The lingering death of New Labour

Yesterday in seven badly chosen words Mr Darling announced the death of New Labour. To many of us it has been a slow and lingering death for some time, but Mr Darling put a stake through its heart.

New Labour was a spin story devised by Mr Blair and Mr Brown in the 1990s to make Labour electable. It said that New Labour would offer economic efficiency allied to social justice. At face value it was a good offer, attractive to many Conservatives. Who doesn’t want economic growth and prosperity, and who doesn’t want that to be used to help the less well off? it sought to banish memories of Labour’s previous economic mismanagements. Every previous Labour period of government had been short, including too much public spending and public borrowing, a balance of payments and a sterling crisis, a devaluation and cuts or slow growth in living standards.

The Conservative Opposition under David Cameron has been doing a good job showing that the social justice side of the offer has not been delivered. New Labour, like Old Labour, thought social justice could be created by taking more money off the richer half of the country to give to people living on benefit. It didn’t work in the 60s or 70s, so there was no reason why it should work in the noughties. Mr Brown thought that the problem in the past had been a shortage of money to do it on a big enough scale, so he simply threw even more money at it. The result was even more people living permanently on benefit. He thought that if he paid benefit to people in work as well as out of work it might tempt more into work, but underestimated how much had to be done to educate, train and motivate the 5 million plus still living on benefit as a way of life. Many people now know that the government has not delivered social justice. The left will urge Mr Brown to do more of the same – spend more money on those on benefits. He will do some of that and it will have the same result as before. He now does it when the puboic accounts are in a dreadful mess. He runs the risk of a government financing crisis to go with the sterling devaluation he has already triggered.The Blairites and modernisers will tell him to look at the detailed work of Iain Duncan Smith and others on how to mend a broken society. He will lift some of their soundbites and back a few pioneer projects, but not on a scale likely to have any impact.

Now Mr Darling has demolished the more important half of the New Labour offer, the promise of economic stability and efficiency. Labour won 3 elections on a few soundbites. Readers of this site will know what I have thought throughout of the spin that Labour made the Bank of England independent and that guaranteed economic stability. Any lingering doubts people had about my analysis must have been cast aside by the convulsions in markets since last August. The bigger soundbite from the point of view of popular impact was the often repeated mantra “There will be no more boom and bust”.

“No more boom and bust” was the most effective of all the New Labour songs. It was audacious and all encompassing. It was audacious because it reminded people of the mistakes of the Tory years in 1992-3 when the Exchange Rate Mechanism fell apart, the only Tory economic policy Labour had ever supported and had urged on the then government! Any sensible critic would accept that had Labour been in office then they would have inflicted exactly the same misery on the British public. As one of the few MP critics of the ERM throughout, it was a lonely business when the main Opposition party would not help us expose and fight against it. It was effective, because people wanted assurances that interest rates and house prices would be stable, or not go down.

The soundbite worked brilliantly in 1997, as part of the reason for change. What change did people most want? “No more boom and bust”. It worked well again in 2001. After all, leaving aside the disgraceful tax raid on the pension funds and the sale of the gold holdings, most of the period 1997-2001 was characterised by prudent management of public finances and produced a reasonable economic performance. That added some credibility to the slogan. Labour still allowed boom and bust in manufacturing, but that was disguised by the strength of services in general and London’s service sector in particular which helped the national figures considerably.

By 2005 it should have been apparent to more commentators that we were back in boom and bust, but because we were enjoying the boom part of the policy too many people were still prepared to ignore the obvious signs. I highlighted the excess and waste in public spending, the build up of far too much public borrowing, and the change in inflation targets to keep interest rates lower than desirable. I also highlighted wrong headed mortgage regulation and the Basel I banking regulations, which became an important part of the disaster.

Mr Darling has told us it cannot work again. Even if his new forecast is too pessimistic, as many private sector commentators imply by their forecasts, we all now know that we have lurched from too much borrowing, too much price inflation, too much house price inflation, to too little growth and to a Credit Crunch. In Mr Darling’s words we have lurched from pretty good economic conditions to the “worst in 60 years”.

