UK's biggest trade union threatens to cut ties with Labour Party

By Kylie MacLellan LONDON (Reuters) - Britain's largest trade union has threatened to sever links with the opposition Labour Party and deprive it of millions of pounds in funding if the party's next leader tries to move it too far to the centre ground of British politics. Labour, which suffered a crushing defeat at the hands of Prime Minister David Cameron's Conservatives on May 7, is in the process of selecting a new leader and of overhauling its policies amid recriminations from some activists that it lost because it had become too left-wing. But trade union Unite, which has 1.42 million members, has warned Labour to tread carefully, with its General Secretary Len McCluskey, known as "Red Len" in the right-leaning press, telling the party not to choose the wrong leader. "It's essential that the correct leader emerges and that there's a genuine debate about the direction we're going in," McCluskey, known for talking plainly, told the BBC on Sunday. "It is the challenge of the Labour Party to demonstrate that they are the voice of ordinary working people ... If they don't, if they kind of inject more disillusionment in the party, then the pressure will grow from our members to rethink." On Monday, McCluskey moderated his tone, saying Unite was not considering withdrawing its affiliation with Labour. But he was silent on whether it might support other parties too. His intervention has underscored the strong influence trade unions have traditionally exerted on Labour, fuelling a debate in the party about whether it should loosen those links and seek to reduce its reliance on union funding. Its previous leader Ed Miliband, who quit this month, was elected thanks to union support, a fact which Cameron's Conservatives regularly seized on to accuse Labour of letting the unions buy its policies and candidates. Part of the difficulty in plotting a new course for Labour after the election is that its problems were different in different parts of Britain. In England it performed worse than expected against Cameron's Conservatives and an anti-EU populist party attacking from the right. In Scotland, a traditional stronghold, it was virtually wiped out by Scottish nationalists who attacked Labour from the left. On Saturday the leader of Labour's Scottish chapter, Jim Murphy, resigned after coming under criticism from McCluskey. Murphy said he no longer felt he had the necessary support, and accused McCluskey of "destructive behaviour" in his efforts to influence the party. McCluskey said his union could throw its support behind the Scottish nationalists in Scotland if he does not like Labour's future course. Other unions have warned Labour would struggle to continue without union funding. "The Labour party, if we pulled out, would be bankrupt," Paul Kenny, general secretary of the GMB union, told the BBC on Monday. "If you took away the support from the affiliated unions financially then it is difficult to see how the Labour party would fight a national election." SOUL-SEARCHING Some within Labour believe the party should now move back towards the political centre ground, from where former Prime Minister Tony Blair won three successive elections, and seek to shake off the perception that it is anti-business. Steven Fielding, director of the Centre for British Politics at Nottingham University, said tackling this perception would help Labour attract other sources of funding. "The Labour Party does need trade union money like never before, but one of the reasons ... is that since 2010 business has abandoned it, and other sources of income have just dried up," he told Reuters. "How do you solve that? You stop being perceived to be anti-business." The election defeat has sparked what has been described as a battle for the soul of the party which is being played out in a leadership contest where the views of four candidates on the unions and the party's future direction are being scrutinised. The party's main health spokesman Andy Burnham is considered the front runner and also the most likely to be backed by the unions. Other candidates include Yvette Cooper, the party's home affairs spokeswoman, Liz Kendall, another health spokeswoman, and Mary Creagh, an international development spokeswoman. Since Ed Miliband relied on union support to defeat his more centrist brother David for the party leadership in 2010, the party has altered its complex election system to reduce the role of unions in selecting a leader. Acting Labour leader Harriet Harman played down a possible rift with the unions on Monday, saying she didn't want to see the unions supporting other parties and didn't expect them to cut their ties with Labour. But she said they wouldn't be calling the shots. "The winner of this (leadership) election is not going to be the choice of the unions," Harman told the BBC. "He or she is going to be choice of the Labour Party." (Additional reporting by William James; Editing by Andrew Osborn and Peter Graff)