The premature announcement of the death of New Labour – tackling the recession or tinkering?

According to some of the right wing press, Gordon Brown has abandoned New Labour. Some trade union leaders agree, roaring their approval. Derek Simpson reckons that “Gordon Brown has thrown off the shackles of New Labour to reveal the real Labour”. Dave Prentis welcomed the Government’s “courage and determination in facing the economic crisis head on”. He wants the government to “hold firm to its commitment for increased public sector investment to create and sustain jobs”. For Tony Woodley the government has “shown that it is listening to people’s fears and is helping the people of this country weather the economic storm”. It has also shown itself “willing to embrace progressive politics”. Whilst these comments are made with one eye on the next General Election union officials are seeing what they want to see. In a situation where their members are faced with a growing wave of redundancies they should be raising their voices for action to save and create jobs rather than painting these changes as the abandonment of the politics of New Labour. Judged by the criteria of how the government is tackling the economic crisis, the pre-budget report fails the test of our members’ interests.


What has the government done? Facing an unprecedented crisis it has manoeuvred. It has been forced to do things which contradict its neo-liberal ideology. It has, after a fashion, nationalised Northern Rock and Bradford and Bingley and taken a 58% share in Royal Bank of Scotland. It has abandoned the out-sourcing of the pensioners card from the Post Office. It has been forced to put a stop to redundancies in the Department of Work and Pensions because, as a result of increased redundancies throughout the economy, there are insufficient staff to cope.

The government is in fact caught in a web of contradictions, yet it has not broken with the ideological framework on which it has operated for the last 11 years. It does not even have the “courage” to concede free prescription charges to people in England in line with Wales and (being phased in) in Scotland and Northern Ireland. Union members in the public sector will suffer the consequences of the crisis as the government presses for savings of £5 billion in 2010-11.

The minor and temporary decrease in VAT is directed at increasing consumer spending on which much of the “success” of the past decade has been based. But it is such a marginal increase that it is unlikely to have much impact. In any case, since the current crisis is the result of unprecedented high levels of debt, it is lunacy to expect people to carry on spending what they cannot afford. It would have been far more sensible to have put money into the pockets of the low paid by significantly raising personal allowances. For instance, raising the start of tax from the current £6,035 to £15,000 would have taken 10 million people out of tax and only cost £8 billion a year.

The “real Labour” which the delusional Derek Simpson sees is continuing to privatise services and is still acting in the interests of the rich. Its market in the NHS remains in place, with self-standing Trusts competing with each other and private companies for patients. Darling’s report says the Treasury’s “public value programme” has identified £100 million that should be saved by “improving” use of NHS “estates” in order to “reduce the use of new hospital space”.

It also paves the way for the entire Primary Care Trust estates to be transferred to public-private partnerships, to be known as PropCos. Assets that are managed in contracts such as these will belong to the private ‘partners’ at the end of the contract period. The Department of Health has been told that these entities do not have to appear on NHS balance sheets. Isn’t this off-balance sheet accountancy? The Health Service Journal estimates that the NHS share of the £5 billion cuts will be between £1.3 – 2.5 billion.

Darling is also looking at the privatisation of the Met Office, Ordnance Survey, the Forestry Commission, the Driver and Vehicle Licensing Agency and the UK Hydrographic Office.

The incredibly timid measure of raising the top rate of taxation from 40 to 45% has been delayed until 2011, and it will only affect those earning £150,000, the top 1% of earners. The government could not bring itself to accede to the demand of trades unions for a 50% rate of tax on those earning over £100,000 even though this would only effect 650,000 out of 31 million tax payers. This delayed and timid increase may be “symbolic” and marks a breach with their long held policy but it hardly marks a significant shift towards a progressive tax system. The means test remains in place for all benefits and the low paid people who lost out as a result of the end of the 10% tax rate have still not been fully compensated.

Any “progressive politics” would have to centre on the question of jobs. The VAT cut will not create jobs. Much consumer spending is based on buying imports since the government has watched the decline of manufacturing and welcomed the growth of financial services. If the government had really abandoned the New Labour programme it would have spent the £12.5 billion from the VAT cut on a programme of Council House building which would address housing need and put people in the building industry back to work as well as those in the building supplies industry. This industry comprises 11% of businesses in the country. Yet such a step would mean a genuine abandonment of New Labour’s discrimination against Council tenants. It would mean ending their effective ban on Council house building.

Although not given prominence in the media we see that the government seems to want to return to business as usual. They are seeking EU approval for a scheme that would provide guarantees for mortgage-back securities “to help banks lend more”. There is also a commitment to consider helping to securitise new mortgages, an attempt to “tempt lenders to lend more”, and get the wholesale financial markets working again. Staggering. It is these derivatives, the “toxic loans”, that have been a central reason for the freezing of inter-bank lending. Yet the government appears to want to build up these markets again!

Another thing which has not been picked up by most newspapers relates to buying extra years towards the state pensions. Darling has announced a 50% increase in the cost of buying an additional year’s contribution from £421 to £627 in April.

Suffice it to say that the declarations of the death of New Labour are premature. The government is fighting for its political survival (and the power and well paid jobs of its members). It is incapable of self-criticism which would lead to the abandonment of its political philosophy, rooted in its belief in the benefits of competition, globalisation, its support for financial capital, its abandonment of collectivism and its worship of (personal) “aspiration”.

The trade union leaders quoted above have picked up the wrong message from the pre-budget report. They should have seen the changes which have been forced on the government by the crisis as an opportunity not to praise the government but to step up pressure on it and demand that the breaches in neo-liberal policy are deepened. At the Defend Council Housing conference recently, Jack Dromey, Deputy-General Secretary of Unite said:

Britain must build its way out of recession with the government investing in a new deal for council housing. Tens of thousands of new council homes every year would help meet the demand for affordable housing and generate much needed work for construction workers and those who produce the bricks, glass and cement that go into building homes.”

This would be a good starting point, together with moving away from a regressive taxation system. At the same time the unions need to defend their members’ jobs rather than accepting the dictates of ‘the market’. As I have discussed elsewhere (https://martinwicks.wordpress.com/2008/08/05/sixty-years-on/ ) the current situation demands a campaign for social ownership. Moreover, the current crisis surely poses the need for the unions to consider what sort of economy we want and how we might move towards it. I’ll consider this is a forthcoming article.

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