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Issue 54

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Issue 54, March 2001

Labour and business

THE RESIGNATION of Peter Mandelson, Tony Blair's closest ally and supporter, has encouraged speculation as to the future direction and prospects for New Labour. Blair is now in a weakened position in the party, thereby strengthening Gordon Brown and his Treasury department.

Mandelson was forced to resign following his involvement in the Hinduja favours for cash scandal. The Hinduja brothers are one of Britain's richest families, with a world-wide empire encompassing telecoms, transport and oil, and are currently under investigation by the Indian authorities for bribery of politicians and civil servants. Having donated 1m to the Millennium Dome - a project much supported by Mandelson - they then lobbied Labour ministers to procure passports for them, by-passing the system. Mandelson was said to have intervened and when this was discovered was forced to resign. With 73,000 people awaiting applications for British citizenship, these businessmen received their passports within months.

This affair highlights New Labour's integration with big business, from which donations come with strings attached. Following recently announced donations from business figures totalling 6m, Blair now tells us that he is proud that big business donates to New Labour. One third of the party's funds now come from this source which, for the first time ever, is more than the trade unions donate. It is reminiscent of when the Tories were in power claiming to uphold 'family values', with the result that one by one government ministers resigned or were pushed out when the reality of their personal lives were revealed. Blair's insistence that his party would be free from sleaze and corruption stinks of hypocrisy as New Labour ministers clamour for the rewards and lifestyle of power.


Mandelson epitomised such worship of big business and wealth in an open fashion. His exit from government has now upset the balance of power between Blair and Brown. Questions are being raised as to whether 'the Blair project' is dead, putting an end to closer ties with the Liberal Democrats and any prospect of joining the Euro. There has even been discussion in the press that Brown is free now to pursue more 'traditional' Labour policies. But how serious are these differences and will they affect Labours strategy?

Firstly, it is true that few in the government now support Blair's vision of the creation of a 'centre-left' alliance with the Liberal Democrats, with some form of proportional representation being brought in as part of the deal. Blair, in fact, had planned to invite some Liberal Democrats into government prior to the 1997 election, hoping to realise his ideal of doing away with 'the left and right parties of the past' and ensuring the Tories would be squeezed from power 'for a generation'. Labour's majority was so big, however, that this option was ruled out.

Yet, even though Brown is against closer links with the Liberal Democrats and PR, he is unlikely to rule it out if Labour's remaining in power depended on such a deal. Anyway, in Scotland, Northern Ireland, Wales and London, the devolved parliament and assemblies have Labour in coalitions with the Liberal Democrats, and even Tories in the case of the London Assembly.

The latest polls, giving Labour a 21% lead, would ensure a 100-seat majority. However, this does not take into account a low turnout or the Liberal Democrats gaining seats as voters look for an alternative. This could put a coalition back on the agenda.


Unquestionably, there are differences between Brown and Blair on Europe, reflecting differences within the ruling class as a whole. Blair has re-emphasised his support for Britain joining the euro, announcing that within two years a referendum on Europe will be considered as long as the five economic criteria are met. Blair was pressurised into making this announcement to appease car chiefs, who blame the demise of the car industry on the high pound.

Brown, however, confirmed his scepticism to the Euro by attacking the European Commission for their criticisms of Labour's plans to increase spending, which would be monitored if Britain joined the eurozone. 'We do not agree that our public spending plans are excessive', he asserted, making clear that he was opposed to the EU hindering his plans to invest in public services. The argument over when and if to join the Euro could become a purely theoretical one, however, as the approaching recession causes economic problems in Europe and Britain, and even the scuppering of the Euro project itself.

There is evidently a jostling for power and infighting between Blair and Brown which reflects differences on certain policies, with Brown being mooted as leader at a certain stage. These will undoubtedly be played down during the election campaign, only to re-surface during Labour's likely second term. They may at some stage reflect different wings of the party and splits could take place, but the suggestion that Brown could champion the left's cause is hard to believe. Some even think that Brown will now reveal his 'Old Labour' characteristics, as 'Iron Gordon' becomes 'Red Gordon'. Gone are the days of holding back spending, the argument goes, and at last we will see Labour spend money on public services as it traditionally would have done. This is a delusion.


Brown has been firmly part of the strategy to transform New Labour into a totally pro-capitalist, bourgeois party, and is not, for example, opposing the further attacks planned on the remnants of democracy within the party. Any differences between Blair and Brown are squarely within the framework of accommodating capitalism and continuing with the privatisation of public services.

In the run-up to the general election, Labour is promising more public spending, prompting some to believe that Labour will move to the left in a second term. Some Labour spokespersons argue that its first term was for 'reassurance' that this Labour government would be different from past Labour governments. They had to prove that Labour would not 'tax and spend', that the trade unions would not be given special treatment, and that big business would be welcomed. Now, however, Labour can increase public spending if re-elected. Moreover, this has been made possible by the substantial increases in tax revenues produced by the growth of the economy in the last few years - growth that is unlikely to be sustained as the US economy slides into recession.

While Labour will promise new spending in the run-up to the election it will not solve the fundamental problems of the NHS, schools and transport. Privatisation will continue with disastrous consequences for jobs, conditions and the quality of public services. Even if more money for schools does materialise, for example, it will be tied in with more privatisation, a move away from comprehensive education, and no solution to the teacher shortages.


Labour's next term will not be as smooth as its first. Even before the election, and before the effects of a recession have bitten, workers are taking action against privatisation, job losses and cuts. The same polls that put Labour ahead also report growing dissatisfaction with this government. Many will vote for Blair in the election, not because they are satisfied with Labour's record, but to ensure the Tories do not win.

As workers continue to struggle after the election against Labour's policies and the effects of a recession, some union leaders could be pushed into opposing the government. Discussions among trade unionists will be along the lines of providing funds to those who will support their demands rather than New Labour.

Last autumn's fuel protests showed how rapidly anger against Labour can grow, but also how it can evaporate in the absence of an alternative. Members of the Socialist Party will be contesting seats in the forthcoming general election enabling us to reach hundreds of thousands with socialist ideas. New Labour has come to mean privatisation and attacks on the working class, ministers entwined with the rich, and a government blatently serving big business. We will argue for and assist in the creation of a new independent workers' party which will be forged as workers move into struggle.

Jane James

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