Iron Grip, Moral Purpose

By Milne, Kirsty | New Statesman (1996), February 27, 1998 | Go to article overview
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Iron Grip, Moral Purpose

Milne, Kirsty, New Statesman (1996)

Labour's final and biggest election pledge was to break with tax and spend. That defensive posture may be evolving into a subtler approach

There are parties you want to remember, and parties you want to forget. For Tony Blair and Gordon Brown, a strong candidate for oblivion might be the party Peter Mandelson gave in the summer of 1992, after Labour's fourth successive election defeat. In his book Asking Around, the playwright David Hare offers an excruciating vignette. The political guests, looking ill at ease, arrived in mufti. Blair wore "tight black jeans and a cowboy shirt", Brown "a conspicuously casual suit". The atmosphere was "sticky, formal, subdued. People were standing in uncomfortable knots, not able to to get past the first cocktail stage." Nobody could think of much to say.

Cocktails and the British economy might not seem to have much in common. But when it comes to Labour's fifth and final pledge, it is worth bearing that appalling afternoon in mind. The conviction that the party's "tax and spend" image had helped lose the election - and the determination to slough it off completely - was etched acid-deep in the psyches of Labour's younger modernisers. For Blair and Brown, it became one of the animating principles of the next five years.

Their caution came to a climax when, in January 1997, Brown donned a voluntary straitjacket, promising that a Labour government would not raise income tax during its first term and, moreover, would stick to Tory spending plans for two years. He got the reaction he wanted. "Gordon Brown's speech was as significant an act of exorcism as we have witnessed in the postwar history of British politics," said the Daily Mail. "Impressively, the shadow chancellor set about laying to rest the gibbering ghosts of tax and spend that have bedevilled his party's prospects for a generation."

What finally appeared on the pledge-card was vague. Labour promised to "set tough rules for government spending and borrowing; ensure low inflation; strengthen the economy so that interest rates are as low as possible". The campaign posters were starker. They read simply: "Income tax rates will not rise." Blair signed a poster in front of television cameras to ram the point home.

Psychologically and politically, it is easy to see why Blair and Brown wanted to lock themselves into a fiscal cage for five years. What seems odd to the layman is that not all economists are applauding.

"It was a very foolish pledge to make," says Martin Weale, director of the National Institute for Social and Economic Research."It reduces their room for manoeuvre."

"It's an unfortunate and inadequate pledge - much what you'd expect from a Conservative government," says Jonathan Michie, professor of management at Birkbeck College, London. The government's promises, he observes, could simply be read as three out of the four Maastricht criteria for entering Economic and Monetary Union - the fourth being membership of the Exchange Rate Mechanism. Other political aims, such as reducing inequality and creating jobs "weren't put on the card", he points out.

Weale was one of the "wise men" who advised the chancellor under the previous government ("Gordon Brown sacked us"). By his own admission, the way the economy is being run now is "not terribly different" from the way it was being run under Kenneth Clarke.

But by surrendering the right to raise taxes, he argues, Brown has lost a crucial weapon in the fight to control inflation. Instead the Chancellor has to rely on high interest rates, which tend to keep the pound high. A high pound hurts exports and makes life bleak for what's left of Britain's manufacturing industry.

Which brings us to the hidden part of the pledge. Before the election, Blair and Brown had privately agreed that a Labour government would hand over control of monetary policy to the Bank of England. The announcement was made less than a week after polling day.

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