As the the dust and white phosphorus settle over Gaza, two questions present themselves immediately. What happens if the rockets fired on southern Israel stop? And what if they continue?

If they stop, Israel will feel fully justified in its strategy of a combined air and ground assault on Gaza, which left an estimated 1,300 dead, many of them women and children. If they continue, as appears to be Hamas's suicidal intention, the ­Israeli army and air force have already shown what the consequences are likely to be.

International opinion is largely irrelevant here. The Arab world remains paralysed by its internal divisions, while western leaders have expressed their horror at the brutality of the war. Amnesty International has called for an investigation into alleged Israeli war crimes in Gaza and this may yet happen. But it will make no difference to the Israeli government's ­position. When I travelled to Israel earlier this year, there was a clear consensus among the government advisers, soldiers and political analysts I met that Israel was doing the west's dirty work for it by containing Hamas. It is certainly the case that its citizens have been in the front line in Sderot and other southern cities.

It is also true that the Hamas government in Gaza has been utterly reckless with the lives of its citizens. From the outside, the grotesque tally of the dead (over 1,000 versus 13 Israelis) looks hideously unjust. But from inside Israel and Palestine, there is another way of looking at it (and this is bleak, indeed): which side did best in protecting its own people?

Israel will now argue that the neutralisation of Hamas makes the prospects for a genuine peace based on a two-state solution more likely. Perhaps that's true. It really is impossible to know at this stage.

But even if you accept, as I do, that Hamas represents a strain of totalitarian Islamist thought akin to fascism, what happened in Gaza cannot be justified. Even if you accept, as I do, that Hamas must be defeated as a military force, this was not the way to go about it. Even if you accept, as I do, that Hamas used women and children as human shields, this does not mean that the terrorist organisation should take the entire blame when Israeli weapons kill innocents.

When I wrote a piece for this magazine last May called "The great betrayal", intended as a critique of the British left's attitude to Israel, it turned out to be one of the most controversial articles I had written. It ­argued that some opposition to the Zionist state on the left was only explicable as anti-Semitism. I described the Israel-Palestine conflict as "a terrible faultline on the British left". The piece was seen in some quarters as over-sympathetic to Israel, but it contained the following important paragraph: "On the face of it, the answer to my question [Why does the left hate Israel?] is simple. The British left hates Israel because it has abandoned its Enlightenment principles and set about the systematic oppression of a people whose land it occupies. The invasion of southern Lebanon in the summer of 2006 was a new low point that caused international outrage. For most people on the left in Britain, support for Israel is out of the question." Now there is a new low point. However, before we assume that everyone agrees with the left consensus that Israel is to blame, it's worth looking at the recent Sunday Times/YouGov poll, which showed that 39 per cent blamed both sides equally and 24 per cent blamed Hamas. Only 18 per cent blamed Israel.

No one denies that what happened in Gaza is horrible, not even the Israeli government. I was struck by an interview during the conflict, on Radio 4's Today programme, with Mark Regev, the Israeli prime minister's tough-talking foreign press spokesman. Asked whether he had any doubts when he saw the results of Israeli bombing, he answered: "Yes, of course I do." Over the past few weeks, Britain's most passionate supporters of Israel have been forced to search deep into their consciences.

On 6 January, when Israel hit a UN school in Gaza, the Britain Israel Communications and Research Centre (Bicom) issued the following statement: "Israeli voices are indicating that there was a hidden weapon store in the school, but clearly there can be no defence of civilian casualties."

In Britain, the main consequence of the Gaza War has been to provide a rallying point for the motley alliance of totalitarian sympathisers of the hard left and Islamic radical right. It is not the responsibility of the Israeli government to consider the consequences of their actions on the rise of militant Islam in Britain and Europe. But the dangers are real. The Islamist tendency represented by self-appointed representatives such as the Muslim Council of Britain and the Muslim Association of Britain was on the retreat. The Gaza War has given them new life, as shown by their prominence in the recent demonstrations, and across the media.

Whether the Hamas rockets stop or not, either outcome will be used to justify the unjustifiable

It is telling that Ed Husain, author of The Islamist and one of the most effective opponents of Hamas sympathisers in Britain, issued a statement calling on the British government to intervene with ­Israel. "The UK government cannot seek to win hearts and minds across Muslim communities while failing to stop Israel from murdering Palestinians en masse," he wrote. More worrying, in a way, is the renewal of an official narrative of compromise with Islamism, as demonstrated by David Miliband's peculiar intervention during his trip to Mumbai where he warned: "The more we lump terrorist groups together and draw the battle lines as a simple binary struggle between moderates and extremists or good and evil, the more we play into the hands of those seeking to unify groups with little in common, and the more we magnify the sense of threat." The uncomfortable fact is that many of these groups do have a unifying ideology, which is anti-Enlightenment, anti-women, anti-gay and anti-Semitic.

I have written widely about the Islamic radical right in Britain and I have always been depressed at the size of the ­psychological space occupied by the Palestinian struggle in the minds of young British Muslims. It has always seemed ­peculiar that bright and politically committed members of the Pakistani and Bangladeshi community are so particularly concerned with the alleged abuses of the Israeli government. If half the energy expended by the south Asian diaspora in ­defence of the Palestinians was spent campaigning for justice and political transparency in Pakistan and Bangladesh, then the prospects for reform in those countries would be vastly enhanced.

To return to my original questions: what happens if the Hamas rockets stop? And what happens if they don't? The ­awful truth is that either outcome will be used to justify the unjustifiable, whether that is the killing of Israeli innocents by Hamas terrorists in the name of resistance, or the bombing of Palestinian innocents by the Israeli military in the name of ­national security.

www.newstatesman.com - The horror comes home

David Cameron owes it all to Ken Clarke. Although it's pretty certain he doesn't see it that way, there is no doubt that Cameron won the Tory party leadership because the support of Tory centrists seeped to away from Clarke about half way through the contest.

The reasons for Clarke's failure were clear enough at the time. He was complacent and underestimated the hunger of the Cameron camp; his outside interests, especially in the tobacco industry, were embarrassing to the party and meant that he spent relatively little time in the Commons.

But Clarke's failings, which played to Cameron's advantage in the leadership campaign could return to haunt the Tory leader now the former chancellor is part of the Shadow Cabinet.

