Essay: Five Years Labour
Robert Skidelsky
Prospect | Wednesday, May 01, 2002

Everyone expected Labour to win in 1997, though not by such a large margin. An identically big victory in 2001, pointing to three or even four consecutive terms of office, suggests that a watershed has occurred in British politics, with Labour poised to take command of the 21st century as the Conservatives did of the 20th. But after five years in power, New Labour remains an elusive political force.
It is true but trite to say that Labour has benefited from a feeble opposition; true, because under Hague the Conservatives were deeply unpopular and under Iain Duncan Smith have remained marginal; trite, because Labour has presented the opposition with few large targets or made the mistakes which normally bring governments to grief. The feebleness of the opposition thus partly reflects Labour's new-found confidence and competence. A huge contributor to the latter has been the Blair-Brown axis-the most grown-up duopoly in post-war British politics.
It is also true to say that Labour has enjoyed large slices of luck. It was lucky to lose in 1992, and to inherit a sound economy in 1997. But at least it did not blow its inheritance, as its predecessors would probably have done. The death of John Smith let in the modernising team of Blair and Brown. Conservative quarrels over Europe dented the Tory reputation for solidity, the ERM debacle for economic competence.
The biggest stroke of luck, however, was changes in the facts-in particular the collapse of the Soviet Union and the advance of globalisation-which enabled New Labour to discard the most electorally crippling aspects of Old Labour: public ownership, "tax and spend" and the promotion of trade union privilege. Soviet collapse also removed the right's most potent message: that the left was weak on communism and so on national defence. Without communism, the left was free to rediscover patriotism.
As New Labour, the Labour party has finally come of age. No longer can the charge be made that it is "unfit to govern." In fact, it is much fitter to govern than its main rival. For almost the first time in its history, Labour seems more in tune with the instincts of the British people than do the Conservatives. These instincts have not become more socialist, though they have become more "social"-one of the unexpected consequences of spreading affluence. Labour strategists were also quicker than the Conservatives to understand the new post-ideological politics in which the media and public opinion have replaced political parties as the central players and control of the message is the key to power.
Tony Blair leads Britain's first truly representative government. In it are mirrored the strengths and weaknesses, hopes and fears, of modern Britain. Its very mediocrity of language and ambition reflects the land it governs-a second-class country with a great past, a comfortable present, and modest prospects.
The new labour project was an attempt to answer three questions. What did Labour need to do to get itself elected? What style of politics is needed to succeed in a consumerist, media-dominated world? What does it mean today to be on the left? Intellectuals debate the last question and democrats worry about the implications of the second. But Labour politicians were mainly concerned with the first. New Labour is a vehicle to capture and maintain power. The motives of those who developed it cannot be grasped without understanding the frustrations of 18 years' exile in the political wilderness.
Labour's problem of unelectability long predated the coming of Margaret Thatcher. Between 1918 and 1979, it had a working majority in the Commons (that is, ten seats or more over all other parties) for just nine years, compared with 41 for the Conservatives. The people's party, it seemed, stood for things which too few of the people wanted. In the early 1980s, as Labour swung to the left while Britain moved to the right, its electoral hurdle threatened to become insurmountable. And after a dismal fourth successive defeat in 1992, Blair wrote that winning required not a "shift in tactics... but a project of renewal."
Initially this meant not so much developing a new philosophy as scrapping those bits of the old philosophy not already abandoned by Neil Kinnock or John Smith. One symbol of the past had remained undisturbed since the party's 1918 constitution was drawn up, namely Clause IV: the commitment to the "common ownership" of the economy. For the first part of the 20th century, the public ownership ideology helped to block the formation of what would have been the most attractive alternative to the right-a Labour-Liberal party, on the lines of the Democratic party in the US. The result was political supremacy of the Conservative party.
