The third way falls apart

Andrew Fisher, LEAP Co-ordinator, draws a few conclusions from the 2008 Budget.

Morning Star, Saturday 15th March, 2008

NEW Labour is entering the rockiest economic period of its years in office. Brown has constructed his political persona around economic stability and prudence, but, after 11 years in power of sustained economic growth and relatively high employment levels, the British economy is now looking decidedly unstable.

The theoretical underpinning of New Labour was the ‘third way’ that professed to unite sound economic management with social justice, with acolytes insisting that there was no contradiction.

While Britain has greater inequality than at any time in three generations, new Labour has so far successfully avoided economic issues making it onto the political agenda at election time.

Instead, Gordon Brown has pointed to the beneficial social effects on this economic success - record employment, reduced child poverty and a minimum wage.

However, these modest achievements have occurred in the economic good times. But the looming question over Darling's first budget was, will further social gains be sacrificed as the economy tightens?

There were already some indications that the Brown government would act much like that of Callaghan, cutting public-sector pay, tightening government expenditure, privatising public functions and cutting taxes for corporations and the rich.

If it follows this path, it will be with similar consequences economically, industrially and, ultimately, politically.

This budget was therefore new Labour's moment of truth. Would it kowtow to the demands of the CBI or would it choose social justice and strengthen its social gains?

On child poverty, the government has admitted defeat. In 1999, Blair committed Labour to halving child poverty by 2010, taking 1.7 million children out of poverty. To date, it has missed its targets and only removed 600,000 children from poverty.

The measures announced in the budget will only remove a further 250,000 by 2010. Therefore, we will leave over 2.5 million children in poverty in 2010, which will be nearer 3.5 million once housing costs are included.

The economic times have also hit the government's other flagship policies on social justice. The minimum wage will increase by just 21p to £5.73. At 3.8 per cent, that's below the current inflation rate of 4.1 per cent, meaning a real-terms cut for the poorest, who will be doubly hit by the removal of the 10 per cent starting rate for tax from April.

The budget gave pensioners a welcome one-off extra £50 on the winter fuel allowance. But this has already been absorbed by the average gas and electricity increase of 11.8 per cent, increasing the average bill by £108 over the year.

The inherent contradictions of the ‘third way’ are only being exposed now that the economy is weakening. At this budget, new Labour had to choose - would it regulate utility companies to slow inflation? Would it raise the minimum wage above inflation to stimulate spending, avoid the burgeoning personal debt crisis and reduce child poverty? Would it tax non-doms, corporates or the mega-rich to tackle pensioner poverty? The answer to all three was: “No.”

As the economy falters, it is clear that the government's solution is to become more reactionary. Ministers are bringing forward ever more brutal ideas for reducing public expenditure by attacking the most vulnerable. Services are being listed for privatisation and outsourcing in areas never before considered. Public-sector wages are being cut and conditions of employment eroded.

Working with Labour MPs, trade unionists and economists, we formed the Left Economics Advisory Panel (LEAP) to challenge the economic hegemony of our age. LEAP is about promoting the economics of co-operation over competition, of democracy over markets and of the many over the few.

In an age when all the major parties are ideologically committed to neoliberal economic dogma - privatisation, liberalisation and deregulation - that need is more necessary than ever.

LEAP is co-hosting an economics conference ‘Beyond the Market Economy - socialist solutions for the economic crisis’ on May 24 at Birkbeck College. This conference brings together economists, trade unionists, students and campaigners to debate the crisis and, importantly, to develop contemporary socialist policies and campaigns in key areas, with workshops on securing housing for all, ending corporate power - 21st century models of social ownership, drowning in debt - transforming the financial system and defending pay, pensions and jobs in a global market economy. To register send a cheque for £10 (£5 unwaged), payable to ‘Another World is Possible’ to LRC, PO Box 2378, London, E5 9QU.