Review: New Labour (New Statesman)

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The proposition which New Labour offered the voters in 1997 was essentially a simple one. Labour was very like the Conservative party while not being the Conservative party. With the Conservative party itself tired, split and discredited after far too long in office, this proved to be a platform with overwhelming electoral appeal. It attracted most natural Labour voters and many natural Conservative ones.

In perceptive, if unhelpful, articles written before the election, Ross McKibbin, historian of the Labour Party, explained why this is a strategy for winning power but not for retaining it. He reminded his readers of the hopeless administration of Ramsay MacDonald. Lacking the confidence, ability or parliamentary majority to pursue its own policies, the MacDonald government adopted those of its opponents. In doing so, it alienated many natural Labour voters and attracted few natural Conservative voters. The electorate, recognising that Conservative policies were most reliably pursued by Conservatives, went to the polls in 1931 and returned Conservative candidates in unprecedented numbers.

There is enough validity in the caricature to give New Labour pause for thought. Labour in 1929 needed to demonstrate that it was sufficiently responsible to hold office; in 1997, after 18 years of opposition, it needs to demonstrate the same thing again. And in its successful campaign, as in the unsuccessful McDonald government, Labour eschewed almost all specifics for fear of causing offence. Yet Gordon Brown knows that the City audience which applauds his austerity as it applauded Philip Snowden’s austerity, will still never vote Labour. New Labour will not succeed in office, nor be re-elected, unless it establishes its own identity.

For McKibbin, and for many others, that identity should be the social democratic strand of Old Labour. McKibbin expresses it well; the essence of his vision is that ‘political discourse at a fundamental level should be rational’. Most social and economic ills arise because things have not yet been reorganised in line with the views of Sensible People like Us.

Now this is a seductive vision, particularly, though not exclusively, for Sensible People like Us. We are intelligent, sophisticated, and socially concerned. Our opinions are carefully considered and well argued. And they cover almost every subject. We have views on the design of the tax system, the philosophy of education, the future of technology, the structure of industry. Sensible People like Us are open-minded and tolerant, though we dislike smoking and think people should travel by train. I do not intend any irony; or not much. If we are to be bossed around, it would be best if it were done by Sensible People like Us.

Now some Sensible People like Us have been troubled by the legitimacy of imposing our views on the population at large. Not everyone. From the Webbs on, there have been those for whom the rightness of their views is so self-evident that no issue of legitimacy arises. But in the main, Sensible People Like Us appeal to a democratic mandate to justify the adoption of our views.

And here we confront a problem. Not all our rational opinions are widely shared. For example, many people take the simple-minded view that the best way to tackle crime is to be very unpleasant to criminals. We blame these misconceptions on the tabloid press and wannabe populist politicians like Michael Howard. That is one reason why Sensible People like Us attach such importance to education. Education (a business in which many of Us are engaged) will help to turn the electorate as a whole into Sensible People like Us.

But the reason Sensible People like Us have been out of power for 18 years is that we made such a mess of things. Take two examples of our failure – electricity and education. In the 1960s we built power stations, nuclear and conventional, as though the demand for electricity was insatiable. And we introduced universal comprehensive education in our state schools. Tony Crosland, archetypal Labour revisionist of his era, was implicated in both.

It is easy to understand why these policies appealed to rationalist modernisers. Electricity, and especially nuclear electricity, was a symbol of the future. Comprehensive schools used mass education as an instrument of social change and democratisation. As a youthful adherent of Old Labour, I was thrilled by both. What could be a more potent symbol of the white heat of technology than electricity pylons striding across the countryside? And our modernist desire for equality of opportunity, rather than equality as such, led us to look for it in our schools.

We know now that both our electricity and our education policies were disastrous. We built huge, coal-fired power stations, none of which were completed to time or budget; it did not matter much because we did not need the electricity anyway. Our nuclear power programme, far from being the foundation of a great British export industry, proved to be a bottomless pit for public money which diverted scarce scientific talent to activities of no value. The introduction of comprehensive education impeded needed reforms in the substantive content of education for two decades, while wholly failing to promote the sense of social inclusion which was its prime objective.

Now the lesson of all this is not that Sensible People like Us should try harder to get it right. It is that no one has the capacity to make these sorts of decisions, and no one can be trusted to do so. Uncertainties about future energy technologies and future energy prices are too great for long-term energy strategies to be possible. And anyone who knows what is the best system of education for all children is a dangerous lunatic who should not be allowed near a school.

Today we have reformed investment in electricity by decentralising decision-making into an environment in which investments are small and incremental. The new electricity companies have mostly built small, combined-cycle gas turbine plants to standardised designs which are generally completed at budgeted cost and in less time than it took to hold the public inquiry that was needed before the last plant built by the CEGB could even be started.

