In April this year, a number of articles were written and speeches made bemoaning the continuing rapid decline in Labour Party membership, and in membership of political parties generally. The crisis meant an alarming shortage of people to stuff propaganda into envelopes and have doors slammed in their faces at election time. The membership figure quoted by Labour headquarters in April – a number that is rarely released and has to be extracted from them with thumbscrews – was 248,294. Nobody believed it. It probably came from 2003 and included tens of thousands who had left the party over the Iraq war, or who were six months or more in arrears with their subscriptions. By July the picture was clearer. A new organisation called Save the Labour Party forced HQ to confess to a figure of 208,000: half as many members as there had been when Blair won the 1997 election, and nowhere near the million members John Prescott used to boast of as being the party’s achievable goal. People are leaving Labour in droves. To anyone outside the present administration the explanation is simple: New Labour lies, and is craven, and has failed. To senior party figures and Labour-affiliated think tanks the membership question is the subject of abstruse and angsty discussion about sociological change and how an apathetic electorate can be ‘re-engaged’.

A million members paying a full subscription would put £24 million a year in the party’s coffers – nearly the size of Labour’s current deficit. Although the connection was nowhere made explicit, it’s no coincidence that the reams of newspaper pieces about membership started appearing in April, just after the first inklings of the cash for peerages scandal. The question of who has lent the party what, and on what terms, and what they were told they could expect in return, is now the subject of a police investigation. Besides Lord Levy, Labour’s chief fundraiser, two people have been arrested during the inquiry so far; 14 are said to have been interviewed under caution, and there is still a chance that Blair will be too. When it was revealed that Sir Christopher Evans, the venture capitalist founder of Merlin Biosciences, had been arrested and questioned about his £1 million loan before the 2005 election, he said: ‘The reason I made the loan was precisely because I was not prepared to make such a substantial donation to the Labour Party. From the outset, I made it clear that the money would be a commercial, interest-bearing loan which was to be repaid in full.’ How he can have been so certain that an organisation running a deficit of almost £30 million – as much money as the UK government has been asked and has failed to provide in aid to Darfur – could repay his loan, with interest, within 18 months is a mystery. When the Labour Party was bullied into speaking up it disclosed a total of £14.7 million in previously secret outstanding loans from individuals. These people must have realised that they couldn’t all get their money back, and it’s far from clear that they all wanted it. Sir Gulam Noon, who lent the party £250,000 and was then nominated for a peerage, had reportedly wanted to make a donation instead but Levy allegedly advised him that a loan was preferred: that way it didn’t have to be declared.

Whatever the outcome of the police inquiry – the hope is that there won’t be evidence for much in the way of prosecutions, since promises of a certain kind tend not to be recorded on paper – all the main parties are soon going to be in severe financial difficulty. The Labour Party may even have to sack a few press officers. The Hayden Phillips review of party funding, commissioned by Blair in order to get the press off his back, is due to report in December. Phillips has made a big deal of opening up the discussion of options – state funding, caps on donations – to ‘stakeholders’, meaning the whole electorate. There is a forum on the review’s website: unfortunately (‘apathy’ at work again?) it contains a grand total of 249 comments, a number of which have been posted by the ‘Review Team’ itself. Also unfortunately, the forum is now closed. But the stakeholders with influence – think tanks such as IPPR, Charter 88 and the New Politics Network – are pressing for a £5000 cap on donations from individuals. Something along these lines may be what Phillips recommends, so long as he doesn’t follow Robin Butler et al and say anything goes. A £5000 limit wouldn’t only prohibit million-pound gifts from businessmen with something to gain: even Michael Frayn, who gave Labour £7000 last year, would be forced to cut back.

So for the parties the membership question is urgent as never before. They try to explain the crisis by saying that in Britain now no one wants to be a member of anything any more, but they also point perplexedly to organisations such as the National Trust (membership three million) and the RSPB (membership one million). Perhaps they don’t see why they can’t enlist an army of twitchers to swell their dwindling ranks of pasty-faced social-outcast doorsteppers. And they don’t understand the very active involvement of huge numbers of people in charities and single-issue campaign groups (Oxfam, Greenpeace, Amnesty, Stop the War), whose literature and email networks are endlessly studied in campaign headquarters in the hope of finding the secret of their success. Ed Miliband, the brother of the man who wants to be the next leader of the Labour Party but one, wrote a frustrated piece for the Fabian Review just before the annual conference: ‘If you are driven to campaign on poverty in developing countries, it must also be possible to persuade you to become a member of a party that is not only at the forefront of the development agenda but also has set out to abolish domestic child poverty.’ Two hundred thousand ex-members of the Labour Party disagree. This ought to say something about the government’s position on the development agenda – and on Lords’ reform. And, indeed, on pretty much everything else.