As I wrote in, October 2005, the real Ken Clarke was nothing like the cuddly, avuncular figure of popular mythology. He was a casual parliamentarian and a hawker of cigarettes on behalf of tobacco giant BAT. And although he has a reputation as a moderate, he was an authoritarian home secretary and a traditionalist on education. He is no moderniser.

That said, his grasp of the economy is good. Gordon Brown would have done well to invite him into the National Economic Council, but now Cameron has got there first.

But Tories should also be concerned that this was a decision taken in reaction to the appointment of Peter Mandelson as business secretary: a Tory big beast to match a Labour big beast. Until last autumn Cameron was driving the political agenda on every front from the environment to work-life balance. This appointment makes it look like he is running to catch up.

www.newstatesman.com - Ken Clarke's return

Just before the Second World War, the Works Progress Administration, one of Franklin D Roosevelt’s New Deal programmes, published a series of statistics about what it had done to get America back to work. In the previous three years the WPA had built 17,562 public buildings, 279,804 miles of roads, 29,084 bridges, 357 airports, more than 30,000 dams and 15,000 parks.

Although nothing on this scale has been considered for Britain as we head towards the second decade of the 21st century, the rhetoric of Lab our's interventionist approach to the crisis is pure FDR. Ministers seem to be wavering between calling it a "Green" New Deal or a "Hi-Tech" New Deal, but the centrally funded work-creation schemes take their inspiration from Depression-era America. That much is certain.

The verdict of history on the New Deal is often harsh. Right-wing commentators in the United States are already warning President Obama that FDR's approach made the Depression worse. There is certainly a case to be made that the war was a more effective work-creation scheme than the New Deal. Even those sympathetic to the fiscal stimulus approach of Obama and Brown are sceptical of the New Deal's immediate impact on the US economy.

Out of this far-sighted programme emerged a whole generation of talent

Writing in the New York Times, the economist Paul Krugman said: "Barack Obama should learn from FDR's failures as well as from his achievements: the truth is that the New Deal wasn't as successful in the short run as it was in the long run." Krugman goes so far as to argue that New Deal decisions to insure bank deposits and maintain social security have helped cushion Americans from today's economic collapse. His advice to the incoming president should also be taken to heart by those working with Gordon Brown today: "The reason for FDR's limited short-run success, which almost undid his whole programme, was the fact that his economic policies were too cautious."

Thus far, ministers have been surprisingly unimaginative in their approach to work creation. While the government is mining the New Deal for ideas for credit-crunch Britain, it should take a look at the less cautious elements of the programmes. Take, for example, the answer in the 1939 WPA pamphlet to the question: "What has the WPA done in the fields of education, the arts, and public recreation service?" The answers are impressive (even making allowances for the propaganda purposes of the document): library workers established more than 3,500 branch libraries and 1,100 travelling libraries, catalogued more than 27 million books and repaired more than 56 million; recreational workers operated nearly 15,000 community centres; educational workers conducted 100,000 classes a month, including those in US citizenship for recently arrived immigrants.

Meanwhile, the Federal Art Project conducted classes attended by 60,000 people a week and produced 234,000 works of art; the Federal Music Project gave 4,400 musical performances a month, with an average monthly attendance of three million people, and the Federal Theatre put on 1,813 plays. The Federal Writers' Project produced guidebooks to the American states and nearly 200 books and pamphlets. It also collated a collection of oral histories including the narratives of the last living slaves. Britain's leading expert on the New Deal, Professor Anthony Badger of Cambridge University, said: "The WPA was based on the principle that there was no point in putting unemployed writers to work digging roads. They were ridiculed at the time, and there were some ludicrous projects, but there were also some remarkable achievements."

The Prime Minister recommended Badger's most recent work, FDR: the First Hundred Days, as one of his books of the year, but there is a section in the professor's previous work, The New Deal: the Depression Years (1933-40), that should be required reading in Downing Street. The results of the various projects were inevitably mixed. Many on the right in the US also suspected the WPA of subsidising political radicals, and Robert Reynolds, a senator from North Carolina, denounced the "putrid plays" of the Federal Theatre that "spewed from the gutters of the Kremlin". Yet, out of this far-sighted programme emerged a generation of American artistic talent, including the painters Mark Rothko and Jackson Pollock and writers such as Saul Bellow, John Cheever and Ralph Ellison.

There is no sign, as yet, that the government is prepared to launch a New Deal for intellectuals and artists who find themselves on the dole. It could also be argued that Britain has a long tradition of state subsidy in the arts. But there is just a whiff of complacency about the feeling within the government that the arts will survive a recession, and possibly even thrive on it.

At a Whitehall reception over Christmas, I bumped into a cabinet minister closely involved with the government's plans to buck the economic downturn. I asked him what would be done for middle-class people who found themselves out of work. What would happen, for example, to the first graduates in a generation who were leaving university with no jobs to go to? I suggested that the legions of unemployed IT workers, media workers and bankers were unlikely to apply for work-creation schemes already announced by the government, such as lagging roofs or laying broadband (or be very good at it). He answered with a shrug: "Well, they can always become teachers or go back to college."

The announcement by John Denham, the Universities and Skills Secretary, of a programme of internships for recent graduates with companies such as Microsoft and Barclays shows that at least one person in government is thinking about the potential loss of intellectual capital which the recession could entail. But if this turns out to be as deep and long as some now suspect it will be, there will need to be some seriously creative thinking, a "New Deal of the Mind" to equip people who work with their brains or in the creative industries for the challenges ahead. Clearly, this would not be cost-free, but if ministers have decided to go down the route of work creation backed by borrowing, they should at least do it with some imagination and flair.

In the spirit of national solidarity as the storm clouds gather, I list my suggestions for the New Deal of the Mind in the panel on the right, borrowing from the best of FDR and adapting this for the new era. Politicians need to begin thinking now about the world after the downturn, and whether we can put some institutional structures in place that will have the historical longevity of the Works Progress Administration. Oh, and if there's a minister out there prepared to take up some of these ideas, do bear me in mind. There are some hard times ahead, not least for those in my own profession.

www.newstatesman.com - A New Deal of the mind

Everyone seems to be talking about the New Deal. The Prime Minister's Christmas book recommendation in the Guardian was FDR: the First Hundred Days, written by the Cambridge professor of American history Anthony J Badger. Gordon Brown let it be known, through an interview with the Observer, published on 4 January, that he was planning a job creation programme based on FDR's New Deal. Where Franklin Delano Roosevelt built roads and bridges, James Gordon Brown would build low-carbon technology and broadband connections. An announcement at Rolls-Royce three days later, of a £140m scheme to create 35,000 apprenticeships in 2009-2010, followed by a cabinet meeting in Liverpool the next day and a jobs summit on Monday, are all designed to demonstrate the active approach of the government as the recession begins to bite. As one Brown aide put it: "The economy is changing so fast that we are having to do things in a faster time frame. We cannot leave the British people without the help they need."

