Critics of the Blairite "project" made a great mistake by accepting - indeed, embracing - the name "old Labour". Our error had honourable origins. We were prepared to renounce neither our past nor our principles. Our tactical blunder, however, was also the result of both arrogance and naivety. We had played our part in dragging the party back into the mainstream of politics when many of the "modernisers" had either occupied the wilder shores of socialism or were waiting nervously to discover if the tide would turn. Nobody, we thought, could accuse us of preferring opposition to government or of wanting to return to the politics of Keir Hardie and the policies of Attlee. But they did.
We, too, were modernisers. Our philosophy was far more relevant to the needs of the 21st century than "the project" could have hoped to be. But although we applauded the decision to replace Clause Four of the 1918 Labour constitution with a new statement of Labour's purpose, we failed to offer an alternative. The global economy had increased the need to struggle for the truly free society which can come about only through greater equality. We should have stopped arguing about the past and made clear that we had ideas for the future. Although the name lacks the resonance of "new Labour", we should have called ourselves "modern social democrats", proclaimed the dawn of "modern social democracy" and begun to update our philosophy.
Statements of basic principle are out of fashion. Tony Blair practises the pragmatism preached by Harold Wilson because he does not realise that it is impossible to "decide issues on their merits" without a clear definition of what those merits are. He has fallen into the trap about which J M Keynes warned: "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves to some defunct economist." The Prime Minister has, perhaps without realising it, become the market man. The economic panacea set out by Adam Smith in 1776 has become the "modern" solution to all problems of efficiency and allocation - even in health and education. It is not, in itself, a philosophy. But it is as near as new Labour gets.
Despite his scepticism about the value of philosophical speculation, Blair insists that his policies are driven by two moral imperatives - fairness and social justice. Admirable though those objectives are, as defining principles they suffer from a fatal flaw. Everybody believes in them. They are the bedrock even of Friedrich Hayek's philosophy. Hayek says it is neither fair nor just to "expropriate" earnings by taxation and spend the revenue on social policy.
A modern social-democratic government needs to build its programme on something more than a vacuous generality. Fifty years ago, the Labour Party had no time - and little need - for ideology. As long as it represented the interests of the people from whom it drew most support it was, in practice if not in theory, consistently egalitarian. But old-style working families are disappearing, most into the middle classes, some into poverty. Labour must become a party of ideas, not of class interest. They are certainly not provided by the Third Way, the burning deck on which now only Anthony Giddens stands. The best he could manage in Where Now For Labour? was "a hand up, not a handout". The ghosts of Tawney, Crosland and T H Green need not fear the competition.
Some Blairites have defined their ideology as the willingness to accept reality and adjust to new circumstances. This is an obligation that all politicians must accept. The changes in the class structure of society are a matter for rejoicing, rather than regret. But it makes the argument for greater equality even stronger. The poverty that remains is all the more unacceptable because of the affluence by which it is surrounded. And redistribution is politically most acceptable at times of growth. That is a statement of new social democracy, not old Labour. More than 3.6 million British families live below the poverty line (defined, by the government, as less than 60 per cent of average income). The poorest 10 per cent of the population survive on less than 3 per cent of national income. The richest 10 per cent live on 28 per cent. Blair, interviewed by Jeremy Paxman during the last general election campaign, refused to express regret that the gap was widening. But Labour Party members believe that the drives for equality and against poverty are inseparable. Most believe that redistribution, to improve the living standards of the depressed 10 per cent, is the primary obligation of a social-democrat government. Yet it is dismissed as out of date by proponents of the "project".
New Labour wants mobility, not equality. The Prime Minister is explicit in his enthusiasm for a meritocracy shifting patterns of inequality. Paradoxically, the success that the government has achieved in reducing poverty among children, pensioners and the working poor provides an overwhelming argument in favour of what new Labour derides as "tax and spend". Child poverty fell by 20,000 last year. Yvette Cooper, the minister responsible for reducing "exclusion", wrote that "the investment in public services since 1997, as well as tax and benefit changes, has provided the greatest help for those on low income". She does not describe that process as redistribution. But that is what it is. The poverty programme is under the supervision of two ministers - John Prescott and Gordon Brown - who believe in that sort of thing. If the Prime Minister shared their view, they might be able to edge their way towards spending the additional £6.8bn that, it is estimated, is needed to eradicate child poverty by 2020. The argument for greater equality is gradually being won within the Labour Party. At its inception, the Social Exclusion Unit aimed to deal only with the socially deprived. Now it has moved on to deal with the socially disadvantaged. Modern social democrats must consolidate that advance. But that is only a beginning.
