When does a political campaigning body cross the red line of legitimacy and become a party within a party, and then what should be done about it? Detailed recent investigations have raised this question about the role of the Blairite Progress organisation within the Labour Party. But the issue raises much wider matters about corporate involvement in modern politics involving all parties, and as such urgently requires attention.

Progress was first set up as a company limited by guarantee in 1994 and the first director was Derek Draper, then a researcher for Peter Mandelson. It publishes no details of any membership and is controlled by the directors of the company. However it has never released its register of guarantor members, nor its memorandum and articles of association, nor details of its corporate structure. Given this secrecy, should such a private company be operating as a membership organisation inside a political party?

Now this might not matter too much if it was an insignificant body on the outer fringes of politics. But it isn't - it aspires to dominate the Labour Party at the centre - and it has access to huge funding to help it achieve its purpose, out of all proportion to that available to any other such body. It has received just under £3 millions to date in donations over £7,500 (the threshold set by the Electoral Commission). No less than 95 per cent of this has come from a single source - David Sainsbury, who previously funded the Labour Party until Ed Miliband won the leadership, when he promptly pulled out and switched to Progress. Interestingly, donations from the second largest donor to Progress, Michael Montague, totalling £875,000, were made at least two years after his death via a trust whose objectives and trustees are unknown.

Progress has thus raised more money than the Green Party, Scottish Labour or Plaid Cymru. It has raised hugely more than any members' association in the Conservatives and the Liberal Democrats and 122 times more than the next highest in Labour. Clearly Progress is an organisation with the funding and staffing of a minor political party, except that it is operating inside the Labour Party. Yet despite the parlous state of Labour's finances, it has contributed none of the enormous funds it has raised to assist the party it seeks to lead by training parliamentary candidates and running its own candidates for the leadership, London mayoralty and the NEC.

Again, if its objectives were identical to Labour's, this might be easier to understand. Whilst this may have been true for its first decade to 2006 - Tony Blair required the new organisation to be "centred round the leader" - it flipped thereafter into becoming a platform for New Labour supporters against the opposing Brownite faction. After the 2010 election it finally morphed from a political education trust into a fully-fledged factional body self-identifying with New Labour, training its own supporters for parliamentary selections, and complete with its own ideology, policies, candidates and campaigns - a range of key functions taken on by no other organisation within Labour. Moreover this transformation was achieved without any internal democratic mandate. Thus, unlike in its original days when unquestioning loyalty to the leader was the dominant theme, the opposite is now true - that support for the leader is now measured in accordance with how far the leader is supportive of Progress's own distinct ideology.

So what needs to be done? The last time Labour faced an organisation operating as a party within a party was in the struggle against the Militant Tendency in the 1980s. At that time the National Executive Committee resolved to set up a register of groups to be recognised and allowed to operate within the party. Revealingly the terms of eligibility included the requirement that groups had to be open and democratic, and should not be allowed to operate their own internal discipline. Progress is of course an utterly different animal from the Militant Tendency, but the same principles of democratic governance need to apply.

The intrusion of corporate funding into modern politics on a dominant scale, which has long been the case, is now being reinforced by novel operating structures carefully crafted to fulfil the minimum legal requirements necessary, but drawn up also to maximise the opportunities for the exercise of power and influence as a self-standing organisation within an existing political party. Progress is a classic example of this tendency. It has no constitutional structure or apparent membership rights, there are obvious questions about how its decisions on policy and finance are made, it is unclear how the leading appointments were made in the absence of democratic elections or indeed what powers they exercise, and it recruits and trains potential parliamentary candidates that fit its own ideological mould to the exclusion of the broad spectrum that had always previously characterised the Labour Party.

If Progress is to remain within the Labour Party, clearly new rules are urgently needed to bring its fund-raising, governance and political activities wholly in line with Labour's principles. The next NEC meeting is on 20 March.

Michael Meacher is the Labour MP for Oldham West and Royton.

Editor's note: Progress has previously responded to Michael Meacher's allegations here.