According to Downing Street, the Prime Minister's favoured phrase to discuss what the government is doing is: "Building Tomorrow Today". The idea is that the lessons of previous recessions show that cutting government investment left the country unable to take full advantage of the upturn when it came.

The PM is said to be unsettled by the events in Greece in which alienated young people took to the streets

When talking about the New Deal, it is important to make the distinction between two very different and somewhat contradictory projects which just happen to have the same name. The original New Deal was a huge programme of public works devised in the United States during the 1930s to stave off the worst effects of the economic depression which saw (according to some estimates) up to a third of the working population lose their jobs. The second project was named by the incoming Labour government of 1997 to describe its plans to force the young unemployed to take jobs or training rather than receive benefits. Apart from the catchy name, the second New Deal really had nothing to do with the first. Is Brown now embarking on a third manifestation, merging the best elements of both, or is this just political opportunism, designed to put clear blue water between Labour and the "do nothing" Tories?

There is a fascinating passage in Robert Peston's 2005 biography of Gordon Brown, written before the journalist became the BBC's face of the UK recession. It concerns Brown's plans for the unemployed, which symbolised the then chancellor's transition from a fierce critic of the brutality of the Tory years to a de facto neo-Thatcherite. Peston quotes a ministerial source who knew Brown well: "We refused to make spending commitments. We rejected a return to crude Keynesianism, a massive injection into the economy which was being recommended . . . And we made our employment creation dependent on responsibilities through the New Deal, which was very controversial at the time."

The recent benefit reforms announced by the Work and Pensions Secretary, James Purnell, suggest that Brown is still signed up to the "rights and responsibilities" agenda of the New Labour New Deal. Claimants, including single mothers, will now risk having their benefits cut if they are not actively seeking work or training. But in his eagerness to dig himself and the country out of the crisis, Brown has now embraced the Roosevelt version as well.

The adoption of the principles of Roosevelt's New Deal marks the second great ideological conversion of Gordon Brown's political career. The first took place in the mid-1990s, when he shook off the last vestiges of his socialist past to become a cheerleader for the values of the market. That conversion broke with the legacy of John Smith and was crucial to the establishment of new Labour. The second brings Brown almost full circle. During his New Year message, the Prime Minister shamelessly announced that 2009 would be the year when "the old era of unbridled free market dogma was finally ushered out", without mentioning that he was himself one of the great evangelists of late-20th-century super-capitalism.

The government is now seriously worried about the generation of young people leaving school and university into a recession. In striking contrast to the Tories, who have opted for a policy of No Deal rather than New Deal, and launched the New Year with a minor announcement on savings as a sop to its core vote, at least the government looks like it cares about the least well off. Brown is said to be unsettled by the events in Greece, which saw thousands of alienated young people take to the streets in protest at the government's handling of the economy. There are likely to be a series of announcements in the coming weeks to reassure the country's ever-growing body of students that they will not be left in the cold.

But some in government are beginning to voice concerns that whole sections of the working population are not yet accounted for in the government's plans for 2009. As one senior minister with a close involvement in the discussions said: "This is a downturn that will also affect people in the private sector who are middle class and middle aged. I am seriously worried about Joe and Rita Bloggs in their mid-forties or fifties. What will they do if they lose their jobs?"

Ministers were asked to come to the jobs cabinet in Liverpool with recession-busting ideas for 2009. There are problems with this approach. Several ministers have already been told that existing projects in their policy areas will not be funded because of the straitened economic times. Another serious issue is the government's collective failure of imagination. New Labour has never been short on ideas in the form of "eye-catching initiatives", but it has yet to come up with genuine legacy institutions with the conceptual boldness of Aneurin Bevan's National Health Service or Jennie Lee's Open University.

It may not be entirely credible that Gordon Brown now embraces FDR-style job creation with the same zeal as he once embraced the free market. But the niceties of political consistency are hardly the issue at a time of national emergency. The real challenge will be to match the Depression-era rhetoric with practical solutions to help people through the crisis. If the Prime Minister succeeds he will have the legacy he so desperately craves.

www.newstatesman.com - It's a New New Deal

The New Statesman doesn't do political awards. I've always thought it a shame to leave the field clear for Channel 4 and the Spectator, but I also recognise that parliamentarians are the last people on earth who need another boost to their egos. It is particularly difficult to pass judgement this year, as the political class (with a handful of exceptions) was miserably implicated in the failure to foresee the scale of the economic calamity about to hit the country. It is not as if we had insufficient warning. Northern Rock collapsed in September 2007, remember, an event that should have alerted us to the possibility that the credit crunch was likely to hit very hard in 2008.

Another difficulty is that a single politician has dominated the year's proceedings, not just in his attempts to rescue the country from imminent economic collapse, but, in his own estimation at least, saving the entire world from descent into a pre-industrial barter system. That is the Prime Minister himself, Gordon Brown.

This judgement will fail to surprise cynics who have believed that the New Statesman is the cheerleading "house journal" of the Brownite faction of the Labour Party. So be it. This year, at least, they would be right. For, if there were a New Statesman awards ceremony, the Prime Minister would make a clean sweep of the trophies.

Here, then, are the New Statesman Political Awards for 2008, otherwise known as The Brighties.

Politician of the Year

There is simply no other contender in this category. In much the same way as the Terminator was more machine than man, at least 90 per cent of Gordon Brown's DNA is not human, but political. Like Arnold Schwarzenegger's screen character, Brown is precision-engineered to annihilate any opposition he encounters. His critics inside and outside the Labour Party should have realised this when he refused to tolerate a credible candidate during the Labour leadership campaign of 2007. Now, as Prime Minister, for better or for worse, he simply dominates the political landscape at the end of 2008.

