New Labour was not about making hard choices

I have now finished watching Blair & Brown – the New Labour Revolution, a 5-part series from the BBC on the Labour government of 1997 to 2010. For politicos like me it was compulsive viewing, for all its flaws. Does it say anything to us about politics now?

One criticism of the series is that it was too long. Five episodes of one hour each is indeed a lot of time, but I was hooked, as were many of the reviewers. We learnt quite a few new things, and the tension between its two principal characters gives the subject a fascinating dynamic. In fact the main problem seemed to be on how much it left out. There was no coherent commentary from the left of the party, for example, and the causes of the Global Financial Crisis were not examined. This left two critical parts of the New Labour narrative (or myth in the word’s broader sense simplified story) unchallenged – that “Old Labour” was unelectable, and that the GFC was something that happened from out of the blue from the USA that the government neither contributed to, nor could do much about. Both warrant challenge, even if emotionally I am bought into the first of those myths, while strongly disagreeing with the second. But neither is a simple question to unpick, and the argument on the GFC is probably asking too much for most political journalists to be able to handle, alas. Instead they took a whole episode to dig into the Iraq War – an editorial decision that it is hard to gainsay. The first episode covered the period before they won power, and there was episode for each of the three terms – so there was a logical structure to the whole series. Quite a bit of time was spent on pregnant pauses within the interviews (which included both main protagonists amongst many other important figures), but the overall pace was not slow.

I am struck by how deeply flawed the partnership was. The two leaders worked as a team before the 1997 election, but after that Gordon Brown jealously guarded the Treasury as his fiefdom and kept Tony Blair at arms length. I have no doubt that it was Mr Brown who was primarily at fault here. One of the most remarkable moments came when it dawned on Mr Blair that the government had to dramatically raise its spending on the NHS, to bring it into line with the average of health spending in Europe. This was a brilliant insight (which I have explained recently on one of my blogs) that very few people in the governing elite seem to understand – instead seeing the NHS as a spending black hole that needs to be contained somehow. But the only way Mr Blair could persuade Mr Brown to follow this line was by announcing it in a television interview. Mr Brown could not see the wood for the trees. It turned out to be one of New Labour’s best, and most popular, policies.

It would be tempting to characterise the partnership as Mr Blair being strong on vision, and Mr Brown being good on the detail. But Mr Blair was wrong about a lot of vision things too. He was wrong to push for joining the European currency (though at the time I was on Mr Blair’s side) – another disagreement resolved through the news media; he was wrong about joining the Americans in the Iraq war; he was wrong about trying to bring a private sector ethos into the public services, such as the NHS and schools. On all of these Mr Brown’s judgement seems to have been better, though he was and remains very unengaged on Iraq. But Mr Brown became complacent, especially with his hands-off approach to the financial sector. He put in place a tripartite system for managing national finance, between his Treasury, the Bank of England, and the Financial Services Authority (FSA). All well and good, but it was clearly his job to ensure that the system as a whole was working. He did not seem to grasp the seriousness of the situation until the collapse of Lehman in late 2008, by which time he was Prime Minister. His response then was magnificent – but more insight in 2007, when the risks were becoming obvious, would have helped. Instead he cut the rate of Income Tax, which left the country very vulnerable when the bubble burst. He was so blinkered by his success in “no more boom and bust” that he would not see the risks building up in the system.

Though it ended badly, New Labour has to be seen as a success overall, with three successive Labour general election victories, two of them landslides. Can it tell us anything about the future? The obvious parallel takes us back to Labour, which once again is back in the doldrums. The New Labour strategy was to win by courting the political middle ground and holding back on the party’s more left wing instincts; their most important insight was that the middle ground was a rather conservative place, and not the liberalism associated with centrist political parties, though it needed that too. The party needed a firm message on law and order, and a conservative stance on taxes and spending – as well as keeping union power at bay. This meant accepting that a lot of the legacy of Margaret Thatcher’s government had to stay. That itself was not enough, because John Major’s Conservatives were firmly anchored in that middle ground, and had used that strength to pull off a victory against the odds in 1992. Mr Blair and Mr Brown also had to exude confidence and competence. This was not too hard, as the Tories were beset by divisions, and their economic prestige suffered a fatal blow with the ERM fiasco in 1992, shortly after the election.

Can Labour follow the same strategy? Its leader, Sir Keir Starmer, clearly thought so after he took over in 2020, with the government floundering with its response to the covid-19 pandemic, and seemingly led by right-wing ideologues. Mr Starmer always appeared on television with the word “leadership” on his backdrop. But the Conservative leader, Boris Johnson, has a clear eye on that middle ground, which remains generally conservative. But he also understands that the middle ground has moved on – largely thanks to New Labour. Now it means a strong commitment to state-funded public services, such as the NHS. Unlike Mr Major (now Sir John), though, he has an iron grip on his party. He has recovered from his wobbles on the pandemic, and the public (or the floating voters anyway) appear to have forgiven him. Mr Johnson’s rhetoric on climate change and the environment also marks out his fight for the middle ground. He is not presenting anything like the target that Messrs Blair and Brown were able to destroy prior to 1997.

