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New Labour meltdown

Within a year of becoming prime minister, Gordon Brown has seen support for his government collapse. Under mounting pressure from public-sector workers against pay restraint, from working-class people hit by fuel and food price rises, and looming economic crisis, New Labour is getting battered in opinion polls and elections. And a repackaged Tory Party is making a comeback. HANNAH SELL looks at the situation in Britain today.

THE CREWE AND Nantwich by election, which New Labour lost in a 17.6% swing to the Tories, came in the wake of its worst local election results since records began, and the loss of the London mayor to Tory maverick Boris Johnson. It marked the point when the meltdown in support for New Labour became catastrophic.

Gordon Brown’s coronation as prime minister of Britain was only a year ago. Hopes that he would be an improvement on the profoundly unpopular Tony Blair led to a ‘Brown bounce’ in opinion polls. As we predicted, it was fleeting. Today, Labour is lurching from crisis to crisis, at record lows in the polls, and Brown is seen by his party as a liability. The nightmare prospect of a future majority Tory government is now more likely than at any time since 1997.

Crewe and Nantwich was not one of the many seats which New Labour won for the first time as part of its 1997 high-tide. On the contrary, it had been a Labour seat since 1945 – held even in the 1983 general election, when Labour’s vote fell to its lowest point in a general election since 1918.

If the swing in Crewe was repeated in a general election, it would mean a landslide victory for the Tories. Undoubtedly, some of those who vote Tory to punish New Labour today would hesitate to do so when faced with the prospect of a Tory government. Nonetheless, it is absolutely clear that anger with New Labour is now the dominant mood amongst the majority of voters, and that, for many, the memory of 18 years of Tory rule has faded sufficiently to make voting Tory a possibility. Of course, this is far from universal. Since 1997, millions of people have stopped voting altogether because they cannot bring themselves to vote for any of the three establishment parties. Others, and their numbers may now increase, have continued to vote Labour as the ‘lesser evil’ to prevent a return of the Tories.

In the big cities of northern England, hatred of the Tories for their past crimes still runs very deep. In the city of Manchester, for example, they still have only one councillor. In inner-city London, many workers turned out to vote for Ken Livingstone specifically to try and stop Johnson. And in Wales, historically Labour’s heartland, Labour also suffered a meltdown. There, the beneficiaries were not generally the Tories, but a mixture of forces: Plaid Cymru in some areas, the Lib Dems in others and, in the Valleys, a mixture of Blaenau Gwent Peoples’ Voice (which broke away from New Labour in 2005-06) and Independents – many of whom stood on a version of an ‘old Labour’ programme.

Nonetheless, in Crewe, and to some extent in the local elections, it seems there was a significant layer of traditional ‘dyed in the wool’ Labour voters who voted Tory for the first time. In one sense, their reasons for doing so were not new. Anger at low pay and job insecurity for the majority while the elite get filthy rich has been a feature of the last ten years – it is central to why New Labour had already lost four million votes between 1997 and 2005. But it has reached a qualitative turning point. The reason is simple: millions of people are feeling the pinch. In the last year, petrol prices have gone up by more than 19%, gas bills by 120%, electricity by 11%, dairy products by 15%, bread and cereal by 8.5%. (The Guardian, 24 May) Meanwhile, average median weekly pay in Britain grew by only 2.9% in 2007.

Brown is trying to implement a brutal policy of public-sector pay restraint. His mantra about the need to accept low wage settlements in order to prevent inflation inflames the anger of all workers who are struggling to make ends meet, not just those in the public sector. Combined with continued record settlements for the city traders, and the revelations about how MPs charge the state lavishly for their every household need (claiming an average of £118,000 expenses a year!), a mood of rage against New Labour is developing even before the looming economic crisis fully hits.