In the second half of the 20th century, Labour leaders came to regard Clause IV as a piece of ritual. In the 1950s Tony Crosland argued that socialism was not about public ownership but about equality-not just equality of opportunity, but a reduction in inequality of outcome. Harold Wilson and Richard Crossman, the modernisers of the 1960s, also relegated public ownership. Socialism, they said, was about planning. National planning of the economy would address the supply-side issues which were impeding growth. Neither of these updates proved successful in wooing the voters or generating good government. Crosland's social democracy presupposed rising taxes and large scale redistribution. But voters hated the higher taxes they were called on to pay. Planning failed to boost growth in the 1960s and led to the industrial ungovernability of the 1970s. Labour's "ethical reach," as Barbara Castle said, "was beyond the mental grasp of the average person." The average person rewarded it with a niggardly share of power.
Blair understood the power of symbols. The Clause IV shadow that had continued to fall over Labour's commitment to and competence to manage the market economy was lifted. Brown followed this by jettisoning egalitarianism in favour of the less quantifiable promise to create opportunities and "access" for all. The party could now speak more honestly to the mass middle class.
The politics of the 1980s and 1990s was a struggle for the allegiance of the upwardly mobile. Thatcher won the first round with her curbs on trade unions, her championing of small business, her council house sales, her asset-distributing privatisations, and her patriotism. But by the end of her rule the Tories had come unstuck. Economic mismanagement produced a sharp fall in the value of newly acquired assets and a glut of bankruptcies. Thatcher never understood that the people who supported her against socialism, trade unions and high taxes wanted good public services too. If Labour could offer Thatcherism, plus competent economic management, plus the social entitlements which Thatcherism threatened, it had a potentially winning formula.
At first it seemed that the Liberal-Social Democrat Alliance, born in 1981, would win the race to become the non-socialist centre-left challenger to the Tories. David Owen's social market, with its rhetoric of competitiveness and compassion, first-class markets and first-class public services, was a fairly precise pre-figurement of New Labour. Only the electoral system and working class loyalty saved Labour from annihilation in 1983. With Kinnock replacing Foot as leader, the Alliance falling apart, and Thatcher losing her way, Labour began the recovery which led to 1997.
The style of political parties reflects the societies in which they exist. Labour's final repudiation of socialism and the class basis of politics was made possible by the decline of the organised working class. As the social structure evolved from a pyramid to a lightbulb shape, an increasingly large majority came to regard themselves as part of the middling curve, usually with correspondingly centrist political preferences.
In the political arena, the dissolution of classes and interests as the building blocks of political support has eroded the mass political party and the old forms of representative democracy. By the end of the 20th century, politicians faced a much flatter political landscape, in which continuous activism was confined to single-issue lobbies, political parties existed mainly to get out the voters at election times and provide platforms for their leaders, and those leaders advertised their wares in a political marketplace of disconnected consumers. Declining political participation coincided with the rise of a hyper-democratic ethos, distrustful of all power and elites. Party leaders responded to this by relegating party activists as conduits of opinion and policy while elevating mass opinion sampling. Polls and focus groups have not, as cynics suggest, replaced political leadership but opinion sampling became more important in shaping the way the policies were made and sold.
When in the mid-1980s Peter Mandelson formed the Shadow Communications Agency, he began the revolution in Labour's marketing strategy which was a condition of success under the new political realities. Subsequent changes, like the introduction of "one member, one vote" as the main principle of party decision-making, completed the emancipation of Labour leaders from party institutions and opened the door to a more populist political culture. Labour learnt the hard way that policies had to be popular, "bomb-proof" and projected in a disciplined, relentless manner. Relatively open debate was replaced with an attempt to marshal and manipulate opinion-so-called "spin"-first in the party and then in the country. This alienated much liberal opinion but by 1997 Labour had raced ahead of the Tories in forging a style of politics suited to a disarticulated society. A small pointer to the reversal is that by the late 1990s, Maurice Saatchi, Thatcher's advertising guru, was producing precise but unsaleable tax-reduction policies, while Blair dominated the media with vague but attractive soundbites.
