After the May Day Flood

Seumas Milne on the new Labour Government

There might be only an inch of difference between Labour and Conservatives, the one-time counter-culture celebrity Richard Neville said long ago, but it is in that space that we live. The opening weeks of the first Labour Government for a generation have been a daily reminder of how far Neville’s aphorism still holds. So tirelessly had Tony Blair strained to ratchet down expectations during the run-up to the election, so assiduously had the Millbank machine tailgated Tory policy, that almost any innovation by the new regime was bound to seem like a political thunderbolt.

As announcements and initiatives have followed one another in hastily choreographed succession, the new Administration has delivered an object lesson in the demonstrative power of government. The last time Labour was elected to office, in spring 1974, refugees from Pinochet’s Chile discovered that the ousting of the Conservatives could make a life-and-death difference to their chances of asylum. New Labour has yet to produce such dramatic instant results, but it hasn’t done badly.

First there was the emblematic flight to Brussels by the little-known new Foreign Office minister, Doug Henderson, to sign up to the European Union’s Social Chapter, followed by the restoration of the Civil Service unions to GCHQ. Then came Robin Cook’s declaration in favour of a landmine ban – achieved by the simple, but effective, technique of failing to inform the Ministry of Defence in advance. Then there was the cancellation of the deportation order against the adopted Nepalese, Jay Khadka, by – of all people – Jack Straw. Within a few days, hospital closures had been suspended, as had the privatisation of High Street post offices. None of it earth-shattering, much of it largely symbolic, but combined with the shifts in government style and culture, the initial effect has been to raise wider hopes that a Blair Government might deliver more than we had been led to believe.

The Queen’s Speech, with its promise of the most far-reaching constitutional change since the First World War, seemed to bear out such impressions. So did the unexpectedly broad, almost Wilsonian, spread of appointments. Part of that reflected the material Blair was bequeathed by Shadow Cabinet elections – and party rules requiring him to use it. Although the Labour leader has not shown himself to be squeamish about dispensing with such footling restrictions, left-of-centre figures such as Cook, John Prescott, Margaret Beckett and Chris Smith have been allowed to surround themselves with like-minded ministers. The man who has replaced the Blairite factotum Stephen Byers, for example, in charge of minimum wage and trade-union rights, is Ian McCartney – a Prescott protégé who declared not long ago that if he was ever cut in half, the letters TU would be found written all the way through him, as in a stick of Brighton rock.

Could all this add up to a vindication for those who thought that Tony Blair would become the first Labour leader in the Party’s history to move to the left once in power? Did Blair not promise in the last week of the election campaign that he would ‘be a lot more radical in government than many people think’ and that no political ground had been ceded ‘that cannot be recovered’? It is a beguiling thought – though Blair’s understanding of radicalism may prove to be only distantly related to the usual interpretation. A more reliable guide to the future is likely to be found in the mantra the new Prime Minister repeated on the threshold of 10 Downing Street on his first day in office: ‘We were elected as New Labour and we will govern as New Labour.’

Two crucial moves during the Government’s first frenetic week will undoubtedly prove more significant in the long run than the initial accumulation of worthwhile, but mostly marginal, gestures. The first was the decision by Gordon Brown to hand responsibility for monetary policy over to unelected officials at the Bank of England – supposedly balanced by the subsequent removal of the Bank’s unhappy role in regulating financial services. This was presumably the kind of thing Tony Blair had in mind when he forecast the end of elections ‘fought on the basis of ideology and politics’. Taking the politics out of economics has long been an ideal for bankers, industrialists and free-market evangelists, such as the Economist. If only a consensus could be established around economic policy, they have argued for years, it could become a technical problem to be left to specialists. Politicians would then be free to argue about issues such as foxhunting, which arouse strong emotions but leave undisturbed ticklish questions of economic and social power.

Brown’s surrender of the Chancellor’s command over the cost of mortgages and other loans will not depoliticise economic policy. But it does send an unmistakable signal that, for Blair’s government, the neo-liberal agenda will be the decisive one. Combined with the adoption of the Tories’ ‘eye-wateringly tight’ spending limits and New Labour’s self-denying ordinance on higher income tax even for the reviled fat cats, the message is clear: for all the talk of long-termism, the City and the financial markets will have the final say. Putting the Threadneedle Street mandarins in charge guarantees that, regardless of Brown’s stated aim of high levels of growth and employment, low inflation will take priority and be pursued as the paramount goal of monetary policy. The contrast with John Smith’s 1993 pledge to use ‘all the instruments of economic policy’ to achieve full employment could not be starker. The decision also points unerringly towards the kind of strong currency policies which have ravaged French and German employment, along with an underlying determination to join a deflationary single European currency at the earliest plausible opportunity.

The second key pointer to the kind of government Tony Blair will lead was the appointment of Frank Field as the minister responsible for welfare reform. The Prime Minister has made it abundantly clear that he wishes to be remembered as the leader who confronted the swelling costs of welfare and reconstructed the benefits and pensions system to fit a brave new world. In private, he has compared his own anticipated role in negotiating and selling the ‘modernisation’ of the welfare state with that of General De Gaulle in the disengagement of French colonialism from Algeria. It would need a Labour prime minister like himself to push through the necessary changes, he explained – the public would never accept such medicine from the Conservatives.

