What today’s politicians can learn from the Gang of Four

The effects of the Limehouse Declaration, which led to the creation of the Social Democratic Party, are still being felt.

The seed for the emergence of the Social Democratic Party was planted on 12 December 1978. The prime minister, Jim Callaghan, was discussing nuclear strategy with Denis Healey, Fred Mulley and me in the cabinet room. Suddenly Michael Foot and John Silkin, the chief whip, burst in to announce that the Tribune Group of left-wing Labour MPs had just decided to vote that evening against economic sanctions on the Ford Motor Company after it agreed a 17 per cent pay increase with the Transport and General Workers Union. We discussed whether we should make the debate a vote of confidence and how, if we lost, the general election would have to take place in January.

Foot was implacably against making it a vote of confidence; Healey was for (he was later joined in this stance by Roy Hattersley, who would have had to announce it at the start of the debate). In the event, Callaghan sidestepped a confrontation, even though he knew he would have had my support and almost certainly Mulley's, too. We lost the vote that night by 285 to 283. The government immediately tabled a motion of confidence, which was debated the next day, and we survived with a majority of ten. Yet sanctions were like a finger in the dyke - once they were removed, the whole edifice of trade-union-supported pay restraint collapsed. We were into the "Winter of Discontent" and doomed to lose the election whenever it was called.

Over the next two years the power structures inside the Labour Party changed. Foot and the trade union leaders were in the ascendant. Callaghan unwisely delayed resigning immediately after losing the May 1979 election, undermining Healey's chances of leading the party. By the time of the special party conference at Wembley on 24 January 1981, with Foot now party leader, Tony Benn had succeeded in committing the Labour Party to fighting the next general election on four ruinous policies: withdrawal from the European Community, without even the referendum that Labour had given the country in 1975; unilateral nuclear disarmament, previously adopted by the Labour conference in 1960, but reversed in 1961; a return to the wholesale nationalisation and state interference in the economy enshrined in Clause Four of Labour's constitution; and changes aimed at substantially reducing the power of the parliamentary party by introducing an electoral college for electing Labour's leader, while specifically rejecting one member, one vote.

Meeting at my house in Limehouse, east London, the next day, Shirley Williams, Roy Jenkins, Bill Rodgers and I were in no doubt that these policies would not be changed before the next election. And we knew that many Labour supporters would find it impossible to campaign on a manifesto that contained them. Naturally, politics involves give and take, and it was not unreasonable for those on the left to try to shift the balance of power in the party closer to their views in the aftermath of electoral defeat. But this was no minor shift. It was designed as a fundamental challenge to Labour as a party of responsible government - to the party of Attlee, Bevin, Gaitskell, Bevan, Wilson and Callaghan.

In the Limehouse Declaration, we spelled out an alternative, what we called a "realignment of British politics". It was, for me - and, I think, for the others - a deeply emotional occasion. I owed much to the Labour Party. Without it I would never have served in government.

[W]e do not believe in the politics of an inert centre, merely representing the lowest common denominator between two extremes. We want more, not less, radical change in our society, but with greater stability of direction. Our economy needs a healthy public sector and healthy private sector, without frequent frontier changes. We want to eliminate poverty and promote greater equality without stifling enterprise or imposing bureaucracy from the centre. We need the innovating strength of a competitive economy with a fair distribution of rewards. We favour competitive public enterprise, co-operative ventures and profit-sharing. There must be more decentralisation of decision-making in industry and government, together with an effective and practical system of democracy at work.

It is hard to recall exactly what we hoped for. I never thought the SDP would govern alone in its own right or that we would be able to batter our way through to power quickly. But I did hope that we would be part of a coalition government within my working lifetime and that I might have the opportunity of being in charge of a department again. I knew I could never expect to be prime minister, because in leaving the Labour Party I had given up whatever slight chance I may have had of becoming its leader. But over the past 30 years I have felt at various times that the creation of the SDP had unleashed forces far more powerful and potentially important than anything I had ever seen stemming directly from the Labour Party - or indeed any of the major political parties - all of which I think we have at some stage influenced, and for the better.

Realignment effect

No fair-minded person reading the Limehouse Declaration today can doubt that the SDP's message still has resonance, even after 13 years of Labour government and eight months of a Conservative-Liberal Democrat coalition. The SDP believed that multiparty politics was coming to the UK, whether the politicians liked it or not, and that working across parties and being ready to form coalitions would become the norm, reinforced by having a fair proportional voting system. Such a combination was then, and still is, commonplace in the countries that now form the European Union.

Not for nothing did the SDP champion the case for Scottish and Welsh devolution in a way that Labour had never done. A joint SDP-Liberal Party commission chose proportional representation through the single transferable vote, and rejected the Alternative Vote (AV), for electing the Westminster parliament. We also supported comprehensive reform of the trade unions throughout the 1980s.

