Osborne Judgment

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Osborne Judgment

Great Britain 1909

Synopsis

The finances of the Labour Party (founded in 1900 as the Labour Representation Committee) depended on contributions from affiliated trade unions, which were acquired by a compulsory political levy on the subscriptions of their membership. In 1907 Walter Osborne, a member of the Amalgamated Society of Railway Servants (ASRS), began legal action against his union's political levy; in 1909, the House of Lords (the highest court in the land) declared the levy unlawful. The ruling struck a serious blow against the Labour Party and against the broader political and nonindustrial activities of the unions themselves. The impact of the ruling was mitigated in 1911 by the introduction of payment for Members of Parliament (MPs) and largely overturned by the 1913 Trade Union Act, which established a new legal basis for the unions' political funds and political levy.

Timeline

1889: Flooding in Johnstown, Pennsylvania, kills thousands.
1893: Wall Street stock prices plummet on 5 May, precipitating a market collapse on 27 June. In the wake of this debacle, some 600 banks and 15,000 other businesses fail. The nationwide depression will last for four more years.
1898: Bayer introduces a cough suppressant derived from opium. Its brand name: Heroin.
1902: The Times Literary Supplement, a weekly review of literature and scholarship, begins publication in London.
1905: Russian Revolution of 1905. Following the "bloody Sunday" riots before the Winter Palace in St. Petersburg in January, revolution spreads throughout Russia, in some places spurred on by newly formed workers' councils, or soviets. Among the most memorable incidents of the revolt is the mutiny aboard the battleship Potemkin.
1909: Robert E. Peary and Matthew Henson reach the North Pole.
1909: Founding of the National Association for the Advancement of Colored People (NAACP) by W. E. B. Du Bois and a number of other prominent black and white intellectuals in New York City.
1909: William Cadbury's Labour in Portuguese West Africa draws attention to conditions of slavery in Sã o Toméand Principe.
1911: Revolution in Mexico, begun the year before, continues with the replacement of the corrupt Porfirio Diaz, president since 1877, by Francisco Madero.
1915: A German submarine sinks the Lusitania, killing 1,195, including 128 U.S. citizens. Theretofore, many Americans had been sympathetic toward Germany, but the incident begins to turn the tide of U.S. sentiment toward the Allies.
1919: Formation of the Third International (Comintern), whereby the Bolshevik government of Russia establishes its control over communist movements worldwide.

Event and Its Context

Background of the Case

The Labour Representation Committee, which was established in 1900 to further the independent representation of labor in parliament, was a federal body formed by socialist organizations and sympathetic trade unions. Trade union support had risen markedly after the Taff Vale case; around 90 percent of Labour Party income derived from trade union contributions financed by the political levy.

In 1905, Walter Osborne, an active Liberal and secretary of the Walthamstow (North Londo) branch of the ASRS, threatened legal action against his union's political fund, which was used to support the parliamentary candidatures under Labour auspices of the union's general secretary, Richard Bell, and three others. Osborne resented his union dues going to a political party which he alleged was under socialist control. The ASRS responded by holding a successful ballot of members to sanction its political expenditure but Osborne pursued the matter.

In 1906 Osborne wrote a letter to the Daily Express to solicit funds; in the following year he launched legal action against the ASRS, claiming that it was acting unlawfully. As was expected, Osborne lost his initial hearing—the courts had recently sanctioned political spending by unions in the case of Steele vs. the South Wales Miners—but he raised additional funds and appealed the decision. The three Court of Appeal judges found in his favor. They asserted that the 1875 Trade Union Act provided a "limiting and restrictive definition" of trade union functions that did not permit political activity. Two judges lamented the plight of an "unwilling minority" of union members who were forced to support financially "objects of which they may heartily disapprove." The Labour Party pledge, which required that its MPs vote as determined by the majority of its parliamentary representatives, provided a further point of legal attack as it was held to contravene the public interest in requiring that MPs subordinate their individual judgment in favor of a party line. In brief, the judges argued that if the unions acted beyond their statutory powers, the unions could not expect to enjoy the immunities granted by the 1906 Trade Disputes Act. The union appealed the case to the House of Lords, which one year later upheld the Appeal Court verdict: three judges found against the union on ultra vires grounds (that the union was acting beyond its statutory powers) and two condemned the Labour Party pledge.

Significance of the Case

The nature of the verdict and its background in a series of damaging court cases seemed plausibly to evidence the hostility of the British legal establishment to the labor movement. The implication of the ruling for the Labour Party in particular was stark: the party's financial lifeline of trade union finance had been cut. Responses varied. Some unions carried on as if nothing had happened, and a few got away with this approach. By November 1910, however, some 25 injunctions preventing unions expending monies for political purposes had been brought successfully. Other unions sought to make political contributions voluntary. In some areas (for example, among South Wales miners), this approach worked satisfactorily, but overall there was a sharp drop in contributions. The Labour Party coped in the two general elections of 1910 by financing the bulk of its candidatures from its own financial reserves, but the number of standing Labour candidates fell from 78 in the January election to 58 in December. (Conversely, the number returned rose from 40 to 42, so in some respects the Party may have fared better by concentrating its forces.)

Overall, it appears that the political impact of the Osborne Judgement may have been less immediately damaging than anticipated, but the longer-term implications remained severe. The Miners' Federation, for example, lost some £27-28,000 a year in political funding, and the political fund of the Derbyshire Miners' Federation fell £1600 into debt. The ASRS itself was losing £3000 to £3500 a year in uncollected political levies. On a local level, the ruling's implied ban on union support for trades councils (the bodies that coordinated the labor movement's local political campaigns) led to the dissolution of a number of such organizations and a significant weakening of the Labour Party's still fledgling grassroots network. Furthermore, the threat of further injunctions loomed large. Such considerations became influential in Labour's willingness to accept the Liberal reform that was eventually proposed.

