hayden Phillips, the reality is that the two parties have been at each other’s throats over financing.

Last night, the inevitable happened. The Tories pulled out of 18 months of talks aimed at trying to bring the arms race in election spending to an end.

Francis Maude, shadow Cabinet Office minister, blamed Labour’s refusal to break its link with its traditional trade union paymasters, his party’s key demand. Jack Straw, justice secretary, responded neutrally, as befits his ministerial status, saying that he regretted the Tories’ decision.

Behind the scenes, though, ministers were a good deal more pleased than they would dare to let in in public.

The truth is that David Cameron never wanted to do a deal. This is more than Labour spin. The Tories had little to gain from a compromise that would have seen campaign spending capped outside elections with new local and national limits - as Sir Hayden was recommending.

The former civil servant’s proposals for a cap of £50,000 on individual donations and loans, and a single spending limit of £15m per party for local and national campaigning through parliament, would have meant the loss of millions of pounds in funding from Lord Ashcroft, one of the party’s biggest financiers, for the party’s candidates in marginal constituencies that will be the key battleground come 2009.

A legal loophole in the current law means there is no cap on this kind of spending and Labour cannot match it. The Tories knew Labour would never agree to break the union link. "We weren’t asking very much," one Conservative insider grins.

Labour MPs with slim majorities had been working themselves up into a state of panic over the summer. The pressure on Gordon Brown to act has ratched up since parliament’s return from the summer recess and his decision not to call a snap election.

So, whatever Mr Straw says in public, he knows that the Tory withdrawal is good news for Labour. It gives ministers the opportunity they have been waiting for: a chance to get legislation closing the Ashcroft loophole onto the statute book before the next election. And, conveniently, they can blame the Tories if it looks one-sided.

One senior cabinet minister has told me that a party funding bill is now certain in the forthcoming parliamentary session - whether or not the Queen mentions it in her speech next week.

This is one possible vehicle for closing the loophole. Alternatively, an MP could bring forward a private members’ bill. The second option would have the - admittedly somewhat meaningless advantage - of not making the government look too partisan.

As I have said before, though, legislating without Tory support nevertheless leaves Mr Brown with a problem.

Getting the bill through the Commons, with Labour’s commanding majority, will be a breeze. The Lords will be trickier.

A pliable Liberal Democrat party will be needed to guarantee the bill’s passage through parliament’s upper chamber. This is far from guaranteed. But my suspicion, based on nothing more than gut instinct, is that the Lib Dems could back it. The thumping they have got in the polls at the hands of Mr Cameron’s party will make them just as hostile to the Ashcroft millions.

All well and good for those Labour MPs in the path of the Ashcroft avalanche. Or is it? By the time the legislation receives royal assent it may simply be too late. Some of those marginals - the home secretary Jacqui Smith’s Redditch constituency among them - could already be lost.

October 31st, 2007 in Uncategorised | Permalink