But the problem for Mr Johnson, and anybody hoping to win on the middle ground, is that it is a have-your-cake-and- eat-it sort of place. It wants well-funded public services but no more taxes; it wants action on climate change but no addition to heating or motoring costs, and so on. This is creating growing tensions within the Conservative Party. It does not create much of a direct opportunity for Labour – who are no more able to solve the contradictions of this middle ground than the Tories. But division amongst the Tories could allow Sir Keir to appear as a more competent alternative.

But a successful challenge is unlikely to look anything like New Labour. Perhaps Labour can try its own “cake” strategy by allying itself with the Lib Dems and the Greens, each of which can cement its appeal to different segments of the anti-Conservative market while leaving there contradictions unresolved. That alliance would need to be based on the promise of electoral reform. It would be a risky strategy, and it is too early to start playing the cards now. New Labour did create an informal alliance with the Lib Dems in the 1990s, as part of its strategy of leaving nothing to chance. But the Lib Dems are weaker now, while trust between the parties is low. Mr Blair was happy to hint at electoral reform then but in the end was “unpersuaded”. Something stronger would be needed now.

Britain, along with most of the rest of the world, is confronting some difficult choices. This is much more the case than in 1990s, when the opportunities for economic growth were much better. After an initial period of austerity, New Labour did not have to navigate such treacherous waters and was able to present voters with a “both/and” proposition. Alas hard choices do not make good politics – the revolution now would be to make taking those choices electorally appealing. The New Labour experience offers us no clue on how to pull off such a feat.

4 thoughts on “New Labour was not about making hard choices”

  1. Given all our present economic and social problems, I think it is time to reflect on how much better the performance of New Labour was; this not only in economic fundamentals such as productivity growth but also in social matters such as crime and child poverty. Keir Starmer’s Fabian Society pamphlet published before the Labour Party conference hammered away at this point, to good effect. Interestingly Starmer took up a forthright and New Labour type stance on public ownership; that the right boundary between public and private sector depends on pragmatic considerations not ideological ones. However, Starmer’s problem is that to show anything like Gordon Brown’s concern for the poor would, in present circumstances , be prohibitively expensive. So which political party can inherit the mantle of the middle way? The jury seems to me still out on this one.

    1. Yes I think there was a lot of good in New Labour’s record – especially an improvement in schools and the NHS, and child poverty, as you say. I’m not so sure about productivity as my suspicion is the a lot f it a statistical artefact based on the expansion of the banking sector, which was shown to be fictional by the crash.

  2. “…..but more insight in 2007, when the risks were becoming obvious, would have helped. ”

    Agreed. With the proviso it had to be the right ‘more insight’.

    “Instead he cut the rate of Income Tax, which left the country very vulnerable when the bubble burst….”

    I don’t follow. He was putting more money back into the economy which had a possible inflation risk but at the same time was giving everyone more protection against a burst bubble.

    I would have thought that ‘too little too late’ would be a more appropriate criticism.

    We can make the same point about the reduction in VAT to 15%. That only happened after the event but it would have been better to have done it much earlier.

    The rise in interest rates before the 2008 GFC showed that the Govt/BoE was acknowledging that monetary policy prior to 2007/8 had been too slack. So, perhaps with the benefit of hindsight, doesn’t it follow that fiscal policy was also previously too tight?

    Curiously, after 2009, we ended up with a monetary policy which was far and away looser than the one which had caused the problem in the first place and, after the Tory/Lib Dem Coalition took charge, a fiscal policy which can only be described as ‘recession inducing’.

    “The New Labour experience offers us no clue on how to pull off such a feat.”

    This is true. And would also be true in all those other countries without a ‘New Labour’ Govt. Like the USA. You can float the economy on a ever increasing pool of private sector debt for a time and while it last the figures look superficially good to neoliberally inclined economists. There’s good growth at the same time as the Government is not taking on “too much debt”. That’s because the rest of us were doing it instead! But you can only do it once. When interest rates hit the so-called ‘lower bound’ that’s the end of that particular road.

    In any case, the ‘rest of us’ are fickle creatures. When something goes wrong we panic. Instead of giving the economy a “smooth landing” (remember that phrase?) we panic and end up crashing it instead!

    1. My point about GB’s raising of income tax was that it was the wrong sort of tax, even if you accept that fiscal expansion was the right thing to do at that point. In British politics rates of income tax only go down – that’s been the rule since Thatcher. It was hard to reverse – unlike NI or VAT. At the time the economy was too dependent on capital taxes, which evaporated at the time of the crash, causing panic at the Treasury when the deficit reached over 10% (even if you argue that panic was all it was). Once the bubble burst then fiscal loosening to soften the monetary shock made sense, and doing that through VAT made good sense.
      Monetary policy in 2009 was only loose if you look at the BoE in isolation – the rest of the banking sector was in meltdown.
      We’ve had many an argument over whether HMG’s fiscal stance was too loose or too tight before the GFC. I have stld you the story about my macroeconomics lecturer at the time posing that question. Or more precisely whether the UK growth record reflected advancing productivity or a loose fiscal policy. A balance of payments deficit combined with high real exchange rate pointed to loose fiscal policy, she said. She was using the IS-LM models so despised by your MMT friends of course, but I still find it convincing. Funnily enough that line of reasoning does not suggest that monetary policy was too loose – though the out-of-control finance sector does not point that way. I think her answer to that would have been that our interest rate policy was mainly driven by global conditions and not national ones.

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