Most of these core SDP attitudes were eventually adopted by Labour during its 18 long years in opposition. It should be said, however, that Labour was forced back into sanity not by the SDP alone, but also by the MPs who stayed to fight from within, such as Healey, Hattersley, John Smith and - in his 1985 confrontation with Militant - Neil Kinnock. After 1994, Tony Blair and Gordon Brown created what they called "New Labour", a name originally considered for our nascent party. Labour's adoption of SDP policies continued, and many more SDP members started to return to Labour, or else joined it for the first time.

By 1987, many SDP members had built cross- party friendships, as well as policies, with the Liberals. Nevertheless, the party did its own cause a great disservice by agreeing to a merger that would deprive members elected as SDP MPs and councillors of the right to continue as such. The proposed merger that it involved rested on the belief that the Conservative-Labour duopoly could only be challenged by a single third party, with the implication that the alliance had been a failure. Yet in Wales and Scotland four parties already existed, and following devolution in the late 1990s, cross-party arrangements and coalitions became the norm in their parliaments. We would, I believe, have had a hung parliament in 1992 if the alliance had remained in existence.

By 2009, I was convinced this would be the likely outcome of a 2010 election and helped create Charter 2010 to educate the public about hung parliaments. The coalition made possible by the electoral arithmetic last May will come under considerable strain in 2011, particularly in Scotland, and Ed Miliband must be ready by 2012 for a possible rupturing of it.

According to Anthony Seldon's recent book Brown at 10, the then prime minister offered the Liberal Democrats a referendum on voting reform with three options, one of which was full proportional representation. It would be refreshing if Miliband, who has already said he supports AV, backed an amendment in the House of Lords providing for a third option of proportional representation in the forthcoming referendum. He is realistic enough to accept that many Labour members will still support first-past-the-post, but he should not line Labour up alongside the Conservatives and Liberal Democrats in trying to fix the referendum so as to exclude the option of proportional representation.

Fixes between political parties are part of politics, but referendums are different. By and large, politicians choose to call them for two reasons only: if the constitutional issues involved are are major and if there are deep divisions within their own party. But once the referendum mechanism is chosen, for whatever reason, there is a democratic obligation to let the voters choose between all the available options.

Market manoeuvres

It is encouraging that Miliband has started to win back for Labour a position of principle on civil liberty issues that was virtually destroyed by Blair. Shortening detention without charge, coming out against ID cards and refusing to identify with Blair's attitude to the very Freedom of Information legislation that Labour introduced, Miliband has struck a very different tone. It would have been ludicrous for Labour to have allowed itself to be outflanked in these areas by the coalition. It also needs to identify more with public concern at ever greater European integration and stop flirting with membership of the eurozone.

Furthermore, the Liberal Democrats' self-inflicted wound of not sticking to their own coalition agreement, which allowed them to abstain on the withdrawal of 80 per cent central government financial support for higher education and the trebling of student tuition fees, is an opportunity for Labour. It is right to examine a student graduate tax as the medium-term best option. It was championed by the SDP in the late 1980s and remains the fairest and best way for UK students in English universities to pay back their individual fees to society for the public good of a higher education without incurring huge levels of debt.

There are many other SDP policies that Labour should be re-examining, along with scrapping its electoral college and using a one member, one vote system for electing the party leader. One pressing matter is the coalition's surprising endorsement of proposals by the Health Secretary, Andrew Lansley, for an external market in the NHS - a potentially huge change. I write as the person who advocated within the SDP, and won reluctant acceptance in the alliance, for an internal market in the Health Service.

It was essential that people working in the NHS who were making decisions involving millions of pounds became more aware of the financial implications of what they were doing. However, the internal market is not the same as an external market. It was never en­visaged that decisions should be taken solely on competitive and financial grounds, without regard for the obligation to provide the best possible medical care. Ironically, the SDP's internal market was attacked by Margaret Thatcher before and during the 1987 general election campaign. Yet one of its logical implications, GP fund-holding, was wisely introduced by John Major's government. And in most cases it proved to be highly satisfying for the GPs involved and beneficial for their patients.

There is growing anxiety within the coalition that Lansley's reforms will prompt the public to hold the government responsible for anything and everything that goes wrong in the NHS. No wonder David Cameron is worried. And no wonder Liberal Democrats, deeply committed to the NHS and historically sceptical even of an internal market, are beginning to question what they are being asked to support. If the Liberal Democrats cannot call a halt to or, at the very least, slow down, these ill-conceived health reforms they will no longer be able to claim to be the heirs of Beveridge.

Thirty years ago the SDP reversed the conventional political axiom "stick to your party, damn your principles". If anyone wants to go on pretending in 2011 that the creation of the SDP has not had a profound effect on British politics, they are free to do so, but they must be living on a different planet.

David Owen was one of the founders of the Social Democratic Party. He sits in the House of Lords as a crossbencher.

Lord Owen was Foreign Secretary 1977-79, a founder-member of the SDP and is now a crossbench peer.

This article first appeared in the 24 January 2011 issue of the New Statesman, State of Emergency