Speech of the Year

With typical media hyperbole, it was trailed as the speech of his life, but the significance of Brown's address to the Labour party conference on 23 September 2008 was not, on this occasion, overhyped. If he had fluffed it, as he did the previous year with his shameful "British Jobs for British Workers" speech, he would have found it hard to recover. As it was, the "no time for novices" line was a stroke of genius, dealing with Davids Cameron and Miliband in a single rhetorical blow. More importantly, it has embedded itself in the public consciousness.

Comeback of the Year

This category was a tightly fought, two-way contest and some would think Peter Mandelson more deserving of the title. But the political fortunes of the twice-disgraced Business Secretary had been rising since he was appointed EU trade commissioner in 2004. So, again, the award must go to the Prime Minister, who recovered from 20 points behind in the polls in June to within striking distance of the Tories by the end of the year. Much in the world of politics in 2008 has been unprecedented, but the recovery of Gordon Brown is without parallel.

Hypocrite of the Year

This was a shoo-in for the man at No 10. Late in the year we had the unseemly spectacle of an opposition politician being arrested for receiving leaked documents, made even more unpalatable by the fact that Brown had made his own reputation as shadow chancellor through a series of such leaks. Yet this was just the culmination of a year when the Prime Minister had gone from an evangelising global free-marketeer to a Keynesian state-interventionist. He even managed to blame the international crisis on the failure of international financial institutions, despite chairing the key IMF reform committee up until he became Prime Minister in 2007.

Authoritarian of the Year

Despite a pledge to put constitutional reform at the heart of his political vision, Gordon Brown established his anti- democratic credentials early in 2008. The unelected Prime Minister, who was crowned Labour leader unopposed, used his position to announce his intention to raise the period that terror suspects could be held in detention without charge from 28 to 42 days. He also continued to support the introduction of identity cards. Brown's democratic instincts were further called into question when he ennobled Peter Mandelson in order to bring him into the cabinet as a peer. The Prime Minister's failure to condemn the police raid on the Conservative MP Damian Green's offices in parliament established him as a worthy winner of this award.

Backbencher of the Year

With the Prime Minister dominating the major awards, it seems fair to give a series of lesser awards that he cannot possibly snaffle. Tribal New Statesman readers will be relieved to hear that I have given myself a strict rule not to honour Tories or Liberal Democrats.

There are strong candidates for the first of these prizes. The decision by David Davis to return to the back benches and trigger a by-election in his Haltemprice and Howden constituency over the 42 days detention issue was a brave, if somewhat foolhardy, expression of the importance of defending ancient liberties. Denis MacShane has worked tirelessly on European issues, anti-Semitism, parliamentary democracy and, more recently, libel. It remains a mystery that he does not have a government job. But, for his dignified campaign over the abolition of the 10p tax band that made him an effective thorn in Brown's side throughout the year, and for reminding the Prime Minister of the people whom the Labour Party is supposed to represent, Backbencher of the Year is Frank Field.

Loyalist of the Year

Alistair Darling is a strong candidate. Having tolerated a wave of vicious attacks from allies of the PM for telling a Guardian journalist that the economic crisis was serious, the Chancellor remained utterly loyal to the government cause. The "Go Fourth" campaign, led by John Prescott, was the surprise success of Labour conference and set the tone for the party's fightback. But, perhaps controversially, the award goes jointly to Siobhain McDonagh and Joan Ryan, the two ultra-loyal Labour MPs brave enough to call for a leadership contest and tell the Prime Minister the truth - that his own leadership was going off the rails.

Survivor of the Year

This award could go to a number of politicians, including George Osborne, who survived as shadow chancellor despite his excruciating dalliance with the Russian billionaire Oleg Deripaska. Harriet Harman has also had a good year and continues to defy political gravity. David Miliband has weathered the collapse of his leadership bid to establish himself as a respected Foreign Secretary. This is another award that could also go to the Prime Minister, although, alone among politicians, he is the master of his own fate. The real survivor, as the economy crumbles around him, is Alistair Darling, who lives on into 2009 despite all speculation to the contrary.

Moment of the Year

There were some dramatic moments in the House of Commons, including Speaker Martin's "apology" over the raid on Damian Green's offices and Alistair Darling's historic pre-Budget report. David Davis's resignation was high drama at its best and the Labour party conference was a series of extraordinary events. But the Political Moment of the Year happened beyond the gaze of journalists on the Greek island of Corfu, when Peter Mandelson and George Osborne discussed Gordon Brown over a platter of meze. Little did the young Tory know how completely that sun-drenched conversation was to change the political weather.

Rising Star

Within the cabinet, James Purnell has ploughed a Blairite furrow and steadily enhanced his reputation as a minister and a media performer. Hard-nut Tony McNulty has moved from the thankless job of immigration minister to the impossible job of employment minister and must surely be rewarded with a cabinet post soon. Between them, Liam Byrne and Tom Watson have transformed the Cabinet Office and made No 10 functional once more. But if the Labour Party is looking for vision in the successor generation, then David Lammy is the man to watch in the new year.

www.newstatesman.com - A year of ups and downs

I usually have a rule not to make political predictions but I made an exception for last year's Christmas issue:

The New Statesman does not employ an astrologer and the usual rule of thumb is that political predictions are as useful as a handful of homoeopathic sugar-pills. But this year we have been persuaded to indulge in journalistic crystal-ball gazing, because it looks set to be one heck of a 12 months. By the end of 2008 we will have a good idea whether this government is in any state to win an unprecedented fourth election, or whether the current climate of wintry gloom will prove deadly. Much will depend on whether the Conservatives (or, indeed, the Liberal Democrats) build themselves into a credible force.

Almost exactly a year ago, Tony Blair received a festive visit from Scotland Yard to question him about the "cash for honours" affair, in which campaign payments for the 2005 election were hidden as loans. One near certainty at the time was that Gordon Brown would succeed Blair during 2007, but no one could have predicted that the new Prime Minister would himself be engulfed by a police probe into secret donations. There is nothing more corrosive to trust in politicians than the suggestion of dirty money. The Brown administration is wise to this. Cross-party talks on funding, suspended in October after just five meetings, will have to restart, so look out for a compromise deal within weeks.

Apologies for reheating a prediction from last year's NS Christmas special (just goes to show how tricky soothsaying can be): "It is likely that the first stories about a Lib Dem-Conservative electoral pact will emerge in 2007," we said. There were rumours of talks about talks, but nothing substantial materialised. The trouble for the Tories was that Menzies Campbell was never the man to make the deal, because of a historical loyalty to his old friend Brown. No such scruples need bother the new Lib Dem leader. The Tories will argue that in the event of a hung parliament, the third party will have a moral obligation to opt for a change of government.

