On 23 December 2005 Martin Kettle - a usually thoughtful Guardian columnist who makes no secret of his support for Tony Blair and Blairism - announced, with enviable confidence, that "the left no longer seriously pursues a radically egalitarian economic project. History has forced that illusion from the field for the foreseeable future." On the same day, Oliver Letwin, the Conservative Party's policy supremo, told the Daily Telegraph: "Of course, inequality matters. Of course, it should be an aim to narrow the gap between rich and poor." Anyone who read both newspapers on that Advent morning must have felt that the world had turned upside down.
In fact Kettle was doing no more than expressing a view that is held by most leaders of the new Labour "project". For them, meritocracy - meaning the shifting of patterns of inequality - has taken equality's place as the defining characteris- tic of the good society. In the four and a half years since Tony Blair refused Jeremy Paxman's invitation to deplore the widening gap between rich and poor, the Prime Minister's attitude has hardened. Labour's 2005 general election manifesto proclaimed that "widening access to power is as important as widening access to wealth". A party which promises to "widen access" to either of those desirable objectives accepts that inequality is here to stay. The watchword among the young advisers of 10 Downing Street is "opportunity". Fortunately, in the real world, equality is moving back up the political agenda.
Letwin's Christmas "demarche" must be kept in perspective. Well within the time it took the Wise Men to return home, his promise of gifts had been hedged about with so many clarifications, reservations and explanations that the real purpose of the surprise announcement became clear. The Tories wanted to muddy the clear blue water. Margaret Thatcher's philosophy of income redistribution - from the poor to the rich - is now an undisputed vote loser. As Tony Crosland predicted 50 years ago in The Future of Socialism, as the nation grows more prosperous, an increasing number of citizens believe that some of the wealth generated by economic expansion should be spent on promoting social justice.
Letwin attempted to calm Conservative nerves with a promise that the money to be spent on reducing disparity of incomes would be provided by economic expansion rather than from the taxes of the rich. That is the sort of double-talk that justifies scepticism about the Tories' true intention. Pre-empting the receipts of future growth for public expenditure avoids a commitment to immediate tax increases. However, it requires higher income earners to forgo tax cuts that they would otherwise enjoy. No doubt Letwin relied on most Tory activists being too stupid to grasp the true consequences of his proposals. Yet the internal workings of the Conservative Party should not concern us. The hypocrisy of the general presentation makes it important. The Tories know which way the wind is blowing.
So, apparently, do the Liberal Democrats. Simon Hughes - the leadership candidate who wants to lose the label "left of Labour" - promises to abandon his party's election promise to finance (for low earners) public services through the introduction (for high earners) of a 50 per cent tax rate, but he anxiously confirms that he is still in favour of redistribution. It will be financed in other ways yet to be specified. It seems that everybody except the Labour leadership is, at least in public, enthusiastic about greater equality.
Yet, in truth, Labour remains the only party that is even potentially egalitarian in the genuine sense of the term: believing that disparities of wealth are morally wrong as well as socially dangerous whether or not the living standards of the poor have improved in absolute, as distinct from relative, terms. Clearly - through the national minimum wage, minimum income guarantee and half a dozen policies aimed at "lifting children out of poverty" - the Blair government has helped low-income families in a way no other government would even have contemplated. But the improvements needed by the poor require redistribution on a scale that will be contemplated only by a party which believes in the ethical necessity of equality and carried out only by ministers who campaign for equality as a moral imperative.
Do not despair of that ever happening. The egalitarian ideal is alive and well within the Labour Party. It survived the early 1980s, when the clamour was for public ownership and the endorsement of every noisy pressure group. And it is now emerging from the canard of the late 1990s, which dismissed equality as outdated and unrealistic. The egalitarians remained true to their beliefs because their policies were guided by a coherent and comprehensive principle. Their ranks are now reinforced by party members who have grown tired of a footloose leadership that plucks policies out of the air. After years of chasing the chimera of "doing what works", the party has rediscovered the power of an all-embracing idea. For Labour, that idea can only be equality.
