The big issue that won't be discussed

The Liberal Democrats may have voted to drop their 50p top rate policy, but at least they had the co

Progressive politics in a globalised economy comes down to one central issue: can economic efficiency and social justice go hand in hand? This past week, it was the turn of the Liberal Democrats in Brighton to test the theory through a proxy debate on tax. In the coming week, Labour will use Manchester as the backdrop to the same discussion - only this time through a putative leadership and, in particular, deputy leadership election.

Two parties, two towns, but the same central dilemma - how to achieve greater equality in globally competitive markets.

So far all the parties are failing in the quest. Poverty levels judged by household spending have risen since 1997, while social mobility has gone into reverse. New Labour is running desperately hard just to stand still at the levels of poverty bequeathed by Margaret Thatcher. Of course it's better than if the Conservatives were still in power - but is that enough? Each worker replaced by a cheaper colleague is on the receiving end of economic efficiency, not social justice.

Labour needs, more than anything, a national debate about the tensions between the needs of society and the demands of free markets. Tax can be the cipher for that discussion. New Labour, despite a national income hiccup in 2001, has remained silent on tax. Not for the first time the Liberal Democrats have shown the way. Many progressives might be disappointed that, in the face of resistance, the party voted to drop its "50p top rate" policy, but at least it had the courage to conduct an open debate about taxing more. The Lib Dems have been doing Labour's heavy lifting on income tax for a long time and have got fed up with it. Now they have opted for increased capital gains taxes and hard-hitting green taxes.

If tax options remain set in stone, fewer poor people vote, because politics stops being about them and their lives. A vicious cycle ensues. The less the poor vote, the more the party campaigns focus on the well-off who do. Thus Britain takes another step towards the social divisions and scars of the United States.

Rewarding winners

"It's the economy, stupid" is not just some throwaway campaign slogan. It is a sentiment that dominates British politics. A rising tide may lift all boats. The problem is that unfettered markets lift some much higher than others. The gap between top and bottom stretches the country to breaking point. The UK has a booming economy fuelling a social recession. This is because free markets reward winners and punish losers. Instead of going "hand in hand", the relentless pressure of global markets always puts economic efficiency above social justice. Public services are made to look like the markets they were designed to protect us from. In a speech on 14 September Alan Milburn backed a political approach that is "liberal on economic policy" and so inevitably concluded, "The state should be running less, not more."

In Manchester Labour delegates won't be allowed to vote on anything significant, least of all tax policy. Tony Blair has already instigated a ten-year policy review but forgot to involve the party. So much for "Let's talk" as the antidote to that gimmick, "the Big Conversation". Downing Street briefs that Blair is shaping the next election campaign, although he will be gone within a year. The target is families that want to get on "rather than a focus on equality". There we have it again - economic efficiency over social justice.

Outside chance

It need not be this way. The minimum wage gave greater priority to social justice than to economic efficiency . . . and the ceiling did not fall in. The shift to a living wage would be met with howls of anguish from the Confederation of British Industry - but then sullen acceptance as long as every business faced a level playing field.

With the leadership already in the (Brown) bag, the focus switches to the deputy leadership. Is this the place to have the debate about tax and the relationship between society and the economy? Only if someone stands from outside the closed circle of cabinet members and ministers who refuse to do anything except intone the mantra "economic efficiency and social justice go hand in hand".

Step forward Jon Cruddas. Cruddas is Blair's former adviser on employment and union issues, and has seen at first hand what an unrestrained global economy has done to his constituents in Dagenham. Constituency activists and unions are urging him on, but he has still to confirm whether he will stand. A tilt at the job would provide the space to hold the debate about the market making a good servant but a poor master.

Sixteen years after Margaret Thatcher's fall, progressives from all parties and none have to face the fact that the good society may not always chime with an efficient economy.

Neal Lawson is chair of Compass (www.compassonline.org.uk)