No longer nice

THE ECONOMY GREW at its slowest pace in three years in the first quarter of 2008. New Labour, having initially ignored the looming economic crisis, is now vainly trying to escape any responsibility for it, treating it as a kind of ‘natural disaster’ for which it is blameless. As chancellor, Brown famously declared that he had overcome the ‘boom-and-bust’ cycle. It is possible that New Labour’s craven worship of unfettered capitalism actually meant he was foolish enough to believe his own propaganda. We warned that, having been a ‘lucky’ chancellor, he would be an ‘unlucky’ prime minister as far as the economy is concerned.

Economic crisis is intrinsic to the capitalist system which New Labour reveres. Britain has been able to avoid crisis over the last decade by the build up of enormous bubbles in the economy, driven largely by the finance sector, and particularly by increasing house prices and personal indebtedness (the latter is now greater than Britain’s annual GDP). However, this is now turning into its opposite, and the prolongation of the party is making the hangover all the worse. Mervyn King, governor of the Bank of England, has declared an end to the NICE (non-inflationary continuous expansion) decade. Commercial property prices fell at the fastest rate in a decade in the first quarter of this year. House prices fell by 2.5% in May alone, and the speed by which they are falling is accelerating fast. If the rate of fall for the first three months of this year was annualised, it would mean a 16.6% fall in prices, far worse than that in the 1992 recession.

The global dominance of the US means its severe economic crisis is affecting the whole world. However, Britain, where New Labour has struck what The Guardian economist, Larry Elliot, described as a "Faustian bargain with the financial markets" (12 May), is particularly vulnerable because its economy has many of the same lopsided and unhealthy features as the US. In fact, reliance on the finance sector is even greater in Britain. The economic forecasting group, the Ernst & Young Item Club, explained in April: "Although the economy has remained relatively buoyant so far this year, our reliance on international banking means it is only a matter of a time before it slows. This is going to be a rapid, painful adjustment and it will mean a rough ride for a substantial proportion of the population". (The Guardian, 21 April)

Britain is facing the worst economic crisis since the early 1980s, if not the recession of 1974-75. Not surprisingly, there is a collective fear in society of the likely consequences. Given this background, it was incredible that chancellor, Alistair Darling, announced that the lowest ten-pence tax band would be abolished and workers would start paying tax at 20p in the pound – hitting five million of Britain’s lowest-paid workers. The 10p tax fiasco was a disaster which acted as a lightening rod for people’s anger. It shattered the idea that New Labour at least throws a few crumbs every now and then to the poorest in society. This allowed the Tories, without any content to justify it, to pose as the party of the poor. If a mass party existed which genuinely stood in the interests of working-class people, it would be benefiting significantly from the anger against New Labour. In the absence of this, the initial gains, at least electorally, are being made in the main by the Tory Party.

Superficial differences

THIS DOES NOT represent, however, ideological support for the Tories. How could it, when the Tories are offering only a semblance of deeply unpopular Blairism which, in turn, was a reinvention of Thatcherism? This is not to suggest there would be absolutely no difference between a Tory and a Labour government. It is most likely that a Tory government, if it felt strong enough, would attempt to be even more brutal in its attacks on the trade unions and the working class than New Labour. The last Tory government introduced anti-trade union legislation that is amongst the most repressive in the advanced capitalist world – virtually none of which has been repealed by New Labour. Nonetheless, George Osborne, the shadow chancellor, responded to the recent public-sector strikes by calling for additional anti-trade union legislation to curb them. Boris Johnson is also threatening to try and achieve a no-strike deal on the London Underground. A Tory government that attempted to implement these policies would face ferocious opposition from the working class.

However, the differences between New Labour and the Tories are not deep-seated. It is not accidental that Tory leader, David Cameron, is delaying outlining any actual policies for as long as possible. New Labour followed exactly the same approach prior to the 1997 election. When all you have to offer is the idea that your party will be a ‘change’ from the incumbent – when, in reality, you are no change at all – it pays to stick to sound bites and spin.

While the Tories’ increase in support is superficial, the meltdown in New Labour is not. Blind panic rules in the Parliamentary Labour Party. Desperation to hold onto their seats at the next general election could well lead to a leadership challenge to Brown, perhaps at the Labour Party conference in September. It is only the absence of an ‘heir apparent’ that lessens the chance of a more rapid challenge. Brown is also likely to purge the cabinet in the next few weeks.

