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By a Newsnet reporter

Following the row between the Labour Party leadership and trade unions over reforms to the party, the GMB union has announced that it is to slash its funding of Labour from £1.2 million to £150,000 and blasted the party for its "lack of understanding" of the union movement.

The union said that it would also be reducing spending on Labour campaigns and initiatives, leaving the cash-strapped party to struggle to make up the shortfall.

Tensions have been building between Labour and the union movement following the bitter row over Unite involvement in the selection of a replacement for disgraced MP Eric Joyce in Falkirk.  In response to the dispute, party leader Ed Miliband announced that in future trade union members who were paying the political levy would have to be asked whether they wished to affiliate to the Labour party. 

Under current rules, trade unions can decide how many of their political fundpayers are affiliated to Labour.  The executive of the GMB union, which represents many workers in the public sector, have decided to cut the number of union members affiliated to Labour from 420,000 to 50,000, with a concomitant  reduction in funds paid by the union to the party. 

As of January, the annual amount paid by the GMB to Labour will fall from the current level of £1.2 million to just £150,000.  It is thought that other unions may follow suit, leaving Labour with a funding shortfall which could total £9 million. 

The funding difficulties are likely to have a serious impact on Labour's ability to mount effective campaigns in next year's European elections and the Scottish independence referendum. 

In a statement, the GMB union said:

"The GMB central executive council (CEC) has voted to reduce its current levels of affiliation to the Labour Party from 420,000 to 50,000 from 2014.

"This will reduce the union's basic affiliation fee to Labour party by £1.1 million per year.

"It is expected that there will further reductions in spending on Labour Party campaigns and initiatives.

"GMB CEC expressed considerable regret about the apparent lack of understanding the proposal mooted by Ed Miliband will have on the collective nature of trade union engagement with the Labour Party.

"A further source of considerable regret to the CEC is that the party that had been formed to represent the interest of working people in this country intends to end collective engagement of trade unions in the party they helped to form.

"The CEC also decided to scale down by one third the level of its national political fund."

Speaking to BBC Radio 4, shadow Treasury minister Rachel Reeves tried to play down the impact of the GMB decision.

"Most of the money the Labour party receives comes from small donations and members.

"Of course we welcome the support we get from the trade unions but this is a decision for the GMB and Ed has spoken about the need for greater transparency and openness in that relationship and we're going to be doing more to reach out and get affiliations from individual members directly to the party."

Other Labour figures do not share Ms Reeves' optimism.  Labour MP Ian Lavery described Mr Miliband's affiliation reforms as the "biggest political gamble" in the history of the party.  Mr Lavery, chair of the trade union group of Labour MPs, said he believed fewer than 15% of union members would opt to join Labour.

Mr Lavery said:

"People are not queuing up to join Labour - quite the opposite.  They are waiting to see what the party will bring to the table in its manifesto."

Despite claims from Labour's front bench that the bulk of their funding comes from individuals and small donations, figures from the Electoral Commission reveal the true extent of the party's financial dependency on block funding from the trade union movement.  According to the Electoral Commission, unions provided 77% of Labour donations.  In the second quarter of 2013, £2.4 million of the party's funds came from trade unions and only £354,692 from individuals.

Labour's lead over the Conservatives has narrowed to 4% in recent opinion polls, and Mr Miliband has struggled to make an impact on the public, with a mere 2% of those polled believing he was a "natural leader". 

Midterm, governing parties are normally at the height of their unpopularity, and the Conservatives can be expected to narrow Labour's opinion poll lead even further in the run up to a General Election.  On current polling figures, Labour is unlikely to form the next government.

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