Perhaps he did this with the full knowledge of the Prime Minister, with both men thinking that lowering expectations drastically was the best way to create a new start and to get an audience for whatever actions they will take next. Polls must tell them people did not believe the old spin line about how well placed the UK economy was to weather the US sub prime crisis, as if people would not see the other crisis made here in the UK.If he did, the PM is now offside, and others are at work to undermine the Chancellor in favour of Mr Balls. Perhaps he did it to cut loose from a Prime Minister on the slide, telling us that he the Chancellor recognises that his inheritance from his boss was not all it was cracked up to be at the time.

Either way, it transforms British politics. It now allows us a more honest debate about what went wrong and what needs to be done to put it right, if only the media will start to listen to those voices that have dissented throughout from the nonsensical spin that has prevented proper economic analysis. It will anyway confirm the public view that New Labour is dead – it has delivered neither economic efficiency nor social justice- whatever the media now do.

We do need both social justice and economic efficiency. To achieve them we first need a government which can get a grip on public spending and borrowing, and reform our monetary and banking arrangements, so they will deliver prudence and low inflationary growth in the future. That was what we tried to set out in the Economic Policy Review last autumn, published just before the Rock crisis, written in the expectation that the monetary mismanagement we were witnessing would end in tears.

The idea that the treasury should guarantee and underwrite £40 billion of housing values is absurd. Have they learnt nothing from nationalising Northern Rock? The more they spend on such ventures, the more they waste, and the more confidence drains away. IT IS TIME TO STOP DREAMING UP NEW SPENDING PLANS, TIME TO GET A GRIP ON THE STATE BUDGET.There are limits to how much the state can borrow. They are well into the danger zone already.


  1. michael, islington
    August 31, 2008

    Are you really prepared to let the unseen hand have its way with the housing market?

    So 2m to 3m unemployed, and God knows what other catastrophes multiplying through the economy for yonks in some sort of Great Depression Classic with a big fat tail.

    Public spending has been wreckless. Agreed. There will have to be an adjustment. Also agreed.

    We are where we are though. No Conservative government, and I suspect not even one where you were the chancellor, would dare to resort to the Anglo-Saxon measures which you advocate for obvious reasons.

    That handy get-out phrase "It's all the other lots fault" would in this instance have some traction but your political evisceration would be almost certain.

    If the Fed can step in and nationalise Bear Stearns, at a cost to the US taxpayer of $29bn worth of toxic mortage securities, you bet any UK government, incuding I strongly suspect a Conservative one, is going to be forced to do something similar facing a similar situation.

  2. Acorn
    August 31, 2008

    "Cometh the time, cometh the man"; and his name is Redwood.

    If this current Labour government was your beloved pet, you would take it to a Veterinarian to have it put down. This would be an act of kindness; an act understandable at any level of society, even in a high benefit labour constituency. It will be hard for the family to give up the [social security] "benefits" and [tax] "credits" that the pedigree socialist pet supplied, both real an imagined.

    Unfortunately, we cannot get an appointment with the Vet till about May 2010, so our beloved pet will have to suffer in pain till then; assuming it does not die a painful lingering death prior to that time.

    The trouble is there are about 5.8 million public sector pets; and, another 5 million non working pets. Oh, and numerous other pets that visit about 45% of our households when someone whistles for them at the local DWP office.

    The big question is; do these households with pets now outnumber the households that have no pets; can't afford pets; because somehow they seem to be paying for someone else's pets!

    Some bedtime reading for Redwoodians:-

  3. Obnoxio The Clown
    September 1, 2008

    I realise no ranking politician can say this, not even you, John but: we don't NEED "social justice". It's a disgusting concept dressed up in noble-sounding words that ultimately reduces the victims thereof to a pseudo-existence no more fulfilling or meaningful than the human batteries in The Matrix. People WANT social justice because they're lazy or because it provides an excuse for governments and other parastatals to spend everyone else's money, but the reality of it is that it reduces people to shallow, pointless existence, rather than life.

    We spend more on "social justice" than taxpayers contribute: is this not a sign that it's gotten out of control?

    1. mikestallard
      September 1, 2008

      You are right.
      What is even worse is that if the Authorities spend all your money and their time rewarding the "vulnerable", then you get more and more "vulnerable" at the expense of "the Tory middle classes".
      It really pays to be "vulnerable" today from the excellent parking services, the free car and transport, the free housing, the free pocket money, the free education and NHS. Old people get the lot – free (so long as they can't afford it).
      The government even gives you a (free) Christmas present of £150!

