The Decade New Labour Wasted


"Were you up for Portillo?" The excited catch-cry of Labour’s crushing victory in May 1997 — referring to Defence Secretary Michael Portillo’s loss of his safe Tory seat live on television — reflected the overwhelming feeling of excitement, hope and renewal throughout the UK after nearly two decades of Conservative rule.

A dozen years later, and after the release of the bleakest budget since World War II, Labour MPs have been sent running for cover. There has been, one senses, a growing panic on the back benches for some time — a gradually dawning realisation that the last decade has been wasted. The events of last week, which have simply brought the now-inevitable defeat into much clearer focus, provide the opportunity to consider the question: What legacy does New Labour leave behind?

There are plenty of books waiting to be written on the numerous individual failures of the New Labour project. But there is a unifying thread running throughout, namely the essential timidity of the entire New Labour reformist project — assuming it could be called reformist at all. Having been elected on a tsunami of goodwill, what New Labour delivered was, as we now know, not much more than Tory-lite (although even Maggie baulked at privatising the Royal Mail).

Some figured it out earlier than others. In a remarkably prescient article for The Guardian in January 1999 entitled "Designer Drivel", Mark Lawson savaged the so-called "third way" approach:

"The third way between Old Labour taxation policies (top rate of 90 per cent) and Tory revenue-raising (even the super-rich paying no more than 40 per cent) would logically be to ask the highest earners to pay around 60-65 per cent. Yet, on this defining issue, Blair proves oddly content with the second way established in the 1980s.

"Similarly, where his much-publicised creed asks him to steer a third course on defence policy between Tories (slavishly pro-nuclear and pro-American) and Old Labour (strongly opposed to both), Blair merely continues recent devotion to ICBMs and the White House. The Third Way turns out to be the second way with a few cosmetic echoes of the first."

This point is crucial. With nearly two decades of resentment built up towards Conservative rule, plus government scandals erupting from every pore of John Major’s administration, Labour was presented with an overwhelming mandate — and opportunity — for change. Yet their lack of appetite for major reform frittered away a once-in-a-generation chance to establish the party as the UK’s pre-eminent political force. Its economic credentials in tatters, the New Labour project is now comprehensively dead, its social achievements set to be shredded in the drive for budget savings.

In truth, New Labour’s policy timidity goes back to before Blair even set foot inside Number 10. Having witnessed the disaster of the 1992 campaign under Neil Kinnock, Blair resolved that he would eliminate any obstacles that could possibly get in his way. Apart from getting chummy with Rupert and business leaders, previous tenets of Old Labour policy framework regarded as articles of faith — such as socialised education, health and housing, active labour market intervention and unilateral disarmament — were completely abandoned.

According to the website Labour Policy Watch, of the 194 policies assessed, 60 policies have been left unchanged from the Tories, while a further 54 have been extended in the direction the Tories were taking them, compared with only 69 policies having been wholly or partly carried out in accordance with pre-1994 Labour policy.

What, then, was New Labour really about? At its heart, it proposed a continuation of the neoliberal agenda, with the rough edges smoothed off. As Hamish McRae observed in the Independent last week, New Labour relied on two core economic beliefs: firstly "that a vigorous, enterprising economy would generate sufficient tax revenues for the government both to rebuild public services and make sizeable transfers to the disadvantaged", and secondly "that by prudent monetary and fiscal management, the government could avoid both the financial catastrophe of the 1970s Labour governments and the wild swings from boom to bust that had occurred under the Tories". Gordon Brown was eager to proclaim as much, famously arguing in 2000 (and subsequently) that New Labour policies meant "no return to short-termism … no return to Tory boom and bust".

If you say so, Gordy.

Unfortunately, the dire state of the UK’s public finances now presents the country with a thoroughly unappealing choice. The first option is batten-down-the-hatches austerity, in all likelihood for well over a decade, if the debt is to stand a hope of being repaid. This, indeed, is pretty much the assumption of every commentator — that it is nose-to-the-grindstone time to try to clear up the mess.

But the hidden story is the partly structural nature of the deficit. The numbers are so bad because, in addition to being battered by the bank bailouts and a collapse in revenues from the City, they reflect the effects of the crisis on a long-term borrowing binge.

Over the last two decades, the overall trend has been inexorably upwards, but last week’s Budget will push total Government debt well beyond £1 trillion. Indeed, on the Government’s assumptions, further borrowing amounts to an additional £703 billion on the debt pile over the next five years, and even that’s a scenario predicated on plenty of hockey-stick assumptions (a return to 1.25 per cent GDP growth in 2010 and 3.5 per cent in 2011, which no-one outside the Treasury believes).

Even on the wildly optimistic Budget forecasts, the UK is headed towards a peak national debt of around 80 per cent of GDP. Pessimists (or realists), such as those at the Institute for Fiscal Studies, reckon that figure could be closer to 90 per cent, and crucially, remain that way for decades — they place a date of 2032 on the UK being debt-free, a very sobering prospect indeed.

Clearly, the UK’s predicament is a signal, and a warning, of the dangers of excessive debt. But the shocking figures are also why Brits should be concerned at the softly-softly approach being adopted by David Cameron. As the Liberal Democrats’ Treasury spokesman Vince Cable pointed out, it’s a bit rich for the Tories to be complaining about the debt bubble considering the consequences have been building for 30 years.

More to the point however, Cameron is clearly a devout fan of the Blair political playbook. His response to the Budget was, entirely understandably, to say nothing. With a chorus of consultants in his ear telling him to sit tight while Brown continually smacks the self-destruct button with a mallet, you can hardly blame him. The gift to Cameron in this mess is extraordinary — rarely in the field of political conflict has so much been handed to a challenger on the basis of so little effort.

Short of the proverbial being caught with a dead girl or a live boy, David Cameron will be prime minister in a couple of years’ time. Like the country itself, he faces a stark choice. At the moment, his favoured tactic is an adaptation of the successful Kevin07 strategy — stressing the failures of the incumbent government and capitalising on a catalogue of gripes built up over a decade.

But tempting as this small-target approach may be, the Tories should resist it. With Labour standing absolutely no chance of winning in 2011, Cameron has more freedom than most leaders in opposition. In this respect, the success of the Obama campaign is instructive, for the way he took the lead on policy formation and in crafting a truly broad and ambitious agenda for change — the sort of sweeping changes anticipated from Blair — while emphasising just how bad things currently are.

Above all, it requires recognition that the permanently debt-driven growth model of the last three decades is unsustainable and has proved fatally flawed. Nothing less will suffice if he is to make any sort of impression on the UK’s worst economic crisis in decades, one that is the culmination of decades of mistaken policy.

With the UK lacking compulsory voting and with an exceptional number of Labour supporters disillusioned by the current administration, adopting a position as the country’s de facto government has many advantages for the Tories. As Labour and Brown flounder, it will win Cameron support as a leadership figure, grant him an overwhelming mandate for overarching change at the election, and, importantly, create plenty of policy flexibility in office for the Conservatives.

But it requires a willingness to be bold — and a refusal by Cameron to be overwhelmed by the same politics of timidity which hamstrung New Labour. Any future Tory administration is going to have to pull off a difficult triple juggling act of cutting spending, expanding borrowing (in the shorter term), and increasing taxes. He would be well advised to start preparing the ground now to ensure he has room to move in 2011.

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