However, neither changing the membership of the cabinet, nor even ditching Brown – which would mean two changes of prime minister in succession without a general election – would solve any of the fundamental problems facing New Labour. While it is true that Brown has proved peculiarly impersonal and ham-fisted as prime minister, it is not a question of his style but New Labour’s substance that is the root cause of its problems. It is conceivable that a new leader would lead to a temporary boost in the opinion polls, although this would be a faint echo of last year’s weak ‘Brown bounce’. It is also possible, however, that the stench of desperation from pushing Brown aside would lead to a further haemorrhaging of New Labour’s support.

No return to ‘old Labour’

SOME COMMENTATORS and MPs, such as Polly Toynbee and Michael Meacher, both writing in The Guardian, are using the crisis to argue for a return to traditional, ‘social-democratic’ policies – that is, of attempting to gradually reform capitalism in the interests of working-class people. Toynbee rightly commented on Crewe that it is not traditional Labour voters who are "the deserters: Labour has deserted them". (23 May) However, the return of ‘old Labour’ under Brown, or anyone who elbows him aside, is absolutely ruled out.

It is true that New Labour is now reliant on the trade unions for 92% of its funding. But the unions have no constitutional power to determine party policy, nor do the right-wing trade union leaders show any intention of trying to force Brown’s hand. New Labour’s financial crisis, with debts now in the region of £24 million, is the result of a complete collapse in financial support by big business – not because they fear New Labour moving left but because, after eleven years of loyally acting in capitalism’s interests, it is worn out and discredited with voters. For now, at least, the majority of the capitalist class is beginning to believe that a ‘new broom’ in the form of a Tory government will have a better chance of implementing its programme.

The Blairites transformed the class basis of the Labour Party, arguing that the only way for it to succeed was to accept the diktats of the market. Instead, the policy they forced through has already turned the Labour Party into a husk, a shadow. It is possible that, beyond the next general election, it may be reduced to a small rump.

Those hoping to avoid this by shifting Labour leftwards have pointed out that the elections showed that to do so would be popular. They argue that Livingstone, although defeated, actually had a small increase in his first preference votes compared to 2004, whereas New Labour nationally had a dramatic fall in votes. It is accurate to suggest that this was related to the perception that Livingstone, originally elected in 2000 as an independent after a rigged selection process denied him the official Labour candidacy, was more ‘left’ than New Labour. This was partly for historical reasons, but was also because of his opposition to some aspects of New Labour policy, such as the Iraq war and post office closures.

Nonetheless, Livingstone himself has made it absolutely clear that he had long since ceased to be any kind of ‘social democrat’, when he proudly declared in The Guardian the week after his defeat: "Labour's campaign in London gained major support from business. The Financial Times concluded that the majority of big business in London supported my re-election". (The Guardian, 9 May)

New Labour, including the ‘maverick’ Livingstone, is wedded, body and soul, to the interests of big business in this country. Meacher himself, having argued for some social-democratic measures, such as houses at risk of repossession being bought up by public authorities and their owners converted to tenants until they could afford to buy again, nonetheless accepts that New Labour will not "envisage market intervention of this kind" because of its "commitment to City interests". (The Guardian, 27 May)

Northern Rock nationalisation

IT IS TRUE that New Labour has already been forced to carry out more ‘market intervention’ than it ever envisaged. In order to rescue Britain’s ailing banking system it stepped in and nationalised Northern Rock and pumped £50 billion in to avert a meltdown of the mortgage market. These measures were demanded by Britain’s financial markets in order to prevent a catastrophic systemic crisis. By the time Northern Rock was actually nationalised the Financial Times and The Economist had been calling for it for many weeks. Ironically, New Labour hesitated for longer than a Tory government would have done because of its terror of anything that could be seen as ‘old Labour’. Larry Elliot explained that the government "has moved so far from its traditional social democratic roots that any action to remedy the excesses of capitalism can now be portrayed as being akin to Bolshevism". (The Guardian, 12 May)