      1. Matthew Reynolds
        September 1, 2008

        There is no real social justice for someone with a student loan still to repay who still lives at home and whose wages are pretty poor while having to put into a pension fund . Having incomes of £12,000 p/a taxed is just not on – not all of us low earners can get credits after all….

        The lower paid need to be encouraged into self improvement – not dependency . Ronald Reagan was right – lower taxes help to cut poverty rates via more social mobility . Complex egalitarian redistribution just hits the middle classes while trapping the poor in poverty – Labour's tax credit fiasco proves that beyond dispute .

        The Tory response must be that as tax loopholes are closed and as cuts in the kind of public sector waste that John Redwood often highlights take effect tax credits can be phased out and all tax payers can keep the first £14,000 p/a free from income tax .

        This would turn the Conservatives into a mass-movement radical one nation Party pledging to cut taxes for everyone in a way that favours the lower paid while giving the coping classes some help.

        Labour's £2.7 billion £120 rebate is rather like the 2p off income tax that Jim Callaghan granted under pressure in 1978 – a timid , grudging gesture that with any luck the Conservatives when in office will do on a bigger scale . Just as Thatcher & Major cut basic rate income tax by 10p to 23p – let us hope that Cameron will raise the basic personal allowance far higher than £6,035.

        Lady Thatcher was right to say that the facts of life often turn out to be Tory . Government is too big and those who can least afford it are paying too much tax – the economy would respond very well to fewer QUANGO's and a bigger basic personal allowance as would the voters !

  4. James
    September 1, 2008

    Welcome a bored Flight eleven2ten on HMG's Air Farce One with Capt.Brown and co-pilot Darling. Unfortunately due to circumstances entirely within our control this flight is doomed.Contrary to crew member Straw's assertions, we are in fact experiencing turbulence INSIDE this craft. Take off with newly self-promoted Capt Brown was initially achieved through a euphoria of high press expectation with a fresh hand at the helm. Unfortunately, partially due to much tale spinning and running on empty, we are in an irreversible nosedive. Despite, mutinous rumblings from the hand picked crew and sound advice to jetison the excess baggage of Quangos, ID Cards and Plastic Policemen, which we acknowlege may have given us the necessary lift to avoid obsticles in our path, we are about to impact on the mountains of Debt. Very few are expected to survive unscathed but there are those out there who will come to the rescue and pick up the pieces, albeit conservatively.
    A Political Pilot Announcement by the Labouring Party.
    (correct spelling)

  5. Johnny Norfolk
    September 1, 2008

    I think John Redwood is correct. It is very basic. Do you want a government that controls your life or should you be in control of your own life. The question is where do you draw the line. I think a government should only do the minimum possible so as to allow people to develope. Government should only provide a safety net, not a cushion.
    What is now happening is that Labour is removing more and more personal resposibility and more and more are dependant on state handouts than ever before.
    If we continue on this present course the country will be broke before the next election, as we ended up last time Labour were in power.
    So many people need to get real. They are just far to soft and it is taking this country to ruin.

  6. Eddie Allen
    September 1, 2008

    "We do need both social justice and economic efficiency. To achieve them we first need a government which can get a grip on public spending and borrowing, and reform our monetary and banking arrangements".

    Although I share these views I think there are a number of factors to prevent sufficient reform. Surely to tackle it unilaterally would be difficult unless we managed multinational agreement to reform Maastricht and Basel ?
    After all, our agreements with those are surely the monetarist system employed by all Europe and America.
    Is tackling it alone the way to do it because that would leave us at the mercy of economic coersion wouldn't it ?

    Do you sense a mind for European reform Mr Redwood because whilst that would indeed be beneficial to us I think they'd not be overly happy across the Atlantic if the UK gained control of its own economy again ?

    Are you advocating social economics Mr Redwood?

    Reply: I have set out in several books why and how we need to get power back to govern ourselves. I am advocating the kind of economics set out on this blog.

  7. GeoffH
    September 1, 2008

    "If the Fed can step in and nationalise Bear Stearns"

    Bear Stearns was NOT nationalised. JP Morgan took them over.

