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27 November 2008

No time for mourning

New Labour has not died. The coalition that won three general elections was always based on pragmati

By Steve Richards

The obituaries of new Labour are being written. After Alistair Darling’s pre-Budget report, newspaper editorials and columns are concluding that the end has come. Leading Conservatives dance around the corpse. As they jig they claim the fiscal rectitude that was once the life force of the dead body. They have carried out a prudence transplant and suddenly feel healthier again. In contrast, quite a few Labour MPs and some nervy ministers are in a kind of mourning for lost certainties. And they are fearful, wondering how they will win next time, concerned that this was the week in which the election was lost, as new Labour became old.

But mourners and cheerers alike are seeing a corpse rather than a new manifestation of the same political phenomenon. In doing so they misunderstand the calculations that shaped the defensive, fragile and yet sometimes far-sighted new Labour project of more than ten years ago, as well as the frightening economic context in which some of the original architects now make their moves, desperately implementing measures that are more expedient than they seem. Contrary to mythology, for good and for bad, new Labour is alive and more or less kicking.

That is partly because new Labour was too ill-defined as a political entity to live and die so neatly. As far as a definition is possible, new Labour was about doing what needed to be done in order to win elections, taking decisions that had the potential to be broadly popular, acting in ways that genuinely sought to help the disadvantaged and also in ways that put the Conservatives on the defensive. All those factors were still in play as the death knell was wrongly sounded. In an unrecognisably different era, new Labour produced a different set of policies.

In 1997, the political imperative for new Labour was to display prudence. It wanted to reassure virtually everyone. Now reckless expediency is the only immediate option. That does not mean Gordon Brown has lost interest in a big tent of support. Suddenly it is pragmatic to be bold. In order to hold out the chance of returning to the golden era in which prudence swept all before it, imprudence is necessary now. Brown, Darling and others have not taken these actions lightly. They were around during the 1992 election when Labour lost because of its so-called tax bombshell, as James Macintyre reminds us on page 13. They have been tormented by that defeat ever since. Yet still they made their decisions on “tax and spend” in recent days and they did so partly with the next election in mind.

The Blair/Brown decision in 1997 to freeze income-tax rates and stick to the Conservatives’ spending plans was not made out of a principled conviction that this was unambiguously the right thing to do. Indeed, Brown contemplated a new top rate for high earners then. He was talked out of it by Tony Blair, who argued that Labour needed to purge its reputation as a party that taxed recklessly. Later Brown conceded that Blair had made the correct call, but it was a tactical decision aimed at winning an election and the trust of voters who had turned away. New Labour ended up becoming trapped by the commitment because it became such a potent symbol, yet no effective political force could be defined solely by a rigid commitment not to put up income tax.

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Some Blairite MPs tell me that Blair would never have given the go-ahead for some of Darling’s proposed tax rises. But Blair was not prime minister in the middle of this epoch-changing crisis. Even in the golden era of the late 1990s, he sought to have it both ways, sometimes telling Brown that he must provide big increases in public spending for schools and hospitals, at the same time arguing that the Treasury must not put up taxes. It is easy to be against tax rises until the bills start to arrive or public services start to creak. After the next election the bills will be huge.

Virtually the same group of people who took the economic decisions of 1997 is taking them now. Brown, his old ally Ed Balls, Peter Mandelson and a few others who were prominent behind the scenes that year made their contributions to the November pre-Budget report, delivered on Monday by a chancellor who acquired a deserved reputation for calm caution in his previous ministerial posts. Have they all gone bonkers in their desire to bury the vote-winning project that they helped to create?

Doing nothing was not an option. Brown and Darling therefore took the least risky road in announcing their fiscal stimulus. Polls suggested that tax rises on high earners would be popular after the banking crisis and City bonus scandals. So, in effect, Brown still searches for popular tax increases, as he did in 1997 with his one-off tariff on the privatised utilities.

Brown’s objectives this time were not mark edly different from his longer-term aims in 1997. Helping the least advantaged was always the purpose behind his prudence. This, much more overtly, was also the aim of Darling’s package of 24 November. But, in characteristic new Labour style, the benefits will be spread more widely: the wealthy will also save a few pounds from the temporary cut in VAT.

