The changing landscape has left Gordon Brown with everything to play for in 2009
Published 18 December 2008
The changing landscape has left Gordon Brown with everything to play for in 2009
This has been a year of profound cultural and political shift in Britain, the most significant since 1979, when Margaret Thatcher launched her counter-revolution against the quasi-socialist consensus politics of the long postwar period. For decades to come, historians will analyse and debate the causes and consequences of a financial crisis of unprecedented complexity. But already, even before the recession has made its full destructive mark in this country, verdicts are possible. The collapse of the financial markets in the early autumn, with the banks reluctant to extend credit to one another and stock markets tumbling, has transformed the political landscape in Britain. More precisely, the flawed but bold financial package put together so hurriedly in the United States by Henry Paulson, the treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, indirectly saved Gordon Brown's leadership.
With the right-wing Republican administration intervening to bail out the US banking system by purchasing stock in failing banks, against the prevailing free-market thinking of the Bush administration, Mr Brown, usually so cautious, was finally emboldened to act. With speculation mounting that he would be removed from office in a cabinet coup, Mr Brown found a still limited, but nonetheless authoritative, prime ministerial voice, daring to talk about the importance of an active state and an interventionist government.
He deftly positioned himself and his government against the quietism of the Conservatives - the "do nothing" Tories, as they have since been caricatured. It makes for a vivid contrast with a year ago, when he was still desperately trying to avoid nationalising Northern Rock. Now he publicly mocks the Tories for opposing part-nationalisation of the banks.
In another twist, the economic crisis has brought together the two sides of new Labour, Peter Mandelson's return to the cabinet the most extraordinary manifestation of the sudden closing of ranks within the party. While harmony between Brownites and Blairites is necessarily fragile after a decade of near-civil war, the truce is real and grounded in the economic crisis. Now both Brownites and Blairites are putting the case for active government in a deep recession. After the pre-Budget report in November, there were many eager to announce the death of new Labour. The obituaries were premature, however; in reality, the project's original architects are applying their pragmatism and restlessness for more electoral success to a new set of economic circumstances. This time, we have an astonishingly different set of policies from those timidly proposed in the boom years of 1997. Some of the responses have been misguided, such as Alistair Darling's cut in VAT (we would have preferred a one-off tax rebate for the low-paid), but at least Mr Brown has acted.
The defining question of the coming year is whether Labour can incorporate into its urgent counter-recessionary measures a renewed commitment to a fairer society: this may not be the moment for novices, but neither is it the time to abandon first principles. Protecting the weak, safeguarding jobs, keeping people in their houses - these have to be Mr Brown's guiding principles.
Yet already the Prime Minister's widely praised plan to recapitalise the banks and to get them lending again is being called into question. No British bank has collapsed, but there are few signs that any of them is willing to inject cash into an ailing housing and business market. On Tuesday 16 December, the governor of the Bank of England, Mervyn King, suggested once again that more might have to be done in an attempt to restore confidence.
Mr Brown's failings have been more than matched by the Conservatives' confused response to the financial meltdown; the party is almost alone in the western world in opposing a "fiscal stimulus". The Tories have been wildly inconsistent, pledging bipartisan support one moment, attacking the government the next, and proposing feeble measures almost comically at odds with the scale of the challenge. For all their posturing about modernising the party, David Cameron and George Osborne have reacted to events by returning to the Conservatives' default position of offering market solutions to market crises. Like William Hague, Iain Duncan Smith and Michael Howard, Mr Cameron calls for huge cuts in public spending without specifying where these will fall (and for near-zero interest rates, as in the US). He dropped his already waning commitment to the government's tight spending plans after sustained pressure from the Conservative right. Emphatically, the party under Mr Cameron has no alternative recovery programme, and the able and experienced former chancellor Ken Clarke, who has amusingly stated that he considers himself to be in "mid-career", remains outside the shadow cabinet.
It is not surprising that even such astute tacticians as Mr Cameron and Mr Osborne have been knocked off-balance by the scale of the financial crisis, their old certainties challenged, their ebullience diminished. The collapse of the Anglo-Saxon model of capitalism - the Thatcher/Reagan orthodoxy of unfettered markets and limited regulation, established in the early 1980s - challenges their small-state, anti-regulation instincts at the most fundamental level. Even if the Tories were to win the next election, their recent return to their comfort zone of economic conservatism would leave them poor navigators of the darkening gloom.
But, from a domestic political perspective, 2008 will be remembered most of all for providing further evidence of the wild oscillations in Gordon Brown's career. In the summer he was written off by virtually every senior figure in the Labour Party, and by most influential political commentators. In public, it seemed as if he had lost all confidence, speaking like a prime minister who knew that the end was near. As we prepare to enter 2009, a possible election year, even his most trenchant critics acknowledge that he is in with a chance of leading Labour to an improbable fourth general election victory.
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