A Labour Party that regains its moral purpose will seek to redistribute both power and wealth. The creation of an elected second chamber would be a stimulating declaration of belief that the people know best. But there is also practical work to do. We need a major reorganisation of government - regional devolution in which the new authorities take their powers away from Whitehall and Westminster, not away from local authorities. Indeed, local government must be rehabilitated and its powers restored. The policy of encouraging the election of executive mayors was intended to elevate personality above policy. Voting for "men not measures" is the illusion of democracy. The way to stimulate interest in municipal and county government is to give the counties and the municipalities something worthwhile to do and allow the voters to determine who (and which party) will manage the vital services - housing, education, police - which affect their lives. Too many of them have been transferred to unaccountable agencies and private enterprise. New Labour believes in the power of central government and the rights of individuals. It ignores all the democratic institutions that lie in between. The idea of "community" has passed it by.
Old-fashioned socialists were never very enthusiastic about passing power out to the people. A centralised state was necessary for "planning". Public ownership and government intervention in the economy were regarded as essential to make industry more responsive to the needs of society. The objectives were rarely achieved, but the merits of nationalisation and regulation are no longer worth discussing. The era in which they were regarded as essential to prosperity (by both Labour and Conservatives) is over. The task of a modern social-democratic government is to create greater equality within an economy in which manufacturing industry, the financial services and the utilities are privately owned and operate in an unavoidably flexible labour market.
New Labour dismisses the trade unions as an economic and social anachronism. Certainly they now occupy a quite different place in society from the one they enjoyed in 1979. That is less the result of Margaret Thatcher's industrial-relations legislation than of changes in the economy. The mass-production industries - the natural home of workers' solidarity - are in continuous decline. Individuals make short-term contracts with their employers. Few men and women now expect to stay in the same job for life.
Old-style collective bargaining may still be possible in the public sector and a few remnants of large-scale industry. But most unions will have to develop an increasingly personal relationship with their members, protecting their individual interests and their rights. A modern social-democratic government should extend those rights as far as the full implementation of the social chapter of the Maastricht Agreement and then go on to establish for working people the benefits that are enjoyed by the executive class - "family-friendly" privileges. The role of the unions is to make sure that employers fulfil their obligations. They need to be bigger and stronger if they are to do so.
A highly competitive private sector is a modern social-democratic aim, because it guarantees that power is not concentrated in too few hands. This requires a sharper competition policy. Yet new Labour facilitated the extension of the Murdoch empire. It will be interesting to see how it reacts to a bid by Associated Newspapers (Daily Mail, Mail on Sunday and London Evening Standard) to acquire the Daily and Sunday Telegraph. Competition in the private sector prevents large companies from swallowing up small. Autonomous growth should be an engine of economic expansion.
Unfortunately, the government is most enthusiastic about promoting competition in the public services, where it is alien and wrong. Perhaps the notion of introducing markets into health and education - and the related incentives of targets - was originally intended to generate value for money. John Reid, the Secretary of State for Health, has subsequently elevated hospital rivalries into the creation of "choice", something he seems to believe is demanded by the population at large and amounts to a moral necessity in a developed society. He has failed to notice the detriments of replacing the public service ethos with the values of the stock market. The problems have been set out with admirable clarity by David Marquand in his recently published book Decline of the Public. Marquand judges, with much supporting evidence, that "incessant marketisation . . . has done even more damage to the public domain than low taxation resource starvation". The public sector depends on commitment and trust. The market relies on self-interest.
A second problem arises from abandoning social democracy in favour of "doing what works". The "dependency culture" (a broadsheet cliche) was to be confounded by "welfare-to-work" - in itself an admirable development, but one that has evolved into a dangerous theory of citizenship. Rights, it is said, must be matched with responsibilities. Professor Raymond Plant (far more sympathetic to new Labour than I am) "raises the question of those who cannot be part of this world of obligations, contribution and reciprocity" - men and women whose circumstances prevent them from living as the government wishes. The risk is that they become not "active", but "second-class citizens". New Labour has drawn a distinction between the deserving and the undeserving poor. Though the minimum wage and income guarantees have transformed the prospects of low-income workers, the adult and childless unemployed have been largely neglected.