The elevation of Frank Field – a man with a passion for thrift and self-help, who has described welfare as the ‘enemy within’ – confirms that Blair is in earnest. Field used to be known as a maverick, but is now respectfully written up in the mainstream press as a ‘radical’, with many good things to say about Chilean pensions privatisation. He has been given the brief of thinking – and doing – the unthinkable about the Government’s £94 billion social security budget. Once again, the likely strategy seems clear: more sticks than carrots, more means-testing, more Clintonesque workfare schemes and a shift towards a state-regulated private pensions setup – which would incidentally create a profits bonanza for Britain’s rapacious insurance companies.

In principle, Labour recognises that the only way to make inroads into welfare costs is by slashing both the official and real levels of unemployment. But the Government’s plans to use the windfall tax to fund job subsidies for under-25s and the long-term unemployed can hardly be expected to do that. And proposals to pay for a more ambitious public-sector-led jobs programme by raising taxes on profits and high earners are treated as irresponsible Old Labourism. In any case, the Governor of the Bank of England would doubtless use his new powers to choke off such profligacy with higher interest rates.

None of this is very new on an international scale. Welfare cuts, privatisation and financial austerity have become the small change of left-of-centre governments over the past 15 years. From the early Eighties, Western European socialist-led administrations – in France, Spain and Italy, then in Scandinavia – began to bend to the free-market gale blowing throughout the capitalist world. In Australasia, Labour governments, which were elected on traditional corporatist or social-democratic platforms, were quick to adopt the neo-liberal recipe. But these were largely ad hoc accommodations to the prevailing climate of free-market globalisation. In continental Europe, most socialist parties continue to keep one foot in the past, as Tony Blair would see it, cleaving to well-established policies and loyalties.

Blair and his closest allies have leapfrogged over them, dispensing not only with the policies of postwar social democracy – nationalisation, deficit spending, progressive taxation and the rest – but with much of its ideological framework as well. For all Blair’s insistence that he is merely intent on modernising the means to achieve Labour’s traditional ends, he has self-evidently gone much further, banishing social-democratic principles – the pursuit of equality, for example – from the Party’s agenda. Even Gordon Brown, who went out of his way in a pre-election Fabian Society lecture to emphasise his redistributionist credentials, felt unable during the campaign to pledge that the gap between rich and poor would have narrowed after five years of Labour government.

It is this retreat from a defining commitment to social solidarity which has opened up a political divide between the New Labour zealots and both the veterans of the old Croslandite Labour Right and the more fashionable partisans of stakeholding, championed by Will Hutton. Responding to Blair’s insistence that rights be balanced by responsibilities in his latest stake-holding testament, The State to Come,[*] Hutton identifies the tendency for obligations to be urged on the poor (to search for work, to save for a pension) while rights (to enjoy low marginal tax rates, to opt into private education) are defended for the well-off. ‘Labour’s flirtation with a partial implementation of the rights and obligations framework, hitting the poor harder than the advantaged, is dangerous. Moral principles are universal or they are not moral,’ Hutton thunders.

The New Labour disposition of social priorities has already made itself felt in the Government’s deference to boardroom barons. Within three weeks of the Party’s election victory, four prominent businessmen had been appointed or approached to join or advise the Government: Sir David Simon, chairman of BP, to become European competition minister, Martin Taylor, chief executive of Barclays Bank, to lead a Whitehall task force on tax and benefits, Lord Hollick, chairman of United News and Media, to advise on industrial policy, and Peter Jarvis, Whitbread chief executive, who was asked to head the Low Pay Commission, charged with setting the rate for the planned legal minimum wage. In previous Labour administrations, it was trade-union leaders like Ernest Bevin and Frank Cousins who were invited to join the Cabinet. Now the boot is on the other foot and the unions – who dutifully paid for Labour’s election campaign and much else besides – will have to take what they are given and lobby like any other pressure group.

There is no question that the crowning of New Labour represents a historic break. If the 1981 Mitterrand Government can be seen as the last throw of the postwar reformist Left, the Blair Administration is the first explicitly post-social-democratic government in a major Western state. For the New Labour advance guard – Blair, Peter Mandelson and their closest supporters – that means an unconditional embrace of the new rules of the globalised economic game, with its privatised, deregulated, free-fire zones for multinational business, along with the new balance of power that goes with it, both at home and abroad. For that reason, the Blair Administration has already become an international reference point, taking a process that was well-advanced elsewhere in the world to its logical conclusion. In every Western social-democratic and socialist party there are little Blairs – in Germany Gerhard Schroeder, in Italy Walter Veltroni – hoping to inherit the mantle of electoral success and take part in the new politics of the post-social democratic era.