  8. Matthew Reynolds
    September 1, 2008

    I favour trebling the 10p tax compensation by giving basic rate payers aged under 65 an extra £120 refund in December 2008 and a further £120 in January 2009 . This will give retail spending a lift over the Festive period – a mini retail sales boomlet fuelled via people getting extra cash . This would be a one off as would a one off Child Benefit Christmas Bonus of £300 and the over 60’s Winter Fuel Payments being doubled . This would apply from December & October respectively with a view to helping both the poor and Middle Classes at a time of economic woe . The lower paid are more likely to spend extra cash and so this £10 billion shot in the arm could help ease the impact of any recession .

    I would also say that drastic public spending cuts in 2009-10 are needed to reduce the PSBR by at least £10 billion or £15 billion via an all out attack on government procurement costs , Whitehall consultants , QUANGO’s , the New Deal & civil service recruitment not to mention changes to public sector pensions . This would get the PSBR back down again and should public spending growth in real terms be restricted to just 1% in real terms untill the budget was balanced then interest rates & inflation might fall thus paving the way for an economic recovery . Looking at giving the Bank of England its debt management powers back could boost liquidity while regulatory changes to boost the UK’s capacities in relation to water , transport and energy could boost employment now and provide an infrastructure on which an economic recovery can be built to last . Mortgage & construction industry red tape needs an overhaul to tackle scams and cut costs so we can get the housing market moving . Moving back to the old inflation target of RPI-x would boost confidence as it is more reliable and setting it at 2% would make a recovery last by stopping the price spiral .

    Paying private firms to get the jobless into work and merging JSA & IB to discourage economic inactivity might help secure long term cuts in unemployment as might changes to Council Tax Benefit and Housing Benefit so that they casue the working poor less of a poverty trap while discouraging long term unemployment . Paying private frims to get the jobless into work can be funded by cutting the employment training schemes that largely do not work .

    Thanks to coporate tax breaks being ended and greater control of public spending rates of corporation tax could be cut untill a 15% flat rate was in place . Taxing the working poor so that they are trapped in poverty via meanstested credits costs a lot of money to administer while the poor suffer so no credits and a basic personal allowance of £12,000 p/a ( for all taxpayers so the pensioners tax allowances do not over complicate the tax system ) might well boost social mobility and encourage hardwork .

    There are both short term measures to help those suffering the most and longer term policies that could if introduced pave the way for economic recovery . Axing CGT , taxing gains as income for the first two years and leaving them tax free after then while axing stamp duty on shares would if funded by speeded up asset sales in 2009-10 help the Square Mile when the UK needs a stronger stockmarket the most . 2009 will be tough alright and fostering enterprise might not a bad move . Any long term revenue loss from this policy could be offset by tighter restraint of public spending in 2010 as thses tax changes would be permenant – but the asset sales used to fund them in 2009-10 would be just temporary .

    There is much that government can do to tackle these problems so that the recession is kept to a minimum while a recovery can be speeded up .

    1. mikestallard
      September 1, 2008

      This is just pie in the sky.
      This lot are completely broke and in debt, perhaps to the tune of at least £1,300,000,000,000.
      The believe in controlling your life for you because they KNOW and you are either working class (in which case you are stupid) or else a Tory (in which case you are wicked).
      They aren't gong to change any more than you are! And they believe their own lies, too.

      1. Matthew Reynolds
        September 1, 2008

        Labour is in terminal decline because they are not putting into place the policy agenda that I suggest which would give the economy a short term boost while getting the fundamentals in place for a lasting economic upswing . These ideas will never be enacted by Labour which is a shame because Gordon Brown ought to rectify the mess that he has helped to create….

    2. Bazman
      September 1, 2008

      Matthew Reynolds. You are a gift!

  9. DiscoveredJoys
    September 1, 2008

    I worry about the idea of 'social justice'. It's a great idea in principle, but there are many people who will interpret 'social justice' as a personal entitlement to the best of everything. This is simply not possible for two reasons, firstly there will never be enough money/resources, and secondly those forced to surrender their money will perceive this as their own personal 'social injustice'.

    Far better, surely, to campaign against general 'social injustice', such that there will be no post-code lottery over health or education or bin emptying (unless you choose to move to purely local taxation and electoral control of local services).