Despite its squeamishness on the subject, New Labour and the Bank of England are likely to be forced to take further ‘interventionist’ action to try and ameliorate the economic crisis. Regardless of the parlous state of public finances, the government can be forced by crisis to pump more money into the economy, and even to carry out further nationalisations. Like the actions of the US Fed, these will not solve the fundamental problems, and are likely to be too little too late. Worried by inflation, the Bank of England is extremely cautious about cutting interest rates. However, it is likely to be forced to do so by the severity of the economic crisis.

Compelled by the failures of capitalism to nationalise Northern Rock, New Labour has done everything within its power to show that this is not an ‘old Labour’ measure and to use it to discredit nationalisation. A ‘non-dom’ has been put in charge of the bank and one third of the staff of Northern Rock is being laid off. Despite spending over £100 billion on Northern Rock and the mortgage markets, not one single measure has been implemented to assist those working- and middle-class families who are threatened with losing their homes. Nonetheless, New Labour’s actions will have a radicalising effect. During the recent teachers’ strike, young teachers came with homemade placards pointing out that Brown had £50 billion for the bankers, so could easily meet their pay demands. Recent events will also play a role in beginning to re-popularise nationalisation as a socialist, or at least pro-working class, measure. When factories face closure, it is inevitable that the demand will be raised: ‘Well, you did it for Northern Rock, why not for our factory?’

Trade union leaders

THE MAJORITY OF national trade union leaders will react to New Labour’s election debacle by demanding their members remain loyal to Labour in order to prevent a Tory election victory. With some, particularly older trade unionists who remember the Tories, this will receive a certain echo. Other rank-and-file union members, however, will meet it with indignation. Many trade union activists have been reporting trying in vain to convince members not to resign from union membership after receiving a letter from trade union headquarters calling for them to vote Labour in May’s elections. The issues of rising prices and wage restraint that are angering the population at large apply equally to rank-and-file trade unionists. Such is the pressure from below, that even Brendan Barbour, general secretary of the TUC, was forced to publicly criticise the government – in a very meek and mild manner, it has to be said. As trade unionists enter struggle against the government, anger at their union’s affiliation to New Labour will increase tenfold. This happened in the postal strike last year and is likely to be reflected in the discussion on disaffiliation at the Communication Workers’ Union conference this year.

The one-day strike on 24 April over pay by teachers, civil servants and lecturers showed the real possibility of an all-public sector general strike on the pay issue. Unfortunately, the sentiment of ‘don’t rock the boat for fear of the Tories’ is leading the national public-sector trade union leaders, with some honourable exceptions – particularly the Public and Commercial Services union (PCS) – to continue to hold back or hesitate over calling further action. At the same time, the leadership of UNISON, the largest public-sector union, is launching a desperate witch-hunt to try and silence socialist activists (see update, page ten). Despite the role of these leaders, many trade union members could draw different conclusions.

New Labour MPs, desperate to save their seats, are likely to suddenly discover that they oppose some of the government’s most unpopular proposals, just as they did with the 10p tax proposal (which only six Labour MPs had opposed when it was first passed). Such is the anti-working class nature of New Labour today, this will not include a back-bench revolt calling for a decent pay rise for public-sector workers, at least not without a struggle by those workers. Nonetheless, the government could be forced to retreat on a whole number of other issues, giving workers the confidence that the palpable weakness of Brown means that a victory could be won if determined strike action is taken.

Right-wing populism

FAR FROM CHANGING course towards the left, New Labour is reacting to its slump in support by moving further and further to the right. We are facing the nightmare prospect of the Tories and New Labour trying to outdo each other with right-wing populist measures for the remainder of this parliament, attempting to tap into fears of social and community breakdown.