During the series of crises that followed the "election that never was", Brown has consoled himself with the plaudits he received for his reaction to early events in his premiership: the failed terror attacks, the floods and foot-and- mouth. Sir Michael Pitt's independent report into ministers' response to the floods will provide the first assessment of the new administration in the face of a crisis. Anything negative in the report will be seized on by Brown's enemies to suggest that the honeymoon was all hype.

One of Brown's first acts as PM, in order to establish his brand, was to set up a series of reviews of Blairite policies about which he had always been less than convinced: supercasinos, 24-hour licensing and the downgrading of cannabis classification. The first of these will be published in January and the last in April. The announcement of the reviews allowed Brown to represent himself as a breath of fresh air sweeping away the excesses of the Blair era. This was the very essence of Brownite new puritanism: designed to be equally attractive to the Daily Mail and core Labour supporters.

But the real test will come when Brown is asked to reveal what he really thinks. Will he actually take on the drinks and gambling in dustries? Will he reverse the downgrading of cannabis and risk boosting the prison population still further? An initial analysis of his decision-making processes suggests that he takes all the available advice he is given, goes into a period of intense self-examination, hesitates and then plumps for the compromise option. This showed itself most clearly over the issue of extending the period that terror suspects can be held without trial from 28 days. Blair and the police had originally wanted 90 days. The outgoing attorney general, the serving Director of Public Prosecutions and the Tories said 28 days was sufficient. So Brown opted for an arbitrary 42 days, guaranteeing his first backbench rebellion of the New Year.

How would that process of consultative compromise work for other policies? Perhaps Brown could announce "midicasinos" (not quite large enough to merit the title "super", but still able to rake in a tidy profit for the gambling industry and provide a modicum of regeneration). With licensing, maybe he could cut the new "Continental" drinking culture to a mere 20 hours, with bars closing between four and eight in the morning. Only on cannabis is compromise more difficult. The increasing strength of new forms of cannabis and new evidence of a connection to psychotic illness suggest a stricter approach is inevitable. But the prisons are already full of drugs offenders and Brown will not wish to add to the problem.

Feel the squeeze

Hovering over everything Brown does in 2008 will be grave worries about the economy. Even if he takes up Vincent Cable's suggestion of nationalising Northern Rock, the fallout from the collapse of the north-east bank will continue to plague the Treasury well into the New Year.

A sustained fall in house prices would eat into the reputation for economic confidence Brown built up while he was chancellor. Every government department will feel the squeeze from the settlement announced in the Comprehensive Spending Review. This will prove particularly difficult for Des Browne at Defence, who has already come under sustained fire from retired generals. But here, perhaps, is one cause for cautious optimism. The year ahead could bring the final removal of British troops from Iraq, coupled with a strengthened presence in Afghani stan, which ministers still believe they can turn into a good news story.

After the spring, the Labour Party will be thrown into a London mayoral election in which Ken Livingstone faces a real challenge for the first time. Boris Johnson is no political heavyweight, but he is as recognisable as Ken is, and equally at ease with the media. The contest will have serious implications nationally if Livingstone loses. The mayor has made it his business to cultivate better links with Brown and his circle. The green light for the Crossrail deal to link east and west London is seen as the early fruit of improved relations.

But Brown must be careful not to hitch himself too closely to Livingstone. The London Evening Standard has already published a series of damaging articles about the mayor's race adviser, Lee Jasper. The intense scrutiny of Livingstone's close circle will continue until the poll on 1 May. Brown has been burned by the row over David Abrahams's donations and rightly criticised for not making it his business to be better informed of the party's funding arrangements. He will do well to interrogate the Livingstone campaign to avoid any hidden surprises.

The civil liberties debate will rage, and we will follow developments closely. Growing public concern over plans to introduce identity cards intensified after the loss of 25 million child benefit records. This still has the capacity to end up as Labour's poll tax, and ministers should use the New Year to come up with an ingenious escape route (the vast expense and the fact that Whitehall civil servants cannot be trusted with our personal information should do the trick).

The treatment of refugees, as Alice O'Keeffe reports on page 58, should already be a national scandal. Developing a policy to allow failed asylum-seekers to fall into destitution as a de terrent to others should not be countenanced by a prime minister who claims to be guided by a moral compass. However, any change of policy in this area seems unlikely.

Meanwhile, we will follow with interest the trial of Derek Pasquill, the Foreign Office civil servant accused of leaking confidential documents to the New Statesman and the Observer concerning policy on radical Islam and "extraordinary rendition" - the de facto kidnapping of terrorism suspects for interrogation. As a result of the disclosures, the government's line on both issues shifted considerably; yet ministers still sanctioned shooting the messenger. It is our contention that this is a political trial, designed to save ministerial embarrassment. One safe prediction for 2008 is that this magazine will lead the campaign to drop the Pasquill prosecution.

www.newstatesman.com - Mystic Mart

As the recession nights of winter 2008 grow longer, thoughts in Westminster turn to parlour games to bring festive cheer in these dark times. The parts are already being cast, for example, in this year's political pantomime. Who'd have thought Speaker Martin would end up as the stage villain, booed and hissed from all sides of the stalls, or that Peter Mandelson would play Prince Charming, breathing life into the comatose body of new Labour with one kiss? A more cruel game is: "Who'll Survive the New Year Reshuffle?" - one that works for all three major parties. But by far the most distracting winter exercise is to imagine who might replace Gordon Brown as leader of the party, should he take the job he surely deserves as chief financial adviser to the world or, alternatively, disappear with the crack of a stage thunderflash through the trapdoor of Britain's economy.

With Labour's recovery now well embedded and discussion of coups from within the cabinet and insurgencies from the back benches at an end, it may seem odd to return to the subject of the Labour succession. But this is not an entirely fan ciful exercise. Even if he wins the next election (which could be called as early as next spring), Brown will not fight another, and leadership speculation will begin in earnest at that point. What's more, Mandelson's return to the cabinet has been viewed in some circles as an implicit snub to the younger generation of ministers jostling for position. They will need to reassert themselves, at some point.