Yet for all Blair’s success, his presidential power and the scores of Parliamentary clones supposedly washed up in the May Day flood, his project remains a fragile one and the true believers around him are few. He never commanded a genuine political majority in either the Shadow Cabinet or among Labour MPs – let alone the constituency parties or affiliated trade unions – during the last Parliament. The same now goes for his own Government. He and his close circle have maintained complete control of the Party thanks to audacious leadership and ruthless machine politics and by having a clear sense of political direction – in marked contrast to their opponents, who collectively are unable to offer a coherent alternative to Blairism. That mastery may, however, become more difficult to sustain in government.

For a start, the intense personal rivalries between the four most powerful Labour politicians after Blair – Brown, Mandelson, Cook and Prescott, and particularly between the first two – risk eventually running out of control, underpinned as they are now by Whitehall fiefdoms and entrenched client groups of ministers and MPs. Blair’s lack of committed supporters at the highest level has some parallels with Thatcher’s position during her first years in power, when the Government was packed with patrician Tories who had no time for monetarism. She did for them one by one and Blair will presumably follow suit, replacing some of the less pliable Cabinet members with the political soulmates he has just appointed to second-rank government positions.

Blair has other problems which Thatcher did not have, however. His very success in drawing together such a broad electoral coalition masks both its shallowness and the lack of a committed social base with an overriding interest in the Goverment’s success, such as Thatcher constructed. Of course, New Labour has a definite political profile and a set of tightly-framed manifesto commitments. But whether its leaders will be able to devise a longer-term, more fundamental programme of reform beyond the existing minimalist social and economic package is unclear. Holding down inflation and cutting back the welfare state are hardly the kinds of policy likely to seize the imaginations of either existing or potential Labour supporters.

Even within the tax-and-spend straitjacket Labour has strapped itself into, there is still enormous scope for government action on behalf of the Party’s core constituency. The key manifesto pledges – on the minimum wage, employment rights, windfall tax, jobs and training, class sizes and the NHS internal market – could become the springboard for a successful reforming Government. But that would need a determination to use the fiscal leeway that remains to invest in jobs and better public services. Some Cabinet and other senior ministers would want to do that, but whether the Prime Minister would countenance such an apostasy seems doubtful. The alternative, however, is to risk the demoralisation of Labour voters and a receding prospect of the coveted second term.

By common consent, Labour’s May Day landslide represented a visceral popular rejection of Toryism and a vote for thoroughgoing change. Although there is no doubt that Blair reached parts of the electorate that other Labour leaders failed to reach, the public determination to get rid of the Major Government dates back well before John Smith’s death, to the sterling and pit closures crises of autumn 1992. Reflecting a widespread view, the Financial Times’s lugubrious free-marketeering guru Samuel Brittan advised his bruised followers after the election to count themselves lucky to have Tony Blair, as Labour would have certainly have won on a far more ambitious and traditional manifesto. The British public ‘remains hopelessly collectivist’, he grumbled, citing a string of opinion poll majorities for all manner of ‘off-message’ propositions. They included overwhelming support for redistribution of income and wealth, tax-funded increases in public spending on health and education and the view that ‘big business benefits owners at the expense of workers.’

His point is even clearer if opinion poll data are tracked over time. One of the striking political paradoxes of the past decade is that as Labour has moved to the right, the electorate has been heading in the opposite direction. Even allowing for the superficiality of polling methods and the sometimes contradictory nature of public opinion, the trend is undeniable. And so is the risk of an emerging crisis of political and social representation – with the kind of ugly consequences seen in other European countries – unless the new Government moves to meet the expectations that have arisen despite Tony Blair’s best endeavours.

Part of New Labour’s answer to hopes of more radical change is its programme of constitutional reform: devolution for Scotland and Wales, an authority and executive mayor for London, the incorporation of the European Convention on Human Rights into British law, referenda by the bucketful, and the promise of a Freedom of Information Act and the abolition of hereditary peers’ voting rights. There is an echo here of the Australian and New Zealand Labour Governments of the past decade, much admired by Blair, which kept some potential critics on-side by championing ‘cultural’ radicalism – women’s and gay rights, environmentalism, the defence of Aborigines, anti-nuclear policies – as they drove through a convulsive Thatcherite restructuring of their economies. But whether purely constitutional reforms can play a similar role is another question.

Blair’s ‘Party into Power’ proposals, rushed through Labour’s Executive in the run-up to the election and currently expected to be passed on a honeymoon vote at this autumn’s Conference, are designed to minimise the risk of public conflict between Party and Government. They would certainly prevent either the Conference or executive again becoming forums of dissent, while further squeezing trade-union influence in Labour’s increasingly centralised organisation. With a commission set to consider state funding of political parties, Labour’s formal union links cannot be long for this world, at least in their current form. And despite the size of Labour’s majority and Blair’s reported scepticism towards proportional representation, the logic of his position still points towards electoral reform and the eventual creation of some sort of centrist governing bloc which he could dominate for many years to come.

[*] Vintage, 125 pp., £4.99, 7 April, 0 09 977881 5.