Tax but no spend

Labour is belatedly attempting to reinvent itself as a party of fairness and social democracy – but

Over the past week the conventional view at Westminster has hardened: Labour will lose, and deserves to lose, the next general election. (Certainly the latest polls show the Conservatives nearly 20 points ahead.) The media were near united in their condemnation of the new 50 per cent tax on earnings above £150,000. The Telegraph depicted Gordon Brown as Stalin on its front page, while the Sun printed a frowning face, presumably for the benefit of those of its readers who belong to the richest 1 per cent of the population that will be affected by the rate change. The Times declared that the New Labour coalition was over.

Yet a subsequent Populus poll for that same newspaper showed that 57 per cent of those canvassed supported the “super-tax” and only 22 per cent opposed it. In other polls, as many as 70 per cent said they were in favour of the new rate. This exposes a crucial gap – one that Brown should note – between opinion-formers whose approval he seeks and the wider electorate. Some have spoken of the Budget marking a “turning point” in British politics. Others in Labour, however, hope that the coverage of the Chancellor’s speech might lead to a different change – that the party will finally cease seeking to appease the media, whose centre of gravity will always be to the right of where the Brown government instinctively wants to position itself.

A few senior ministers have long warned that New Labour’s dependency on the right-wing, and particularly the Murdoch-owned, media is both needless and counterproductive. Today, they feel vindicated. But they also feel liberated: Labour has at last chosen to appeal through the media to the majority who agree that the wealthiest should shoulder their share of the burden during a recession. “The headlines were always going to be bad,” said one cabinet minister waiting to defend the Budget at a TV studio this past week. “But it is the right thing to do.”

Two recent reports – that Tony Blair regards the top tax rate as “unacceptable” and that Peter Mandelson has been “sidelined” in cabinet – are wide of the mark. Both men know that the global financial crisis has changed the rules of the game, and any decision sanctioned and defended by Mandelson could hardly be said to herald “the death of New Labour”.

Obviously the choices on polling day will not remain the same as they have been in recent elections. Instead of Labour spending versus Tory cuts, the 2010 election is more likely to be fought on “Labour cuts” versus “Tory cuts”. Ministers will talk about protecting the essentials in public services, such as primary schools, while the shadow schools secretary, Michael Gove, prepares for “radical” thinking on early years education. However, the dividing lines between the two parties are becoming clearer.

On the 50p income tax rate, the Tories have been wrong-footed. Cameron’s aides initially briefed that the Tories would back it, in an attempt to avoid appearing the party of the privileged – as they do on inheritance tax. But Cameron shifted ground after Boris Johnson, whose ambition to move from City Hall to Downing Street is scarcely hidden, said the Conservatives should oppose the redistributive move. “It’s a mistake. It’s bad for Britain,” Cameron said after being bounced by his troublesome rival.

The Tories claim the tax hike is “class war”, and point to a warning from the Treasury prior to the Budget that two-thirds of those affected by the new levy would find ways of avoiding it. But this is trying to have it both ways – Labour cannot be accused of soaking the rich if this is a pointless tax that will be dodged. If anything, the Treasury warning underlines the case for closing loopholes that make it too easy for the wealthy to get out of paying tax. As well as the £2bn or so the Chancellor predicts will be raised from the higher tax, ministers hope that several more billion pounds will be raised by parallel measures to clamp down on just such tax evasions.

As with the top tax rate, the new Equalities Bill presents the Conservative leadership with an acute dilemma: whether to back it and face the wrath of the party, or (more likely) oppose it and be seen as behind the times. Brought forward by Harriet Harman, Labour’s deputy leader, the bill will force public bodies to seek to ameliorate class inequalities and aim to increase the number of children from poorer backgrounds applying to the best local authority schools. Criticism has already come from the right, with warnings of a return to “Old Labour meddling”. Harman is a polarising figure who is frequently subjected to some of the sexism it is part of her mission in politics to eradicate. She argues, however, that this legislation is “not Old, but New Labour”; that it is about “equality and fairness” and addresses “labour market failure”; even that the positive discrimination that is becoming her hallmark “underpins meritocracy”.

At the time of writing, there is no mention of the bill on the Conservative website once you get past the new home page: a fresh campaign for a referendum on the Lisbon Treaty. Instead there is every sign that Cameron will let yet another opportunity for a “Clause Four moment” pass him by, and oppose what the Daily Mail has described as “Harriet’s mad sex war”.

Meanwhile, Brown has also floated another imaginative measure in the press in recent days: a scheme of national public service, under which young people would be required to do up to 50 hours of voluntary work by the time they reach the age of 19.

It is due to be launched in September, but has gained little attention amid the general anti-Labour mood. Which brings us to the latest spasm of speculation about the party leadership. Spasm is all it is. The only two credible candidates to replace Brown before the next election, David Miliband and Alan Johnson (whom the Tories fear more than any other Labour politician), know they would be forced to go to the country within months of winning any internal power struggle, which would offer insufficient time to become familiar to the electorate and to have assumed the authority of office. In any case, the Prime Minister is not going to stand down.

So the choice will be straightforward: a debt-burdened, mildly redistributive Labour government, protecting basic public services while belatedly pursuing an equality-aspiring agenda; or a Tory party that opposes equality legislation, seeks deeper spending cuts, and is against fiscal stimuli to increase demand in our damaged economy. Ministers and Labour MPs know that there is now no alternative but to support the beleaguered Prime Minister and fight to win on an unashamedly social-democratic platform. They had their chance to remove him during the summer of 2008 but failed to act. Now, they must live with the consequences of that inaction.

Given that Barack Obama won over the far more conservative US electorate with his open call to “share the wealth”, there is no longer any excuse for Labour to shy away from appealing to Britain’s progressive majority. The days of the party stifling its own instincts by constant “triangulation” – in effect, appeasing its opponents – must be over for good.

It is fashionable to say, “It’s time for a change,” but the Tories cannot, unchallenged, be allowed to represent themselves as that change. The new top rate, the Equalities Bill, and even “national service” in the voluntary sector, if it were ever to come to pass, are social-democratic measures that give substance to the values of responsibility and fairness. Yet Brown continues to struggle to be heard amid the ridiculing of his YouTube videos and near-blanket criticism. This is partly his fault. Initiatives are announced apparently in isolation, as Brown focuses on the daily firefight of the global financial crisis.

Contrary to the conventional wisdom, Brown can still win the next election. But he can only do so by providing a bold and consistent outline of how Labour will renew while in government. The Labour Party must proudly be, and be seen to be, the change the country evidently wants. Otherwise, it will have plenty of time to reposition in the wilderness.