Since the events of the summer, when David Miliband appeared to offer himself up as a potential leadership candidate, there has been no direct challenge to Brown's position. But despite the bitter experience of Labour conference, where the party singularly failed to shift its loyalty away from Brown, Miliband will remain a strong contender. Meanwhile, he is making a point of concentrating on his Foreign Office duties. The domestic politics of the past ten days have demonstrated that there are now only two other players left in the game: James Purnell and Ed Balls.

Whatever view one takes of Purnell's proposals for reform of the welfare state, they are bold and bear the imprimatur of the politician who conceived them. No other politician in the cabinet, with the exception of Balls himself, can claim to have a vision on domestic policy so thoroughly worked out. This includes Gordon Brown. Whether you call it social liberalism, über-Blairism or True New Labour, Purnell has a set of arguments that place him to the right of most people in the cabinet, let alone the party. He would argue that his policies fulfil the true promise of 1997. If Tony Blair expressed regret that he didn't listen to himself more on public-service reform, Purnell is the nearest thing to the keeper of the Blairite flame.

It is a sign of Purnell's increased stature within the government that he was allowed to push through such a challenging set of proposals. The principle of cutting benefits for people who fail to demonstrate that they are actively seeking work is anathema to large sections of the Labour Party, as is the abolition of income support. The increase in private- sector involvement to help deliver the new arrangements is also deeply unpopular. Anti-poverty groups, trade unions and the centre-left campaign group Compass have already expressed hostility to the proposals contained in the Queen's Speech (and outlined in the earlier welfare green paper No One Written Off).

Labour can ill afford to alienate still further its core support, but the government has gambled, as it once did as a matter of course, that it can afford to alienate the left as long as its policy gains the support of the media and the wider public. Labour could well do without another backbench rebellion and, for this reason, it was assumed that the welfare reform package would be kicked into the long grass.

Purnell's victory in getting his legislation into the Queen's Speech shows that the Brown government has regained confidence, but it also demonstrates that the market philosophy that drove much of Labour's reform agenda did not die with Blair. It is impossible to overstate Purnell's personal investment in this welfare package. He has not simply tweaked policies inherited from Peter Hain, his predecessor in the job. Hain would never have countenanced such sweeping reform, especially its punitive measures.

So, to our second candidate for the succession. This week marks the first anniversary of the government's Children's Plan, designed by Ed Balls as a blueprint for the next ten years of education in this country. As with Purnell's welfare reform proposals, this is very much Balls's personal vision. But it is very different both in style and substance. Where Purnell represents continuity, Balls marks a distinct break with Blair ism. Where the early Labour reforms were designed to reinforce a testing and inspection regime that would guarantee standards to parents of children at schools, Balls focused on the learning experience of the school student and, in the words of the Schools Secretary, "put the needs of families, children and young people at the centre of everything we do". To its critics, the Children's Plan is a return to "child-centred learning", a concept ditched in the early Blair years.

The Children's Plan also marked a shift towards renewed faith in state-driven solutions to social problems. The target-driven culture of early new Labour education policy and initiatives such as the literacy and numeracy hour demonstrated that Blair was never shy of using centralised solutions when it suited him. But Balls took this a stage further by introducing state intervention into every aspect of family life - parent support advisers in school, an increase of Children's Centres in schools to bring in advice on health and parenting issues, government guidance on the effect of video games and the influence of advertising on children. The proposals even contained plans for a National Play Strategy, to give guidance on the ways in which young children learn best from playing.

Balls will use the Children's Plan anniversary to raise his already high profile. He has not always been the most assured media performer, but the Schools Secretary notably took the lead in defending the Prime Minister in the broadcast media at the height of the criticism of his premiership during the summer. His reputation has also been enhanced by his handling of the Baby P case and the inquiry that followed. Despite early Tory criticism, Balls acted swiftly and decisively to deal with the failings within Haringey children's services.

Such is the distinctness of their individual visions of the future politics of the left that it is sometimes difficult to believe James Purnell and Ed Balls are in the same party. Indeed, if there were a proportional electoral system in Britain they almost certainly would not be. Asked by the New Statesman to outline how the two world-views could be accommodated as part of the same new Labour ideology, one Downing Street adviser simply said: "Fairness." This is about as useful as saying that both men believe in being nice to small animals. Their divisions are no mere intellectual decoration. They run deep within the Labour family. When it comes to the next election, Labour will not be able to fight on its economic record alone (or perhaps not at all). So it will have to develop a coherent package of proposals on domestic policy to put before the British people. The Energy Secretary, Ed Miliband, remains in charge of the manifesto and happens to be much closer ideologically to Balls than to Purnell. But Miliband's old job at the Cabinet Office was taken by Liam Byrne, who has been given the job of driving public-service reform. Byrne is far more sympathetic to the Purnell side of the argument.

A Balls or Purnell leadership challenge is some way off as yet. They both have serious disadvantages when it comes to a genuine challenge, not least that many backbenchers see them as party apparatchiks parachuted into senior jobs. Neither man has a strong base in the party and both are seen as the creatures of their mentors: Gordon Brown in Balls's case and Tony Blair in Purnell's. Yet both candidates are beginning to develop the bearing of politicians who demand to be taken seriously. If the Prime Minister takes time off to go to a panto over Christmas, he might want to heed that traditional warning: "They're behind you."

www.newstatesman.com - The two-man show

So why didn't the police go for David Davis? This is one of the questions hanging in the air after the arrests of the Tory immigration spokesman, Damian Green, and Christopher Galley, his Home Office source. After all, Davis was Green's boss when Galley first made contact in 2006. The former shadow home secretary and Tory leadership candidate has written: "Damian is among the most straightforward and honourable of people. He worked for me when I was shadow home secretary. Everything he did as shadow immigration minister he did with my implicit or explicit support." Is it conceivable that Galley made direct contact with Green? Far more likely that he would have approached tough-talking Davis, who had a long-standing reputation as a ministerial scalp-taker and had already made use of leaked information to embarrass Beverley Hughes and David Blunkett. Peter Mandelson is almost certainly right when he suggests such a sensitive whistleblower relationship would have been cleared at the highest level of the Conservative Party, possibly by David Cameron himself.