Importantly, accountability is now after the event not before it. The Sizewell B inquiry was social democratic rationalism at its best. Every interest group was represented. Every argument was exhaustively explored. We know now that the result was not only wrong, but ludicrously wrong, and Sizewell B should never have been built. Yet no consequences follow for the Sensible People who made that decision: the men behind Britain’s nuclear power programme (they were, of course, men), admirably skilled in defending their proposals and never required to defend the result, retired with life peerages.

Things have changed. Today, anyone can build a power station, but people who make seriously bad decisions are likely to be fired. The incoherence of this structure distresses Sensible People like Us. We see that there is no energy policy. That means there is no strategy for the day we run out of gas. And Sensible People like Us doubt whether electricity supplies can be secure without some Sensible Person making sure that it is so. Sensible People like Us worry about global warming, and fear that the market is insufficiently concerned with energy efficiency.

Perhaps we are right. Or perhaps not. In the course of the twentieth century, we have learnt that Sensible People like Us are often wrong as well as often right, and that the costs of our errors can be very large. It is chastening to reflect that Stalin’s views on the need to organise agricultural production on industrial lines, or Mao’s emphasis on the importance of steel output, were shared by many Western commentators, and that these dictators were able to cause such havoc because they had the power to insist that their absurd wishes be carried out.

The lesson of the failure of planning is that no authority – private or public – is ever likely to get these judgements right. The people who ran General Motors in the 1970s completely failed to understand the evolution of the world automobile industry, as the men in charge of IBM in the 1980s completely failed to understand how the computer industry would change; and if they did less damage than Stalin or Mao it was only because they had less power.

So when markets work better than centralised decision-making by Sensible People like Us, it is not because businessmen are wiser than Civil Servants. Nor is it because of the wondrous motivating effect of large salaries and generous share options. Nor by virtue of any intrinsic superiority of private ownership. It is because performance is achieved by allowing autonomy to manage and conferring freedom to experiment, while combining that with rigorous monitoring and regular, but not continuous, accountability for performance.

And recently, private sector institutions have delivered that more effectively like those of the public sector. Their most conspicuous failures – as in GM or IBM – is where size for long insulated those responsible from real accountability. They followed the public sector in making large bets on single, and often erroneous judgements, and displayed little or no capacity to learn from mistakes. But they did, eventually, get their comeuppance. There is no fundamental reason why this should not happen in public sector institutions, but in the tradition of centralist rationalism it does rarely.

If there is to be a true distinctive identity for New Labour, it is one based on what I believe is the correct characterisation of the social market. Freedom with accountability should be the governing principle of management in both public and private sectors. And accountability is not accountability before the event to some political authority, but after the event to those to whom services are delivered.

Labour’s first bold initiative – granting operational independence to the Bank of England – exemplifies that concept of freedom with accountability. And it is discomforting to Sensible People like Us. Surely Labour was elected to take power, not to give it up. Centralist rationalism prefers the ritual of the Ken and Eddie show, the imposition of a consensus reached among Sensible People like Us, a consensus for which no one is quite responsible and for whose failures no one is to blame. The social market approach prefers to define the scope of the Bank of England’s autonomous authority and must hold it accountable for the results of exercising that authority.

The tension between these two strands of political thinking occurs across many areas of policy. Old style social democracy, in which all lines of decision-making lead back to a legitimate central authority, confronts the new style social market which seeks to confer freedom with accountability on individuals and institutions. Labour’s worst blunder in the election campaign – the contradiction between the offer to decentralise tax-raising authority to a Scottish assembly and the promise that such authority would not be exercised – arises directly from this tension.

But the major battlegrounds will be health and education. The problem in both services is that measures to increase management freedom, to decentralise responsibility, and to assess performance, have been given the label privatisation; something which hardly anyone wishes to see in either sector.

That makes too easy the reassertion of political control. Sensible People like Us again have an opportunity to impose our views; and since many people in health and education feel threatened by the changes introduced in the last decade, or have good reason to dislike the mechanisms and sentiments by which they were introduced, they are ready to welcome the change.

But New Labour is not, or ought not to be, about increasing the authority of the Department of Health and strengthening local government control over schools. New Labour is, or ought to be, about finding a legitimate framework for the increased autonomy, decentralised management responsibility and freedom to experiment which have been the positive side of health and education reforms. Much of the Citizen’s Charter was risible, but its central concept – that public services exist to meet the needs of the public as customers rather than politicians’ interpretations of their wishes as voters – is deeply serious. In old style social democracy, accountability is through political process and is before the event. In a new style social market, accountability is for customer outcomes and is after the event. It is how Labour makes these choices that will determine the identity it acquires – and will justify, or contradict, its claim to be new.

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