Leader: All is changed, changed utterly

There is an unprecedented opportunity to win support for a programme committed to economic and socia

History will record this year as the most significant for British politics since 1979. An election casually predicted to result in a Conservative majority instead produced the first hung parliament in 36 years. Against expectations, David Cameron jettisoned his party's natural suspicion of coalition government and seized the opportunity to secure his liberal conservatism. Meanwhile, in the form of Ed Miliband, Labour elected its first unambiguously social-democratic leader since John Smith. Finally, for the Liberal Democrats, Nick Clegg abandoned the project of progressive realignment, pursued by every Liberal leader since Jo Grimond, in order to form a coalition with the Conservatives rooted in a shared commitment to economic liberalism. In the words of Yeats, all is "changed, changed utterly".

Regardless of the outcome of the election, the first term of a new government was always likely to be dominated by the question of deficit reduction. A Budget deficit of £155bn and a structural deficit of £109bn meant that no one could credibly dispute the need for spending cuts. But the coalition's decision to begin cuts this year and to prioritise spending reductions over tax rises distinguishes its approach from others. This magazine has been consistent in opposing the speed and scale of these cuts, which will exacerbate, not diminish, Britain's economic problems. There is little evidence that the private sector is ready to fill the hole left by the vanishing state; an anaemic recovery is the inevitable result.

In addition, despite George Osborne's declaration that "those with the most should pay the most", the coalition's cuts are, by any measure, regressive. As the Institute for Fiscal Studies has repeatedly demonstrated, the poorest 10 per cent will lose more than any other group as a result of the Spending Review. It is intellectually and morally unsustainable for the coalition to continue to dress regressive cuts up as "progressive".

Had the government been more innovative in its methods of raising revenue, it could have limited the need for punitive cuts. As the Business Secretary, Vince Cable, has argued, any programme of tax reform should include an annual tax on land, 69 per cent of which is owned by just 0.3 per cent of the population. Recent events have demonstrated the need for a less socially divisive approach. The coalition's reckless decision to triple university tuition fees, the result of a planned 80 per cent cut to the teaching budget, has led to the greatest civil unrest since the poll tax riots of 1990. The New Labour years, when the Conservative opposition spoke hopefully of "sharing the proceeds of growth", already look like a model of tranquillity by comparison.

Economics aside, however, Labour's supporters must confront the inconvenient truth that, in significant respects, the coalition is a more progressive force than the governments of Tony Blair and Gordon Brown ever were. It was New Labour that, under the guise of fighting terrorism, launched one of the biggest ever peacetime assaults on civil liberties. The coalition, which came to power promising to "roll back state intrusion", has scrapped identity cards, suspended stop-and-search under the Terrorism Act and introduced greater regulation of CCTV. The Justice Secretary, Kenneth Clarke, has overturned decades of "Prison works" orthodoxy and pledged to reduce the short sentences responsible for Britain's appalling rates of recidivism. At present, of the 60,000 prisoners given short sentences, 60 per cent reoffend. Mr Clarke is right to face down his party's right wing.

Yet the coalition has baulked at the challenge of abolishing "control orders" amid apparently insurmountable ministerial divisions. Mr Clegg claims that his presence in the government has pushed Conservative ministers in a more liberal direction. On control orders, he has a chance to live up to this boast. Should the coalition retain the orders, Mr Clegg will be guilty of a fundamental breach of principle.

The coming year is likely to provide many opportunities for Schadenfreude at the coalition's expense. But no amount of misfortune should be allowed to obscure one fundamental truth: what should have been a social-democratic moment was transformed into an opportunity for the economic right. After this historic failure, it would be careless to assume that public opinion will rally to Labour in a surge of anti-cuts discontent. Should the party fail to offer a coherent alternative to the coalition's plans, there is every risk that the void will be filled by populists and demagogues from the right. But, as we enter 2011, there is an unprecedented opportunity to win support for a programme committed to economic and social justice and to protecting the poorest and most vulnerable. It is one that progressives must not squander.

This article first appeared in the 20 December 2010 issue of the New Statesman, Christmas Special