Effectively the Labour party needs to raise £150 from each and every member to pay off the debts. If the Labour party was a company on the stockmarket it would be a short sell because it is in what traders call a “death spiral”. Rising debt, falling revenues and an unpopular brand have already forced drastic redundancies. This means less employees to generate revenue and improve the brand through campaigning. The party cannot even cover its outgoings as things stand never mind repay the “loans” which are now coming due under great scrutiny from the media and the police.
This all means that the unions will be called upon to bail out the Labour party, a new source of dodgy loans is being utilised in the form of the Unity Trust Bank. UTB is owned by the Co-Op and the unions. The unions are getting millions in bungs from government grants (see “How the Labour Party Washes Money from the Taxpayer Via the Unions“) which is then recycled into donations from the unions themselves or through politically motivated loans from the UTB. The Co-Op bank’s £3 billion of reserves are being eyed enviously by the Labour party. If Labour manages to get it hands on the Co-Op’s money, however it is laundered, the government will be no better than a corrupt African kleptocracy. The likely public outcry that would follow any blatant looting of the Co-Op’s reserves directly is the only explanation Guido can fathom for Labour inducing the smallish UTB to lend such a large amount of its capital base to replenish the party coffers – loans ultimately guaranteed by the Co-Op. So large were the loans relative to the size of the UTB that the FSA required the bank to make monthly returns detailing the risky loan’s status.
It gets worse. Guido has been passed a report prepared by John Ralfe, the respected former head of corporate finance at Boots and a consultant to the UK Accounting Standards Board. In the report he dissects the Labour Party Superannuation Society (“LPSS”) for the party’s 300 employees. With £43m of liabilities and a £6.3m deficit, LPSS is only 85% funded. The pension deficit is an unsecured loan, making LPSS is the Labour Party’s largest unsecured creditor – shades of Robert Maxwell. The pensions regulator wants this deficit plugged over ten years, and put LPSS in a high risk category because the party has £27m negative reserves, an estimated £6m in off-balance sheet operating leases and has mortgaged its property assets. To plug the deficit the party will need to find £1 to £2m extra a year at a time when it is operating at loss. The report states “Although total member and employer contributions have already been increased from 16% to 19% in January 2004, the employer’s £1m annual contribution does not meet even the cost of new pension promises, let alone reduce the underlying deficit.”
If, as expected, Gordon becomes PM next year without a single vote from non-members of the Labour party or union blocs being cast for him, he will have no mandate to govern. The country and the opposition will expect and demand of him a snap general election. An election which the Labour party cannot afford to fight…