Ed Miliband’s relationship with Len McCluskey was defined in a brief camera shot at the Labour party conference in 2010. After praising trade unions, Miliband added that he would have no patience with ‘waves of irresponsible strikes’. Several rows back, McCluskey, who three days earlier had helped Ed defeat his brother David in the leadership election, was filmed shaking his head and shouting ‘Rubbish!’ Given that McCluskey’s Unite union pays most of Labour’s bills, his word was seen as a veto. This was the new deal.

McCluskey and his colleagues bestowed their patronage upon Ed not because they thought he would be a strong leader, but for rather the opposite reason: they expected acquiescence. In many ways, Ed has justified their faith. He damns any attempt to rein in public expenditure as heartless Tory cuts — even now, when total spending is not actually being cut. He has set Labour’s face against the school and health reforms it championed seven years ago. For three years, he has restricted himself to ponderous speeches on concepts such as ‘pre-distribution’. Meanwhile, the unions ran the party.

Only now does Miliband realise what a steep price he has paid for this relationship. David Cameron spent his time as opposition leader scouring Britain for talented MPs: Miliband stood back while unions lined up their stooges for safe seats. No party leader should tolerate a faction attempting to stitch up the appointment of parliamentary candidates, as we have seen in Falkirk. This is a recipe for electoral defeat not just in 2015, but in subsequent elections. Left alone, McCluskey and Unite will poison the Labour party every bit as much as Militant did in the 1980s.

Miliband’s speech this week may fall well short of the showdown Neil Kinnock had with Militant, but it is far braver than the Conservatives will admit. He promised to abolish the practice by which the unions fund Labour through an automatic levy on members, and he’s right to do so — it is indefensible. The GMB union believes that fewer than ten per cent of its members will now volunteer to give money to the Labour party. So why was their cash funnelled to politics in the first place? Labour party funding was a scam. To Miliband’s immense credit, he has decided that the scam must end — even if it means his party loses millions.

And what should replace this money? Miliband has no answer, but there are three options. One is the patronage of billionaires, which invariably ends in cash-for-honours scandals. The second is state funding of political parties, which the Conservatives would rightly veto. The third option is that Labour forms a bond with new voters and sees members return — as happened after Tony Blair became leader.

If the Labour party did what by definition it claims to do — represent working people — it would scarcely have been out of power in a century. Most of us, after all, work for a living. And what most workers want is a decent school for their children, health care for their family, lower taxes so they can keep more of the money they earn and — more than anything else — a decent economy that creates opportunities. Labour, in the days when it won elections, spoke this language. Now, it speaks the language of the state bureaucracy. It has become the party of the system, not of the people.

Labour’s kneejerk response is always to defend the state-run solution, even when it ought to be obvious that this is acting against the interests of ordinary people. Sebastian Payne on p.18 writes about one example of this: the private King’s School, Tynemouth, recently announced a plan to merge with a state primary school to become an academy open to all. Local people are strongly in favour, but Labour has tried to block it because it realises that the move would weaken the stranglehold of the Labour-run council over the education system.

It is the same with the NHS. Labour might be expected to defend to the last ditch the principle of a health system free at the point of delivery, so that people of all income levels can have good health care. But in practice what motivates Labour’s contributions on the subject is the preservation of a mono-lithic state-run service. At every turn its instinct is to keep together vast unionised blocs of public employees.

It is understandable that the Conservatives are revelling in Miliband’s predicament, and love seeing him wedged between the floor and Len McCluskey’s boot, but they should beware. It is not impossible that Miliband might win this fight and it does not matter much if there is less to it than meets the eye. Tony Blair’s much-feted battle over Clause 4 of the party constitution was synthetic, abolishing a concept which had already been abandoned — but as a symbol of Labour’s attempted renewal it was effective. If a funding crisis forces Labour to reconnect with the working people for whom it once stood, the Tories would have cause to be nervous, and perhaps as a result our politics would be better all round.