    True social justice must comprise of no unfair penalties for the poor or the beter off – but there will be no happy medium where everybody wins small prizes…

  10. no one
    September 1, 2008

    social justice for me is a chance for the kids born on the worst council/housing association estates to have a chance of a decent education, a half decent school, with decent teachers, and a fair crack of the whip chance of going to uni or where ever their ambitions lie, this was briefly and partially possible in some parts of the country in my childhood, its now hardly possible

    social justice for me is that someone who has worked every day of their adult life, paying handsomly to the tax pit, should get world class medical attention in their 60s and 70s etc, if the deal was 3rd world health provision then they shouldnt have been taxed so heavily all their lifes and they would have been able to save to fund it themselves

    i agree with most of what you say john, but you need to be clear that social justice is not state benefits for wastelands of unemployed who can never escape cos the schools are so crap, rather it is a fighting chance of success for all

  11. mikestallard
    September 1, 2008

    What worries me more than anything is the back bench Labour MPs .
    They are, I believe, just people who got caught up in the successful machine. This means that they have little to offer anyone else. We are not talking of Ken Clarke (Imperial Tobacco), William Hague (Wilberforce and Pitt) or your backbench self (see appended list of books). These people, like the ex MP for Peterborough, are not, actually, that employable.
    They face a lifetime on the rock'n'roll, sometimes without their life partner.
    I suspect that some of the front bench realise that they haven't got the TV personality of Michael Portillo, either, when the crunch hits them.
    They, therefore, are incapable of leaving the Titanic until the waters enter the saloon where they are still quaffing their champagne and caviar until the end.

  12. no one
    September 1, 2008


    yes but so many backbench MPs fall from the same socio-economic groups, teachers, local govt workers, researchers, lawyers, all groups where it is perfectly possible to return after a 5 year break

    one of the problems with politics is that for anyone in a fast paced high tech industry (for instance) a 5 year sabatical in parliament would permanently cripple their career, and therefore we miss a balanced cross section of the indistries that create the nations wealth in the commons

    far too many labour MPs will return to schools, and return to Quangos, and return to local govt employment, many more of them should be facing a life on the dole

    1. mikestallard
      September 2, 2008

      Schools? Very unpleasant at the moment – unless, of course, you take leave of absence with permanent "stress".
      As for all the bureaucracy, I think that it will probably be "Tory" rewards in a few months' time. And all those New Labour Jobs like "Social Policy Coordinator, £64,000p.a." will probably be Tory too.
      I think there is a big threat of the dole, myself.
      Even Ken Livingstone says (Any Answers Radio 4) that he is finding it hard to get a job that he wants to do.

  13. Bazman
    September 1, 2008

    'Social Justice' Could be argued is when your car is stolen by an intelligent 'Twocer'. 'Ringing' (Goggle it) your BWW or better. A boy who has invested all his intelligence, and against all the odds and is now making a good living from car crime with his highly developed skills and contacts.

  14. Bazman
    September 1, 2008

    Anyone who believes the Conservative party represent social justice is a fool. John Redwood maybe, as he his a smart guy, but the rest believe that "There is no justice only us." The divine right to rule no less. 'Tim Nice But Dim' is horribly true in my experience.
    Sorry John, but has to be said. Britain would be third world if the Conservatives had been in power. Labour are now on a dive though for sure.

    Reply: Not so – and the leadership today is especially keen on tackling divided Britain

  15. Chuck Unsworth
    September 1, 2008

    It's disturbing that Darling only now says that he thinks it imperative that politicians should be forthright and straightforward. What on earth has he been doing for his entire political career? Lying and dissimulating, it appears.

    The past decade's constant attention to presentation rather than content has undoubtedly been the worst aspect of the Nu Lab regime. It has brought about a total cynicism in the minds of the electorate. That is the legacy of New Labour – an enslaved, impoverished, dejected, cynical and disbelieving nation.

    What is needed now is realism, confidence, honour, competence and decency. New Labour has demonstrated at length that it simply cannot offer any of these. Time for it to be ejected from office, never to return.

  16. Socrates
    September 2, 2008

    I wonder if Darling's words weren't quite as inept as they have been portrayed.