Finally, what did being on the left now mean? Many activists and intellectuals have been angered, or at least bewildered, by New Labour's extinguishing of the last remnants of the old religion-the electorally damaging but emotionally satisfying rhetoric of socialist transformation. Political success has been some compensation but not enough for many, as the slump in party membership suggests. And the Blairite attempt to create a replacement centrist ideology has not been a success. Piecemeal social reform in a market economy may be popular but it is not inspiring. The third way, the brilliantly imprecise phrase taken over by Anthony Giddens from the New Democrats, was for a time a rallying point for international attempts to give the centre-left a new coherence. But it has had little resonance in Britain.
The suggestion that the third way offered an escape from "equal and opposite errors" is misleading, since, as Giddens recognises, "communism has completely foundered in the west and socialism more generally has been dissolved." So the menu of choice was in fact confined to a limited variety of capitalist forms. A decisive moment in the evolution of Labour's third way was its rejection of Will Hutton's Germanic stakeholder capitalism, underpinned by Keynesian demand-management. Blair and Brown accepted that they had to play with the grain of Britain's relatively open and flexible markets. The path followed has been closer to a liberal American ideal-a free market, with a generous welfare state-than a corporatist European one where the market is more controlled and heavier obligations fall upon companies. This choice may yet prove a serious obstacle to much further European integration. But in the mid-1990s, it had become apparent that the deregulation of the Thatcher governments had reduced the "natural rate" of unemployment-the rate needed to keep inflation stable. The promise of full employment and stable prices was too tempting for a prospective Labour government to ignore.
New Labour is Thatcher's stepchild, just as the New Democrats were a product of Reagan. Both were designed for societies which had experienced-and seemingly profited from-a heavy dose of neo-liberalism. Thatcherism was a theory of macro-management based on stable prices and sound finance; a theory of micro-policy based on market deregulation and improved incentives for enterprise; and a theory of social policy based on individual responsibility and a wide distribution of private assets. New Labour emerged as an amalgam of taking Thatcherism more seriously than the Thatch-erites did and building onto it a social dimension.
Gordon Brown has no time for third way rhetoric but he has tried hardest to think through this merger of neo-liberalism with what remains of social democracy. Brown understood that a flourishing market economy required what Keynes called a stable standard of value, and that politicised monetary and fiscal policy in Britain had led to cycles of "boom and bust," as well as undermining the predictable contracts which a "virtuous" market economy needs. His first decisions as chancellor were to give the Bank of England an inflation target and control over interest rates, to bind himself to explicit fiscal rules and to adopt his Tory predecessor's spending plans for two years. This signalled pre-commitment to financial stability, in full conformity with neo-liberal rigour, but not Conservative practice. Equally, Brown accepted the Thatcher doctrine that competition is the best spur to innovation and efficiency, simply adding to Tory labour market deregulation an "active" supply side policy to improve "employability."
What about the social dimension of New Labour? The debate here has been between social liberals (led by Blair) and social democrats (led by Brown) with the former arguing that the old egalitarian goals are neither achievable nor desirable and the latter arguing that they remain relevant and achievable, albeit in heavily diluted form. Social liberals like Giddens suggest that the double-edged consequences of modernity-in which liberation from settled habits and customary ties is conjoined to social breakdown-requires a new social contract based on the notion of "the rights and duties of citizenship." Social liberals also believe that poverty is now a residual problem, requiring targeted programmes, not redistribution for its own sake. In their view, the third way is about social inclusion, not equality. The state should not be seen as a top-down provider of welfare, but an "enabler" of communal action. Globalisation, too, needs to be given a social dimension. Social liberal language has little contact with past socialist and social democratic language, harking back if anywhere to the New Liberalism of the late 19th century. Confusingly, Blair can also use the language of communitarianism, generally despised by social liberals.
