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The huge explosion in the use of management consultants by the New Labour government — between 2005 and 2008 the NHS alone spent almost half a billion pounds on them — has been widely criticised. Much less widely known is that think-tanks close to New Labour, such as the Institute for Public Policy Research and Demos, have also become heavily reliant on funding from the taxpayer. The sums involved are much smaller but they are very significant for the organisations involved. A recent TaxPayers' Alliance report has shown that in 2007-8, the IPPR, whose former staffers include Patricia Hewitt and David Miliband, received £350,330 in government funding for projects, the environmentalist New Economics Foundation £601,518 and the New Local Government Network £117,972. 

Demos is perhaps the best example of the taxpayer-funded think-tank, although to be fair, it is easier to see how reliant it is on state funding than several other organisations whose accounts are much less transparent about their funding. In Demos's accounts, it divides its project income into "contracts" and "grant income". In 2007, "contracts" income was £1,098,522. Of this, £741,195, or 67.5 per cent, came from national and local government bodies or taxpayer-funded bodies. These included the Improvement and Development Agency (£56,500), London Borough of Hackney (£12,000), the National College for School Leadership (£29,600), Nesta — the National Endowment for Science, Technology and the Arts (£51,250) — and Scottish Enterprise (£109,010).

Its "grant income" for 2007 was £386,536 with £260,498, or 67.4 per cent, coming from government or EU bodies. It received £85,000 from the Communities and Local Government Department, £14,066 from the Department of Trade and Industry and a further £58,200 from Nesta. 

Demos is not some kind of non-political font of technical expertise. It was founded in 1993 by Martin Jacques, from 1977 to 1991 the editor of the Communist Party monthly Marxism Today, and Geoff Mulgan, its first director. Demos's mission was — after the abject failures of socialism borne out by the collapse of the Soviet Union — to help construct a new post-socialist Left. It played an instrumental part in the evolution of the New Labour project. Shortly after the 1997 election victory, it obtained its greatest public prominence with its call for Rebranding Britain — less warm beer, cricket on the village green and maiden aunts cycling to communion and more Manchester Sound, knowledge economy and Cool Britannia. Mulgan went on to serve under Tony Blair as director of the Prime Minister's strategy unit and director of policy at 10 Downing Street.

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