    1. One of the biggest threats to the economy is militant union action driving up wages. The TUC conference is near. Whilst the brothers (and sisters) themselves are unlikely to pay any heed whatsoever to common sense, it's just possible that their members may well see reason and be reluctant to follow lemming-like action making the chances of them losing their jobs more likely.

    2. If, by some fluke, the economy drags itself out of this imprudent mess in time for the next election – Darling will no doubt claim that of course it was Labour's virtuoso management that saved us from a new Great Depression!

    On the other hand he might be getting his retalliation, for being sacked, in first by effectively quoting the renowned philosopher Stan Laurel – "This is another fine mess you have got me into".

  17. William B.
    September 2, 2008

    My difficulty with the concept of "social justice" is that it has no definition, it is just a friendly, fluffy, feel-good term designed to win votes by saying "we are on your side". As it has turned out, policies promoted in the name of "social justice" have been among the most expensive and least productive of the last 11 years.

    I favour abandoning the term completely and concentrating on selling workable, balanced and productive policies. Adding an ambiguous/meaningless description to a policy merely muddies the waters by encouraging debate about whether "social justice" is being achieved rather than about whether benefits are paid in the correct amount to the correct people, access to universities is available to all who merit a place and so on.

    Reply: To me social justice means opportunity for all

  18. adam
    September 2, 2008

    Tony Blair was the beginning and the end.

    And the middle.

  19. adam
    September 2, 2008

    Is this the death of Labour, full stop.

    1. mikestallard
      September 2, 2008

      I reckon it could be.
      The old working class has all but disappeared with heavy industry and the Empire. In its place are a lot of disparate immigrants and a huge number of misfits living largely off the public purse. (Jeremy Kyle anyone?)
      The more upwardly mobile members are in the BBC, the vast number of employees of the Government, the Bureaucracy and lobbies. Many are very guilty women who know that they cannot serve their Boss and their families properly. Both men and women, of course, are guilty because they know they are in a non-job and not doing that properly. (sentence left out referring to a named individual)The Lib Dems with their idealism, their greenery, their appeal to women’s rights, their support of the gravy train of Europe, and their delight in sanctimonious pronouncements, can appeal to that guilty constituency far better than the cloth capped unions, whippets and pub culture of the generation that is now passing away even in the North of England.
      So, yes, it could well be the end of Labour.

  20. Eddie Allen
    September 6, 2008

    UKIP leader Nigel Farage says his party must change its message.

    He said the party, which campaigns for Britain's exit from the EU, had to shift its reputation for negativity and relentless "knocking".

    "We have not been offering good positive alternatives and what I want us to do is to paint a vision of a 21st Century relationship between Britain and our European neighbours.''

    In his keynote speech, Mr Farage said: "David Cameron could kill the Lisbon Treaty stone dead.

    "All he has to do is say that there will be a referendum on the treaty after the next election"

    "This would strengthen the arms of the Polish and Czech presidents in their refusals to ratify Lisbon and make any attempt at a second referendum in Ireland impossible."

    "So if Cameron were as Eurosceptic as he claims, he would do this. He could stand up this afternoon and announce a retrospective referendum.

    "So the question has to be, why doesn't he do this? Is he not as Eurosceptic as he claims?"

    UKIP achieved a breakthrough at the most recent European elections, in 2004, when it gained 2.7 million votes, or 16% of the vote, pushing the Liberal Democrats into fourth place.

    "We are the party that says we want to trade with Europe, we want to be friendly with Europe, but we insist that we should make our own laws in this country because the best people to govern Britain are the British people themselves.''

    He also said the British position on enlargement into Ukraine and Georgia was lunacy and fraught with danger for the entire E.U.

    He accepted David Cameron will be the next Prime Minister in saying "Let's not kid ourselves on this – he will be prime minister".


    I think his speech is the most honest in stating its position and I think it gives the most reasonable approach to Europe and for Britain.
    I also think it is the least problematic in terms of foreign policy, our democratic deficiencies, the issue of sovereignty, and would satisfy the general feeling in Britain to be one with Europe but not governed by Europe.

    I'll be voting UKIP in the next Euro Elections in 2009, and I'll be voting UKIP in the General Election unless David Cameron promises a referendum on Europe.

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