The idea that left-wing aims are vetoed by globalisation is rejected by social democrats: there is no evidence, they say, that globalisation produces a "race to the bottom" in taxation and regulation or, more generally, puts the state out of business. For social democrats the real constraint is tax resistance-the unwillingness of voters to pay high taxes for public services, a constraint which they hope might be eased by a more committed social democratic leadership, pursuing "smarter" welfare policies which restore people's faith in the state. Brown's recent tax-raising budget for the NHS shows that the social democrat current remains strong: having spent much of the first term reassuring the markets and the middle class, Brown is now more confidently challenging the shibboleths of the 1980s on tax and public services.
Philosophically, Blair is a Hegelian idealist, for whom the synthesising language of community comes naturally. For him the third way is the higher way, in which the old antagonisms between individualism and collectivism, left and right, capitalism and socialism, state and society are reconciled in more fundamental, because more rational, harmonies. A typical Blair soundbite is: "The individual prospers best within a strong, decent, cohesive society." Third wayism often sounds like a parody of Hegelian reasoning. New Labour, say Peter Mandelson and Roger Liddle, combines "a free market with social justice; individual liberty with wide opportunities for all; One Nation security with efficiency and competitiveness; rights with responsibilities; personal fulfilment with strengthening the family; effective government and decisive political leadership with a new constitutional settlement and a new relationship of trust between politicians and the people; a love of Britain with a recognition that Britain's future has to lie in Europe."
By contrast, Brown is a child of the Scottish Enlightenment. The language of individualism comes more naturally to him than to Blair, but it is an individualism shaped by Adam Smith's "moral sentiments." A typically ponderous Brown sentiment is: "I favour a rich and expansive view of equality of opportunity-with a duty on government to continuously and relentlessly promote opportunity not just for some of the people some of the time but opportunity for all of the people all of the time...What is right on ethical grounds is good for the economy too." Characteristically, Brown feels he needs the support of reputable economic theory. Thus he embraced "post-classical endogenous growth theory" which purports to avoid the famous trade off between efficiency and redistribution. Spending on education and training helps the poorest and the economy at the same time.
In practice the two languages lead to much the same set of prescriptions. The state has a duty to create and sustain efficient market institutions and to invest in human and social capital. But in return individuals must accept an obligation to work.
All of this leaves open the the question of whether the aim of policy should be to improve the absolute position of the poorest (raising the floor) or to narrow the gap between rich and poor. In practice most of the effort and money has been focused on raising the floor, an aim that few Tories would argue with. Even social democrats recognise that technological change has increased income dispersal making it hard to close the rich-poor gap at a time of rising incomes, even when you are doing a fair amount of redistribution to those at the bottom. Blair's pledge to eliminate child poverty by 2020 and to reduce it by one quarter by 2004-5 seems to have been made without grasping that poverty figures measure relative not absolute incomes and that some closing of the gap between top and bottom is thus required.
The other big unresolved arguments in New Labour's domestic agenda concern centralisation versus decentralisation and order versus liberty. On centralisation, the government has won little credit for a constitutional reform programme which has included a fair amount of power dispersal-partly because of the grudging manner in which it was delivered. And although Blair does now say that the "top-down" approach to public services reform will not work, there is justified scepticism about whether it will be replaced. New Labour was always a small, centralised group in the Labour party and it is difficult to abandon what has worked well. In this respect, as David Marquand has pointed out, New Labour's centralising, and sometimes illiberal, instincts have much in common with Old Labour.
On order versus liberty, there are powerful currents on both sides but social conservatives like David Blunkett are likely to win most of the arguments on reforming the criminal justice system. This will further alienate the liberal intelligentsia which has never been very enthusiastically Blairite.
The test of any political language is its ability to enable a party to win power and make effective use of it. The language of inclusion has been electorally more potent than the old language of socialism. But has it enabled the government to produce effective programmes?