For the unions, the verdict had a twofold significance. Ideologically, its values seemed to undercut the collectivist beliefs and practices of the union movement. Both as a matter of principle and in terms of practical effectiveness, the unions held that majority decisions should be determinant and enforceable. If dissenting minorities were to be allowed to flout collectively agreed upon union policies, the unions would be powerless to wage effective strike action or discipline members who contravened union rules. More specifically, the judgement's strict interpretation of the 1875 Act might prohibit a wide range of the unions' nonindustrial functions such as financial backing of education, labor newspapers, and the Trades Union Congress (the unions' national coordinating body).

The Labor and Government Response

In 1910 the labor movement campaigned hard for reform, but it faced obstacles from within its own ranks and without. Many union members voted Liberal (and some Conservative). Many others believed that the whole reform matter was irrelevant to their practical concerns as rank and file trade unionists. Both groups were unsympathetic to the levy, and union activists, therefore, had to tread warily in promoting the issue. In this light, Osborne may be considered as a genuine workers' voice and not merely as the tool of wealthy interests, as sometimes portrayed at the time and since. Although he did receive financial and legal backing from upper-class opponents of labor, the evidence suggests that he also found support among ordinary workers. The ballots held to authorize the unions' newly legalized political funds after 1913 provided further evidence of the lack of Labour sympathies of many workers. In the first 63 ballots, 37 percent of voters opposed political expenditure by their unions, many presumably because such spending would benefit the Labour Party.

In the broader politics of the time, the issue paled into insignificance when placed against the constitutional crisis caused by the House of Lords' rejection of the 1909 Liberal budget and the Liberals' proposal to limit the powers of the Upper House. The Liberals themselves possessed mixed feelings on the question of post-Osborne reform. Pragmatically, the weakening of a growing rival to their own working-class constituency was not unwelcome. Ideologically, Liberalism's individualist core values favored the rights of the individual union members against the majoritarian and collectivist principles espoused by labor leaders. After the hung elections of 1910, the Liberals' dependence on Labour's parliamentary support was offset by the Parliamentary Labour Party's support of the Liberal reform agenda and its desperate wish to avoid a further general election. Such an election might threaten both the return of an ideologically unsympathetic Conservative government and Labour's own parlous finances. On the other hand, many Liberals were disquieted by the broader implications of the judgment and were struck by powerful opposition by both Labour interests and from amongst their own ranks by the so-called Lib-Labs (working-class representatives elected under Liberal auspices who were also affected by the Osborne ruling).

In late 1910, the Liberal leader, Herbert Asquith, proposed a reform that would legalize political spending by the unions and enable union members who objected to their unions' political activity to withhold a proportion of their dues. Labour rejected this compromise but, in February 1911, it facilitated the process of reform by abandoning the parliamentary pledge that required its MPs to vote with the party majority. In August 1911, a parliamentary motion was passed agreeing to payment of MPs. The same year, Labour grudgingly accepted as the best they could achieve a bill to overturn Osborne. This bill was withdrawn in response to pressure of parliamentary business, but the Trade Union bill became law in 1913.

The 1913 act permitted unions to allocate money to political purposes provided that a separate political fund was established and endorsed by ballot by a majority of union members. Members who wished to opt out of political contributions were to be allowed to do so without penalty. In the following 15 months, 63 unions organized ballots. In 60, a majority of union members supported the creation of political funds and, in practice, their support of the Labour Party. By requiring that unions create a specific account for political spending, the act may actually have benefited the Labour Party by countering the unions' reluctance to draw money from their general funds. By April 1916, some 100 unions had established political funds; by the time of the 1918 General Election, the Labour Party enjoyed an unprecedentedly strong financial and organizational position that reflected both the legal protection afforded to union politics and the massive increase in unionism during the First World War.

Trade union support for Labour was to remain a controversial issue. The Conservative Government took the pretext offered by the 1926 General Strike to pass legislation that union members contract in to the unions' political funds rather than specifically withhold their contributions as had been the case after 1913. Income from the political levy fell by one-third, largely it seems as a result of the inertia of union members rather than any active or new-found opposition to Labour. The Labour government of 1945 restored the principle of contracting out, with the result that political contributions rose by one-third. Margaret Thatcher's Conservative government renewed the offensive against trade union funding of the Labour Party in a law passed in 1984 that required that unions ballot their members every 10 years to assess their membership's continued support for their political funds. In 1985-86, all 38 unions voted to retain their funds with the "yes" vote averaging 82 percent. Subsequently some 12 other unions voted to establish political funds for the first time.

Key Players

Bell, Richard (1859-1930): Born in South Wales, he became an active member of the ASRS and was elected the union's general secretary in 1898. He served as Labour MP for Derby from 1900 to 1910 but remained essentially a Liberal in his politics. He worked for the Government Board of Trade from 1910 to 1920.

Osborne, Walter (1870-1950): Foreman porter at Clapton Station, north London, and secretary of the Walthamstow branch of the Amalgamated Society of Railway Servants. Once a member of the Social Democratic Federation, he became a strong anti-socialist and was elected a Progressive member of his local council in 1906. After the judgment, he left railway employment to become clerk to the British Constitutional Association and wrote Sane Trade Unionism(1913).