Another early new Labour objective was to prove that its sums added up. This was one of the pivotal calculations again as the Chancellor played his cards. One of the most intense strategic discussions between Brown, Darling and others in recent weeks was over the need to make clear how the tax giveaway would be paid for. There would be no pretence that it was a gift without costs. This was partly a tactical decision, after all the attacks on Brown’s past conjuring tricks in his Budgets.

Until the pre-Budget report Brown had not acknowledged openly that taxes would have to rise after the election. He was starting to sound wily and unconvincing in his evasiveness. Now, nervously, fearful of where the narrative will go next, he has leapt over the barrier marked “Tax”.

He leaps with the positioning of the Conser vative Party in mind. New Labour was always obsessed with the Tories, even when it was 30 points ahead in the polls. It is still obsessed now. In heated discussions at No 10 over recent weeks, David Cameron and George Osborne loomed large. They should not be especially flattered. William Hague and Iain Duncan Smith dominated much new Labour thinking even when they were tormented, struggling leaders.

The Conservatives will almost certainly have to put up taxes if they win the next election, and will not sound credible unless they acknowledge this in advance of any campaign. Instead of hiding behind euphemisms, Brown and Darling have been candid, and this a long way off from the election. From now on, they will persistently put the question to the Conservatives: What would you do?

It will not be easy for Cameron and Osborne to answer. The Conservatives lost the past two elections above all on the issue of credibility. They were vulnerable to the allegation that their sums did not add up, the fatal allegation made against Labour in the 1980s. New Labour has contrived an awkward set of policy decisions for Cameron and Osborne, who lead a party still hungry for big tax cuts.

There is one other significant echo of the early days of new Labour. In 1997 Brown and Blair were hugely influenced by Bill Clinton’s successful presidential campaigns. Clinton had fought his two elections committed to sticking with the relatively low rates of taxation in the US. New Labour followed suit here.

In contrast to Clinton, Barack Obama puts the case for higher taxes on the well-off. The running debate in this year’s presidential election about the taxes of Joe the Plumber could not have happened here – at least not until Darling’s announcement. Obama dared to argue that Joe should pay a bit more and that he would become one of the beneficiaries when services improved. Soon the president-elect will announce a much bigger fiscal stimulus than the one unveiled by Darling.

Some of Brown’s closest allies tell me that the impact of Obama’s election on the British government’s calculations and confidence cannot be underestimated. New Labour follows Obama as it once paid homage to Clinton.

To do so is quite a challenge, and puts new pressure on Brown to develop his prime ministerial voice. As I wrote in the New Statesman last month, he is most at ease when publicly playing the apolitical father of the nation, a managerial figure who is taking “the long-term decisions”. But Brown will have to come out fighting for this package and not just sound like a concerned bank manager. For obvious reasons he cannot match the appeal of Obama, the charismatic and brilliant outsider who challenged the incumbent party. Yet he must aspire to Obama’s knack of projecting progressive policies in a way that has broad appeal. That is the only way he can be the “change” in British politics.

Some who worked with Brown after the fiasco of last year’s non-election tell me he became more neurotic than ever about criticism in the newspapers and sought to dilute his message to the point where it would not offend a single leader writer or columnist in the land. He was then attacked by the same newspapers for being an empty vessel. This was the worst of all worlds. There is some worry within the government that he will panic at the negative reaction in the press to the pre-Budget report and return to being an empty vessel. That would be the end.

But Brown’s public voice is the easy bit of the equation. The much bigger challenge is the scale of the economic crisis. It is by no means certain that the cut in VAT will encourage people to start spending again. I am told that there were particularly rumbustious exchanges between No 10 and the Treasury over whether such a cut was the best way of using the money. Senior government sources say that the reduction was the only move that could be made quickly and simply. But when potential shoppers read about the tax rises to come they might not feel in the mood to have a ball in advance: the equivalent of being invited to a dance on the eve of war.

We are in a deep, multilayered crisis that demands revolutionary responses from governing parties, responses that take them far away from the orthodoxies of the 1980s and 1990s. New Lab our leaps with governments around the world. It has not died this past week. Whether this latest version will win the next election is another matter. Expect many more leaps before it is called.

Steve Richards is chief political columnist of the Independent and a contributing editor of the New Statesman

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