In 1909 W. V. Osborne, a trade unionists who was a member of the Liberal Party, objected to his trade union subscription being contributed to the funds of the Labour Party. The decision by the judges in the House of Lords that a trade union had no legal right to use its funds for political purposes undermined the funding of the Labour Party.

In 1913 Herbert Asquith and his Liberal Government passed a new Trade Union Act that gave unions the right to divide its subscriptions into a political and a social fund. If union members such as W. V. Osborne objected to these political contributions, they could contract out of this payment.