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Labour and Co-op Bank may sever ties Labour and Co-op Bank may sever ties
(about 1 hour later)
The Labour party is considering severing its commercial relationship with the Co-operative Bank Group and moving a loan worth more than £1m to the trade union-owned Unity Trust Bank.The Labour party is considering severing its commercial relationship with the Co-operative Bank Group and moving a loan worth more than £1m to the trade union-owned Unity Trust Bank.
A spokesman said that any move had not yet been finalised, adding: "The Labour party is constantly reviewing its financial arrangements. All decisions are taken for commercial reasons."A spokesman said that any move had not yet been finalised, adding: "The Labour party is constantly reviewing its financial arrangements. All decisions are taken for commercial reasons."
It is not clear the extent to which Labour has initiated the shift or whether the Co-op Bank is itself encouraging the move as part of a wider attempt to loosen, and ultimately sever, its complex historic relations to the Labour party. It is not clear the extent to which Labour has initiated the shift or whether the Co-op Bank is itself encouraging the move as part of a wider attempt to loosen, and ultimately sever, its long and complex relations with the Labour party.
The new management at the lossmaking Co-op Group have been testing the water for an end to financial donations to the Co-operative party. Many Labour MPs are sponsored by the Co-operative party, but the poor governance and losses at the Co-operative Group have strained that relationship. The new management at the loss-making Co-op Group have been testing the water for an end to financial donations to the Co-operative party. Many Labour MPs are sponsored by the Co-operative party, but the poor governance and losses at the Co-operative Group have strained that relationship.
Once the loan from the Co-op Bank has been moved Labour would transfer all its current account facilities to Unity Trust. Co-op party sources said they regarded the decision as commercial and not part of a wider political disentanglement. Once the loan from the Co-op bank has been moved Labour would transfer all its current account facilities to Unity Trust. Co-op party sources said they regarded the decision as commercial and not part of a wider political disentanglement.
But the bank, now 70% owned by US investors, wants to become "apolitical".But the bank, now 70% owned by US investors, wants to become "apolitical".
The Co-op movement and Labour joined together as parties in the 1920s. Party sources said the financial relationship started at that time.The Co-op movement and Labour joined together as parties in the 1920s. Party sources said the financial relationship started at that time.
Labour is battling to lower its debt burden and has reduced the amount it owes from £25m in 2006 to below £4.5m today.Labour is battling to lower its debt burden and has reduced the amount it owes from £25m in 2006 to below £4.5m today.
Earlier this week, it emerged that a report into the near collapse of the Co-operative Bank will blame poor governance at the organisation. The report will also say that the ill-fated takeover of the Britannia Building Society sowed the seeds of the problems.Earlier this week, it emerged that a report into the near collapse of the Co-operative Bank will blame poor governance at the organisation. The report will also say that the ill-fated takeover of the Britannia Building Society sowed the seeds of the problems.
Jon Cruddas, the Labour policy review chairman, has underlined the desire for the party to retain its ties to the Co-operative Group, but admitted damage had been inflicted by the bank's poor commercial decisions.Jon Cruddas, the Labour policy review chairman, has underlined the desire for the party to retain its ties to the Co-operative Group, but admitted damage had been inflicted by the bank's poor commercial decisions.
He said: "The greatness of the Co-op Bank was the trust of its members and, through the Co-operative Group, their shared governance of their own money. That is what needs to be rebuilt in the economy and in politics; devolving power so that it lies with people who belong to associations for their mutual benefit. We need more power to people in our politics and in society and we need the Co-operative Group and Co-operative party to lead the way." He said: "The greatness of the Co-op bank was the trust of its members and, through the Co-operative Group, their shared governance of their own money. That is what needs to be rebuilt in the economy and in politics: devolving power so that it lies with people who belong to associations for their mutual benefit. We need more power to people in our politics and in society and we need the Co-operative Group and Co-operative party to lead the way."
The Conservatives said the shift of the loan would mean the unions would have an even bigger stranglehold on the party's finances.The Conservatives said the shift of the loan would mean the unions would have an even bigger stranglehold on the party's finances.
It said almost 75% of Unity Trust Bank is owned by trade unions – including Len McCluskey's Unite union – and the Co-op, who currently own the remaining 25% , are planning to sell their shares to them. It said almost 75% of Unity Trust Bank was owned by trade unions – including Len McCluskey's Unite union – and the Co-op, which currently owns the remaining 25% , is planning to sell its shares to them.
The Conservative party chairman, Grant Shapps, said: "These proposals would hand the trade unions even more control over Ed Miliband and the Labour party.The Conservative party chairman, Grant Shapps, said: "These proposals would hand the trade unions even more control over Ed Miliband and the Labour party.
"The unions already pick the candidates, buy the policies and choose the leader. Now Ed Miliband wants them to hold the purse strings as well.""The unions already pick the candidates, buy the policies and choose the leader. Now Ed Miliband wants them to hold the purse strings as well."