The converts to equality now include unapologetic new Labour "reformers" who at last have realised that it is unlikely that even the disparate initiatives of "the project" will be realised in an unequal society. The New Egalitarianism (edited by Anthony Giddens, prophet of the Third Way, and Patrick Diamond) contains essays from serious political commentators who recognise that the limited objectives of Blair- ism - some of them little more than political cliches - could never be achieved in an increasingly unequal society. The intellectual status of the protagonists, however, is less important than their willingness to mount an irresistible, but previously unexpressed, argument. Time after time, they acknowledge that "the project" will depend on greater equality.
The one great knot that no one can untie adequately lies in the apparent association between unequal distribution and more equal opportunities. The opportunity structure appears far more egalitarian in countries with more equal income distribution . . . Is tackling inequality a majoritarian political project? This is a fundamental question for those seeking to build a political coalition. There is a strong reason for thinking it simply isn't possible to have a sense of community when vast inequalities of wealth and income lead to citizens becoming increasingly segregated in housing and schooling.
The thoughtful tendency within the Labour Party has begun to reassert the view that R H Tawney set out 70 years ago: meritocracy is no substitute for equality. By definition it provides "escape routes" for only a small part of the population. What is more, without greater equality it does not even extend the mobility that Tony Blair claims is the object of his political philosophy. For most of the population, the "escape routes" are cut off.
Opportunities to rise are not a substitute for a large measure of practical equality. Nor do they make immaterial the existence of sharp disparities of income and social condition. On the contrary: it is only the presence of a high degree of practical equality that can diffuse and generate opportunities to rise. The existence of such opportunities, in fact not merely in form, depends upon not only an open road but an equal start.
If the Blairite majority within the cabinet is serious about extending "the opportunity society" to the country as a whole, it has to turn aspiration into reality by promoting equality.
In the most important of the Giddens/Diamond essays - important because of its intellectual quality and more important still because of the political potential of its author - Ed Miliband asserts that "a focus only on equality of opportunity cannot be enough for progressive social democrats in the early 21st century". He goes on to argue that, although "outcomes and opportunities both matter, the two are not in opposition but are complementary. No sensible progressive today believes in strict equality of outcome. But it is much harder to achieve genuine equality of opportunity with very significant inequalities of outcome."
The joy that such a simple truth should, at long last, have been set out with such clarity is only slightly moderated by the fact that, 70 years ago, Tawney explained how to overcome the equality-of-outcome dilemma. It is resolved by a sensible definition of what equality of outcome means. R H Tawney supplied it.
Although natural endowments differ profoundly, it is the mark of a civilised society to aim at eliminating such inequalities as have their source not in individual differences, but in its own organisation - and individual differences which are the source of social energy are more likely to ripen and find expression if social inequalities are, as far as practicable, diminished.
Nobody wants, or thinks possible, a society of identical mediocrities. It is the imposed uniformity of deprivation and disadvantage which socialists deplore and seek to eliminate.
Tawney's ennobling definition of what true equality means disposes, at least by implication, of the most common (and least plausible) criticism of the consequences which follow income redistribution - the notion that equality and liberty are incompatible. In fact real freedom, the practical ability to enjoy the opportunities provided by a democratic society, is increased by the redistribution of both power and wealth. No social democrat should belittle the importance of negative freedom: freedom from religious or racial persecution, freedom from arbitrary arrest, freedom from the tyranny of despotic government. All those freedoms - built on the rule of law - are the bedrock on which other freedoms have to be built but, in themselves, they are not enough. The perfect definition of the "positive" freedom that should complement those imperative conditions of the civilised society was provided by T H Green, a philosopher whose intellectual rehabilitation, thanks to the Imprint Academic publishing house, confirms that Labour has come to realise the importance of ideas.