The answer is a qualified yes. The most impressive thing about New Labour in action has been its ability to focus on real problems in a flexible manner, without bothering too much about ideological correctness. It has followed the most research-based policies of any government in British history, much of the research being done "in house." Most of its first term policy initiatives were aimed at the excluded: the New Deal for the long-term unemployed; the working families' tax credit for households in need; a minimum wage for those earning poverty wages; new legislation to deal with exploitative employers; and a minimum income guarantee for pensioners.
The use of the language of exclusion rather than equality allowed Labour to target money on those most in need without alienating the better-off. This has meant greater use of means testing than Old Labour would have countenanced. This does not seem to have been resented by the beneficiaries and Brown believes that targeting those in need is popular with better-off taxpayers. But the old problems that means testing throws up such as fraud and disincentives to save have not been resolved, especially in the pensions field which is an unexpected policy disaster. The new phrase being used is progressive universalism-meaning universal benefits that are heavily tilted towards the poor. Experiments are also planned in the subsidising of asset-formation for the poor-"baby bonds" and so on.
Task forces and agencies have sprouted like mushrooms, recalling the chaos and enthusiasm of Roosevelt's early New Deal. Labour's educational policy has also been extraordinarily undogmatic for a party traditionally committed to an intelligence-blind model of comprehensive education. But the improvements in primary school performance have not yet been matched by a similar spurt in secondary schools. The government has perhaps been most New Labour in education and most Old Labour in health.
Any audit of New Labour must ask whether it has made a difference-indeed the explosion of performance targets encourages this attempt at appraisal. However, it is hard to separate the effects of the programmes from the effects of other developments. How much of the success of the New Deal in reducing youth unemployment, for example, is due to the programme or a buoyant economy? There is evidence that the financial framework set up by Brown in 1997 has increased business and market confidence to the point where the gap between British and German long-term interest rates has almost been eliminated. Active supply-side policy takes a long time to show its effects. But it does seem that a combination of full employment and redistribution has helped to reduce poverty. Since 1997, more than half a million children have been raised above the poverty line.
New Labour has not started its second term as well as its first. The government has looked ragged and unusually dogmatic especially on public-private finance. Such partnerships are valid for some things, like urban regeneration. Their utility for public services is less obvious, as the problems at Railtrack and the London Underground have shown. A long look at how to revive the public service ethos would be a better focus for policy than pushing through funding systems designed to raise investment in public services without calling on the taxpayer. If the taxpayer will fund the NHS, why not the rail system too?
When I saw Blair and Brown earlier this year, I asked them both the same question: "Can you have world-class public services at British rates of taxation?" They both gave interestingly agnostic answers. But this is the point at which New Labour flexibility comes up against Old Labour commitments. The tax restraint may have been lifted a little but Brown's last budget is not the breakthrough claimed by some social democrats.
When New Labour began life in the mid-1990s it seemed to be one part of a broader movement of centre-left parties regrouping after two decades of right-wing free market hegemony. New Labour picked up the baton from Clinton and handed it on to reforming social democrats in Europe. Now New Labour looks relatively more successful than most of the others. One explanation is that its modernisation was deeper and more radical than in other places. This may account both for its electoral success and the relative lack of enthusiasm among its own supporters.
Blair and Brown have both proved to be substantial figures with complementary qualities. Under their duopoly Britain's world standing has risen, its economy has been well managed and they have dug in to defend a minimum "left" programme of raising the floor for the poorest, maintaining a public spending level at around 40 per cent of GDP and rallying around the NHS with unprecedented investment. But contrary to Blairite rhetoric this is not a matter of eternal values realised through modern means. Quite the opposite. Values have changed radically-equality is more or less gone, the individual is the measure of all things, the public realm has no special claim. The means, however, particularly the use-sometimes abuse-of state power are depressingly familiar. New Labour does mark a watershed, but so far more in the history of the left than in British politics-1979 remains a bigger date than 1997.