At the time of writing, Davis had not been questioned by the police, though they are said to be interested in what the MP for Haltemprice and Howden might have to say. But the Metropolitan Police is in difficulty here. If officers invite Davis for a polite chat it will be hard to explain why this approach was not used with Galley and Green. The police have displayed a grave (if understandable) failure to grasp how politics works. This, rather than a political decision to target a member of the opposition, is likely to have been behind the raid on Green's offices. The Home Secretary, Jacqui Smith, has talked repeatedly of the importance of respecting the "operational independence" of the police, but there is a clear conflict when this interferes with the operational independence of a member of parliament.

The shadow immigration spokesman is an unlikely martyr. A former president of the Oxford Union with a reputation while a student as something of a Tory "wet", he has done nothing more radical in his life than support Davis in the 2006 leadership election. Even then, he was backing the favourite. A former party official who knows him well said: "He drives a Volvo, for God's sake. He wears Marks & Spencer suits which are shiny at the arse and the elbows." Tory sources suggest Green was given the Home Office mole to "handle", much as an intelligence officer would be given an agent to run by someone further up the hierarchy.

MPs and commentators have been rightly appalled at the treatment of Green, who is said to be particularly furious that his child's bedroom was searched by police. There is also concern, which stretches to cabinet level, about the way officers of the Met were allowed to enter the precincts of parliament to search Green's office. Jacqui Smith and Gordon Brown have emphasised the importance of MPs not being seen to be above the law. The inquiry by Ian Johnston, head of British Transport Police, will have to examine whether the response was proportionate, considering the nature of the alleged crimes.

Several questions remain unanswered in this most singular of cases. Why was the Home Office so exercised by such minor disclosures? They were good scoops for the right-wing press, but by no means huge breaches of national security. Indeed, the arrests were not made under the Official Secrets Act. The police would certainly have used the OSA if they could, because its terms are sweeping and offer no room for a public-interest defence.

It is worth looking at the stories that emerged from this allegedly criminal relationship. The first revealed details of Home Secretary Smith's attempts in July 2007 to manage the story that thousands of illegal immigrants had been allowed to work in security-related posts. Ultimately Smith was forced to admit that as many as 11,000 illegal immigrants had been cleared by the Security Industry Authority. The second involved a memo to the Home Office minister Liam Byrne in January 2008, admitting that an illegal immigrant had been employed as a cleaner at the House of Commons. In August, a third leak revealed that Smith had written a draft letter to Downing Street warning that the economic downturn might lead to a rise in crime. In addition, names of Labour MPs likely to rebel against the proposal to extend detention without trial to 42 days for terror suspects may also have been leaked.

Can the government argue the release of such information was damaging to anything except its own reputation for competence? Could this information not have been placed in the public domain? Ministers themselves concede the draft letter to Downing Street, for example, only stated the obvious.

A genuine worry for ministers is that the slow drip-feed of confidential information to the opposition or the press makes the work of government impossible. Ministers and civil servants need to know that their deliberations will go no further than the walls of their offices. But this risk is hugely overstated. Considering its size and the number of controversial decisions made daily, Whitehall is remarkably unleaky.

This was a point once made forcibly to me by America's most famous whistleblower, Daniel Ellsberg: "You journalists naively believe 'the truth will out'. You don't know the half of it. In fact, you know less than a fraction of 1 per cent. Almost nothing leaks." Thus the man who leaked the Pentagon Papers, a detailed history of America's involvement in Vietnam from 1945-67, enlightened me to a harsh reality: most government secrets remain secret. Even the best-informed journalists just scratch the surface of what is going on. It is often not necessarily the most important and almost never the most outrageous acts of government that are leaked.

The publication of the Pentagon Papers in 1971 by the New York Times wholly undermined the US government's case for war. Christopher Galley is no Daniel Ellsberg, but he says he acted from the same principle: a government was attempting to hide information that should be in the public domain.

Green's arrest and the breach of the conventions of parliamentary privilege that the search of his office entailed are shocking events. Yet something positive may come from this. As a serial disseminator of leaked information myself, it has been my experience that the authorities tend to go for the weakest individual in the chain of disclosure. This is occasionally the journalist, but more often the "mole". This government has a record of shooting the messenger.

In the two high-profile cases I have been involved with, the GCHQ whistleblower Katharine Gun and the Foreign Office mole Derek Pasquill, the individuals had their lives held in suspension for months while waiting to be charged. Both lost their jobs. The mental toll of fighting the government can be heavy, as the former MI5 officer David Shayler discovered. Finding work afterwards is very difficult. At least, with the arrest of a senior politician, we can have a full discussion in parliament about the uses and abuses of government secrecy.

The Green case will have implications for government and for journalists. There are MPs across Westminster to whom I have shown leaked documents - including one leader of an opposition party. How else would they be able to judge whether it was appropriate to discuss their contents under the protection of parliamentary privilege? I will think twice about showing them such material in future and I am sure they will be wary of handling it. As it turns out, I have more protection under the Police and Criminal Evidence Act from disclosing my files as a journalist than MPs derive from convention laid down over the centuries.

The government has oscillated between attacking the Tories for condoning alleged criminal activity and recognising that MPs are worried about the implications of allowing police officers into parliament. But when the dust clears, people should take a long look at the alleged offence for which Green and Galley were arrested. According to the law manuals, the offence of misfeasance in public office is designed to target the "deliberate and dishonest abuse of power". In effect, this criminalises a relationship that has always existed between opposition politicians and their government sources. The government must tread carefully, because for most people looking at the extraordinary events of recent days Damian Green was the victim, not the perpetrator, of an abuse of power.

www.newstatesman.com - An abuse of power

I had the pleasure of speaking at the final plenary session of the Progress conference yesterday. The subject of the discussion was “The End of Ideology: What’s the Left For?” and it was a lively debate. The other panellists were Charles Clarke, Hazel Blears, TUC General Secretary Brendan Barber and writer and broadcaster Tristram Hunt, who were all very engaged and passionate about the future.

Here is my contribution, which Hazel Blears described as “throwing a bomb into the proceedings”. An unfortunate image, but I hope she just meant it was provocative.

"It is important to debate the end of ideology. But what about the end of principle?

I was told I had five minutes for introductory comments, which is always too much on these occasions, but all that really needs to be said is two words: Damian Green.

What a disgrace this incident has been. To hear Labour Cabinet ministers who happily fed journalists leaked information during their years in opposition defending the “independent operational action” of the police is quite staggering.

The question in this case is not whether ministers knew about the operation, but how disgusted they were when they found out. To hear Geoff Hoon on Any Questions refusing to answer whether he had any qualms about such heavy-handed tactics. Any qualms! At that point I wondered whether this government had any principles left.