When we speak of freedom as something to be highly prized, we mean a positive power or capacity of doing or enjoying something worth doing and enjoying, and . . . something we do or enjoy in common with others. We mean by it a power which each man exercises through the help or security given him by his fellow men and which he, in turn, helps to secure for them.
Defining freedom as the "positive power or capacity of doing something" has been developed, irresistibly, by John Rawls into the doctrine of "agency". Almost a hundred years ago, George Bernard Shaw mocked the Englishman's inalienable right to have tea at the Ritz as long as he could pay the bill. Shaw's simplification of the doctrine does less than justice to the noble idea. However, it vividly illustrates an incontrovertible truth: rights are worthless to those who cannot exercise them. Talk of extending choice is a cruel hoax on those who cannot afford to choose.
Equality extends the sum of choice and therefore the sum of freedom. A higher level of personal taxation, imposed on the richest 10 per cent of the population, might well reduce their agency and therefore the range of choices open to them. If their diverted income were distributed among the poorest 20 per cent of the people, however, the agency of the whole nation would be increased. It was Douglas Jay - in his time usually regarded as occupying the far-right flank of the Labour Party - who made the simple point that a pound is of less value to a millionaire than to a pauper. Redistribution makes sense because it maximises marginal utility. Increasing agency at the bottom of the income scale promotes freedom as well as equality.
For social democrats, the arguments about freedom and equality have always been complicated by an unease about markets and the way in which they allocate resources. Fried-rich von Hayek added to the pain by writing that "it has to be admitted that the manner in which the benefits and burdens are apportioned by the market mechanism would, in many instances, have to be regarded as very unjust if it were the result of a deliberate allocation to particular people". Yet, in his introduction to The New Egalitarianism, Anthony Giddens is absolutely right to say that "post 1989, the left has accepted that economic prosperity depends on the success of competitive markets". In Choose Freedom I went even further by asserting that markets are essential both to efficiency and to democracy. However, Giddens goes on to say - with masterly understatement - that "market outcomes, however, do not always generate socially just outcomes or even outcomes that are compatible with the long-term success of the market".
If new Labour had hoped to discover what advertisers' copywriters would have called a "new and improved" form of social democracy - a philosophy that accommodates modern conditions while respecting historic principles - it would have spent its intellectual time devising a way in which the demands of the market were reconciled to the needs of social justice. In fact, it has chosen to search for an alternative to Labour's traditional philosophy and, in consequence, accepted the market - as both the engine of efficiency and the best way of allocating resources - with such an enthusiasm that it has not even considered the possibility of moderating its impact. Yet anyone who has read Alfred Marshall's Principles of Economics, which ought to be the Bible of those members of the cabinet who support classical economics without realising what this is, should at least have realised one basic fact about uninhibited free trade: those who go into the market with most, come out of the market with most - and more. The market is, left to itself, the enemy of equality.
The market does not have to be left to itself. The choice is not between laissez-faire and a stifling combination of nationalisation and regulation. The first necessity is a clear view on where the boundary between public and private enterprise should lie. It was clearly always foolish - even as a series of rescue operations - to take sectors of manufacturing industry into state ownership. It is equally unwise to rely on the profit motive to drive forward activities which can succeed only if their employees are inspired by the public service ethos. It is another example of new Labour's unideological objectives being dependent for their achievement on what new Labour dismisses as ideology. The improvements in "performance" and "delivery" that Blairites regard as a test of the government's success in managing the health service depend on reviving the spirit that the extension of a private element within that very service has badly damaged.
Perhaps it is too late to convince Tony Blair that the permanence of his legacy depends on the creation of the more equal society that he despises. But at least we can hope that Gordon Brown - who is in his way an equally thorough moderniser - will realise that the achievement of new Labour's objectives is crucially dependent on increased redistribution. The intellectual argument for equality is irresistible. The time has come for the Labour Party membership to make it politically imperative.