In Crewe, New Labour’s crude anti-immigrant, anti-youth campaign did not work. On the contrary, it assisted the Tories. Without doubt, the unprecedented scale of immigration to Britain over the last five years, which has been consciously used by big business to hold down wages, is one factor in many workers’ anger with the government. Even amongst anti-racist workers, the sense that already overstretched public services are being asked to cope with ever more people has led to a feeling that the levels of immigration are unsustainable. The nascent economic crisis is already sharpening these tensions.

It is true that rising unemployment will mean that some migrant workers will decide to return to their country of origin. However, this will not prevent an increase in tensions. In Ireland, where the economic crisis is more advanced, there has already been a 25% fall in the number of construction jobs, where many migrant workers are employed. Many Eastern European workers have left, but those who remain face an increase in the level of xenophobia and racist attacks.

New Labour, as the party of government for the last ten years, will not make any gains by whipping up anti-immigrant feeling. On the contrary, it will be the Tories, and perhaps increasingly the far-right, such as the British National Party (BNP), that will gain. In the May elections the BNP did not make gains on the scale it had hoped for, with a net increase of eleven local council seats. Nonetheless, its vote in London increased from 90,365 in 2004 to 130,714, giving the BNP its first member of the London Assembly, which it hopes will act as a springboard for future, bigger gains.

Startled and worried by the BNP’s election success in London, a new generation of young people is becoming active in anti-racist campaigning. Socialists and trade unionists have a vital role to play in campaigning against racism and the far-right. However, important as it is to expose the far-right, racist nature of the BNP, this alone will not cut across its increased support. While the individual national leaders of the BNP are as crudely racist as ever, its election material often avoids direct reference to race, instead concentrating on standing against cuts in public services. This is a conscious attempt to pose, falsely, as a party that stands in the interests of the white working class, in order to gain support.

The gap between the BNP’s underlying policies and the public image it is trying to create means that it is inherently unstable, as demonstrated by the serious splits it suffered earlier this year. Nonetheless, it would be wrong to conclude that the BNP cannot grow. The danger exists that it can establish for itself a semi-stable electoral base – on a similar basis to the far-right parties in many other countries of Europe. The campaign for a new mass workers’ party – which genuinely represents the interests of all workers – is key to the battle to defeat the BNP.

Profound effects of crisis

THE EFFECTS OF the coming economic crisis on the consciousness of the working class will be complicated, with different sections drawing conclusions at different speeds. Nonetheless, they will be profound. It would be wrong to conclude that we will automatically see a ‘stunning’ of the working class, where workers are temporarily too shocked and worried about the deterioration in their living conditions to take industrial action. This is one possibility, but is not automatic, or even necessarily the most likely. It was certainly not the outcome of the recession of the early 1970s, which workers in Britain responded to with mass militant strike action, resulting in the fall of Ted Heath’s Tory government.

There are many differences today. The industrial working class, which was at the forefront of the battles of the 1970s, is much smaller. Nonetheless, as the Grangemouth oil workers’ successful strike graphically demonstrated, it still has enormous potential power. In addition, there are many layers of the working class, including teachers and civil servants, that are more prepared to struggle as a result of their experience of neo-liberalism over the last 20 years. It is possible that Britain could officially enter recession on a rising curve of struggle – as public-sector workers revolt over pay – thereby increasing confidence to meet the economic downturn with action.

The biggest complicating factor is undoubtedly the lack of a mass political voice for the working class. Its absence will increase the confusion and the likelihood of sections of the working class temporarily turning to the right, and even the far-right, in response to the crisis. Nonetheless, economic crisis will also act to push the most conscious sections of workers to look for a socialist alternative.

In Germany, it was the effects of the sharp recession in the middle of the decade, combined with the brutal austerity measures that the government carried out against the working class, which led a layer of middle-ranking trade union officials to found a new left party, the WASG (now merged with the PDS into The Left party, see update, page eight). In Britain, the idea that capitalism can meet people’s needs will be shattered for millions by the events of the coming years. This will open the road to the building of mass support for socialist ideas amongst a new generation.