Labour has won a possible reprieve from a £6m-a-year cut in its funding, after the House of Lords voted for further scrutiny of the trade union bill.

A committee to examine party funding will now be established, after Labour accused the government of an attempt to undermine democracy.

The trade union bill’s proposals would mean a cut in income to the party from the unions of at least £35m across a five-year parliament. The loss would come in annual union affiliation fees and grants and on top of cuts to state funding of opposition parties – known as Short money – introduced by George Osborne in November.

Angela Smith, Labour’s leader in the Lords, appealed to peers from all parties to back her motion calling for more scrutiny.

“Whatever our views, I hope that we would be able to find agreement that it would be totally wrong for any government to use its power to attack the funding of other political parties, particularly the official opposition,” Lady Smith said.

“There is clearly a fundamental difference of opinion between the government and ourselves. We’re not ever going to deal with that by seeing who can shout the loudest – and nor should we try. Surely it makes sense to take a step back and ensure a separate, careful, civilised, evidence-based consideration from a select committee of this House?”



There were 327 peers in favour of Labour’s proposal, with 234 against.

Labour argued the trade union bill was not being conducted in the spirit of a report by the committee on standards in public life’s report, which urged cross-party talks to get a consensus on reforming party funding.

Paul Bew, the chair of that committee, agreed that it was wrong for the trade union bill to “extract one element” of party funding to reform without examining it in the round.

The trade union bill changes the way trade unionists pay into their union political fund, the only source from which unions can give money to Labour, requiring

each memberto agree in writing every five years to opt into paying the political levy, rather than the current system of opting out.

The new rules will apply to all existing 4 million political levy payers in unions affiliated to the party and those who are not. The bill gives the unions only three months to get a union member’s signature assenting to the payment of the levy.