R H S Crossman accused the 1964-70 Labour government of losing its way because it thought maps were not needed by experienced travellers. New Labour made its greatest mistakes because of the same unthinking assumption. Modern social democrats ought to have helped the Prime Minister out of his intellectual black hole by offering him criteria by which he could judge the merits of his policies. He might well have rejected our advice. But we should have persisted in giving it.
Like Hotspur's jackdaw in Henry IV, we should have repeated the reproof time after time: "freedom and equality, freedom and equality . . ." Both those concepts (like fairness and social justice) lack intellectual precision. But they have a precise (social-democratic) meaning. Freedom begins with the extension of those rights that ought to be the basis of democratic society. A proper Freedom of Information Act, which genuinely exposes the working of government to public scrutiny, should have been the declaratory beginning. More prosaic reforms should have followed - easier access to justice and less primitive reliance on prison. New Labour has (in its attempts to placate tabloid opinion) amended the law so as to allow for retrial after acquittal, revelation of previous convictions during trials, limitations on the right to silence, and internment without trial for aliens whom the government suspects of terrorist links. Successive home secretaries have tried to reduce the number of trials by jury. Judges have been attacked for overturning, through judicial review, the unlawful decisions of ministers. Young people have become subject to "neighbourhood curfews". The mentally ill can be imprisoned for fear of what crimes they may commit, rather than because actual offences have been committed.
For the first time in modern British history, the Lord Chief Justice has expressed the fear that the government is careless about the rule of law. Its protection - indeed its revival - is the first obligation of a democratic government. But for modern social democrats, the right to exercise the liberties of a democratic society is only the first step to freedom. It is essential to extend the economic power that makes their exercise possible.
Practical freedom depends on the extension of agency, the economic strength to benefit from the choices provided by a free society. Distribute a rich man's wealth between 20 poor men and women and he will lose the agency that allows him to live in luxury. But the poor men and women will gain the agency that enables them to enjoy more humble opportunities. The sum of freedom will be increased. That, not envy, is why modern social democrats believe in redistribution. In a free society, liberties collide. The government has a duty to adjudicate between conflicting claims. No one who believes in that positive definition of freedom should allow the liberties of a vocal and voracious minority to prejudice the prospects of the whole community.
It is absurd, for example, that the "rights" of a minority of parents to choose selective education for their children should deny places in genuine comprehensive schools for a vastly larger number of families. The organisation of secondary education, perhaps more than any other issue, has been condemned as an "old Labour" cause. But virtually every academic authority, all the teachers' unions and a vast majority of parents condemn secondary selection. It is being extended - by stealth - because the government has no philosophic compass with which to guide its policies.
Perhaps the biggest failure, which illustrates the penalty of plucking unrelated ideas out of the air, is housing policy. Labour activists in 1997 would have thought inconceivable much that has happened during the past seven years. But nothing during Blair's premiership is quite as astonishing as the 95,000 increase in the number of families in temporary accommodation. Once again, Brown and Prescott are the ministers who have taken the initiative to put matters right. They might have been able to move more quickly if they had realised, when the government was formed, that working on slogans such as "no tax and spend" was bound to result in policy failure. The tragic shortage of affordable housing was the result of four factors that created a crisis far wider than the unfortunate families with no permanent homes of their own. Housing policy is based on the meritocratic wish to gratify aspiration rather than need. Housebuilding was left almost entirely to private enterprise. Local authorities were denied a role in the provision of low-cost property. The subsidised housing market was virtually abandoned.
It is not too late to regain the lost ground. Indeed, at what is clearly a moment of crisis for the government, social democracy should come to its rescue. The question that is constantly asked, by both enemies and disillusioned friends, is: "Does Labour believe in anything?" There can be only one answer to that question. The idea of freedom and equality is far too strong to remain submerged for long. But those of us who hold that view must now argue the case with greater determination than we have displayed during the past seven years. And we must not be intimidated by the allegation that our philosophy is out of date. Social democracy is about the future, not the past.
Roy Hattersley was deputy leader of the Labour Party (1983-92)