So what has this to do with ideology? Well, everything. To forget one’s principles as a parliamentarian is to demonstrate that politics has become purely tribal - Damian Green must have done something wrong because he is a Tory.

These are genuinely unsettling times for observers of politics. Much of the commentary at present depends on the “confusion reigns” school of journalism. This is partly because most political journalists have a very sketchy knowledge of economics.

Two narratives of the future of the left have emerged from this confusion. The first says that the left is dead in any meaningful sense. When a Labour Mayor of London makes common cause with the Islamic extreme right and a Labour government forges a strategic alliance with American neo-cons, is it any wonder people are confused?

Is it surprising that people are confused when a Tory mayor of London guarantees a "living wage" for the low paid and introduces an asylum amnesty - two policies to the left of Labour and Tory frontbenches.

So one narrative is that the left is dead. Then there is the second narrative which states that the old ideological order has been restored as a result of the recession. On the one hand it's bank nationalisation, Keynesian economics, work creation schemes and borrowing our way out of recession. On the other it's laisser-faire capitalism on the Thatcherite model, cuts in public services and old-style fiscal Conservatism.

Where does leave those of us whp still consider ourselves to be on the left? In some senses in quite a good place. The Labour Party has re-established itself as the party of the poor and the Tories no longer look like they care. Forget for a moment who got us into this mess, in terms of standing up for the people who will lose most from the downturn, the government looks much, much more convincing.

On the downside there is the democratic deficit. I know Peter Mandelson is treated as a demi-god by Progress, but there is a serious problem with him becoming the de facto deputy Prime Minister. We know have an unelected PM and an unelected deputy.

Although I still think Mandelson could turn out to be Labour's Sarah Palin, his return to government has been impressive. But my concern for some time has been that Gordon Brown does not have democratic instincts.

The great thing about ideology is that is generates differences of opinion and someone wins the argument. Without it, all that matters is winning at all costs. Hence the disgraceful comments of Cabinet ministers this weekend.

www.newstatesman.com - The end of principle

So the government has ripped up the new Labour rule-book with a return to redistributive taxation, nationalisation and work-creation schemes. The same spinners who once laid burnt offerings at the feet of the gods of the free market now sing the praises of state intervention.

In this world turned upside down, one government figure has been consistent in his reading of the situation. From the early summer, Alistair Darling has been saying that we are living through the gravest economic crisis the country has faced since the first half of the 20th century, and that the government must do all it can to protect the British people from the effects of the storm.

The Chancellor began his statement on this week's pre-Budget report in apocalyptic terms, speaking of an "unprecedented global crisis". There was a time when he would have been accused of talking down the economy. Such an idea now seems absurd. At the end of August, during his infamous interview with the Guardian's Decca Aitkenhead, the Chancellor merely said that economic conditions were "arguably the worst they've been in 60 years". The only quibble now with Darling's assessment would be that he ever judged that it was "arguable". At the time, the sky fell in on Darling, with a series of attacks that included disgraceful briefings from Gordon Brown's allies against the Prime Minister's most loyal lieutenant. In fact, Darling had been warning of the seriousness of the situation for almost three months. In an interview with the New Statesman in early June, he said: "If you ask fundamentally what's changed . . . self-evidently it's the credit crunch . . . The IMF has said that it is the biggest shock to the world's economic systems since the 1930s."

It is hard to think of a historical political figure who has survived such a battering, from oil price rises to a bank collapse

Watching Darling's performance in the Commons on Monday, what was striking was his extraordinary calm. Some have put this down to his background as an Edinburgh lawyer, but this isn't an adequate explanation. Just before the £500bn banking bailout in October, a journalist was overheard asking Darling how he remained so unruffled in such turbulent times. He said it was the wrong question, adding: "Now is not the time to panic." He has not panicked, yet. At the height of the briefing campaign against him, he also held his nerve. Darling is popular among political journalists and despite his identification as a "Brownite", he is seen as a non-sectarian figure in Westminster.

There is still the distinct possibility that the PBR will unravel (and the news that the Treasury considered raising VAT to 18.5 per cent does not help matters). Some within the Labour family salute the aims of giving the economy a £21bn boost, while wondering whether it will be enough. But few are turning their fire on Darling himself. For example, Frank Field, the leader of the 10p tax rebels, said he believes the fiscal stimulus may yet turn out to be inadequate. But he recognised that Darling had been clever not to put a limit on how long the measures would take to work. "Alistair has given himself all the time in the world," he said. "Now he will just keep saying that the measures need to be given the chance to work."

There is no doubt now that Darling stays calm under pressure. It is hard to think of a historical political figure who has survived such a battering. Quite apart from the collapse of the banking system and a vicious campaign to undermine him from within his own party, the Chancellor has dealt with Northern Rock, the loss of computer disks from H M Revenue & Customs containing the personal data of 25 million individuals, fierce criticism of his decisions on capital gains tax and corporation tax, the stagnation of the housing market, wild fluctuations in the prices of oil and huge rises in the cost of household fuel.

There is at least one area where Darling remains vulnerable, however, and that is over the policy to abolish the 10p tax rate, which he inherited when his predecessor left for No 10. In the PBR, Darling announced an increase of personal tax allowances by £130 a year to soften the impact on those who lost out. But the real question for the Labour high command should be whether this will be enough. If backbenchers feel renewed pressure from their constituents on this issue, the possibility of a rebellion over the Budget in the spring will re-emerge.

The revival in the fortunes of the man at No 11 coincides with a new sense of direction throughout Downing Street. The National Economic Council has helped open up dialogue between departments and there is no longer the feeling that cabinet ministers are huddled in their individual silos. The increasing influence of the affable MP for West Bromwich East, Tom Watson, since his appointment to the Cabinet Office at the start of the year, has helped stamp out some of the more thuggish briefings. And despite differences over the emphasis of the PBR, the Treasury and No 10 are said to be working well together.

A new test of Darling's nerve will come in the new year when unemployment begins to bite. If the news bulletins are led every day by job losses up and down the country, Labour backbenchers are already talking about being afraid to show their faces in public. Darling has demonstrated his integrity over the course of the past year and consistently delivered a brutally honest assessment of the economic crisis. But if unemployment hits three million in 2009, these qualities will count for nothing.

www.newstatesman.com - Darling holds his nerve