In the 1992 general election, the Labour shadow cabinet ran on a platform of increased taxes on middle and higher-income earners – a decision which cost them the election after the Conservatives ran an effective ‘Labour’s tax bombshell’ campaign. After Labour’s 1992 general election defeat, Tony Blair and Gordon Brown took the decision that they must nullify forever voters’ fears that Labour would tax the rich wealth creators punitively. Never again would Labour only protect the poor to the detriment of the interests of middle and higher income earners and neither would it go into an election as a tax-raising party. The failure of the 1992 election led to the establishment of Blair as Labour leader and Brown as shadow Chancellor, and the two men set about making New Labour the party of ‘aspiration’. New Labour embraced wealth to such a degree it made its traditional supporters very uncomfortable. Peter Mandelson, one of New Labour's architects, memorably said that he was "intensely relaxed about people getting filthy rich." Tony Blair understood that by encouraging wealth creation he could enhance social justice as the former paid for the latter. It was one of the central tenets of the New Labour philosophy.
But after yesterday’s Pre-Budget Report, Darling effectively killed New Labour. He not only increased taxes on the wealthiest two percent of the country which was something New Labour had promised not to do (more of a symbolic move than a significant tax raising measure), he also raised national insurance tax by 0.5 percent from 2011 onwards (not that Darling was explicit about this in his speech and unsurprisingly was the only key measure not to leak out beforehand) – a move that will affect those earning just £19,000 or more a year (Labour disputes this but the IFS has confirmed it is true). Once again Labour will fight a general election with the promise of tax hikes not only on the wealthy but Middle England too. George Osborne called it “a tax on the jobs and incomes of Middle Britain.” The Tories also called it “the most socialist budget since Callaghan” and the BBC’s Economics Editor Robert Peston said this was the "first genuine socialist budget" from Labour since they returned to power in 1997. The IPPR also proclaimed Alistair Darling’s tax measures as “the most redistributive budget statement of the last 30 years.” This Robin Hood Budget has shown that Old Labour has risen once again from the dead, killing New Labour in the process. ‘Aspiration’ has been replaced with ‘redistribution’, or ‘fairness’ as Labour is spinning, as the party’s central message.[1]
The move has delighted Labour’s core voters and traditional supporters because Brown, an instinctive tax raiser, has boldly decided to jettison the strictures holding him back. Polly Toynbee was ecstatic exclaiming: “The New Labour era is over – welcome to social democracy!” and Labour MPs were also jubilant hailing what they called a “soak the rich” package. Changing course so drastically is much easier to do now. Not only is the country in recession which allows Brown to say “extraordinary times call for extraordinary actions,” his greatest restraint is no longer next to him – Tony Blair. When shadow Chancellor Brown favoured a 50p top rate on incomes over £100,000 in the run-up to the 1997 election, but the plan was vetoed by Blair. Once Chancellor, Brown decided increasing income tax on high earners was not worth the effort – until now. It is inconceivable that Blair would have sanctioned such a Budget, fearful of losing the Big Tent of the electorate that he had constructed so carefully over the years, delivering three massive general election victories in the process.
The Budget, therefore, has to be seen as an enormous U-turn from Brown; as big as they come. It is also a gigantic economic and political gamble. Brown is gambling that the economy recovers by the second half of next year; that the government can deliver a major clampdown on spending and huge efficiency savings; and that the electorate will support a significant rise in taxes targeted at the wealthy but which will hit those on middle incomes too. By abandoning New Labour, Brown is gambling that voters will stay with him. Has the public mood changed so much that it is once again willing to give Old Labour a go? Brown is gambling that it has and that people no longer remember or fear the 1970s.
If the gamble works, Brown will have hauled the political centre to the Left, destroying the Thatcherite politico-economic consensus/settlement. If it fails, Old Labour’s return will be short-lived and most likely killed forever. The ideological stakes could not be greater. Nobody can argue anymore that voters do not have a choice in elections.
But after yesterday’s Pre-Budget Report, Darling effectively killed New Labour. He not only increased taxes on the wealthiest two percent of the country which was something New Labour had promised not to do (more of a symbolic move than a significant tax raising measure), he also raised national insurance tax by 0.5 percent from 2011 onwards (not that Darling was explicit about this in his speech and unsurprisingly was the only key measure not to leak out beforehand) – a move that will affect those earning just £19,000 or more a year (Labour disputes this but the IFS has confirmed it is true). Once again Labour will fight a general election with the promise of tax hikes not only on the wealthy but Middle England too. George Osborne called it “a tax on the jobs and incomes of Middle Britain.” The Tories also called it “the most socialist budget since Callaghan” and the BBC’s Economics Editor Robert Peston said this was the "first genuine socialist budget" from Labour since they returned to power in 1997. The IPPR also proclaimed Alistair Darling’s tax measures as “the most redistributive budget statement of the last 30 years.” This Robin Hood Budget has shown that Old Labour has risen once again from the dead, killing New Labour in the process. ‘Aspiration’ has been replaced with ‘redistribution’, or ‘fairness’ as Labour is spinning, as the party’s central message.[1]
The move has delighted Labour’s core voters and traditional supporters because Brown, an instinctive tax raiser, has boldly decided to jettison the strictures holding him back. Polly Toynbee was ecstatic exclaiming: “The New Labour era is over – welcome to social democracy!” and Labour MPs were also jubilant hailing what they called a “soak the rich” package. Changing course so drastically is much easier to do now. Not only is the country in recession which allows Brown to say “extraordinary times call for extraordinary actions,” his greatest restraint is no longer next to him – Tony Blair. When shadow Chancellor Brown favoured a 50p top rate on incomes over £100,000 in the run-up to the 1997 election, but the plan was vetoed by Blair. Once Chancellor, Brown decided increasing income tax on high earners was not worth the effort – until now. It is inconceivable that Blair would have sanctioned such a Budget, fearful of losing the Big Tent of the electorate that he had constructed so carefully over the years, delivering three massive general election victories in the process.
The Budget, therefore, has to be seen as an enormous U-turn from Brown; as big as they come. It is also a gigantic economic and political gamble. Brown is gambling that the economy recovers by the second half of next year; that the government can deliver a major clampdown on spending and huge efficiency savings; and that the electorate will support a significant rise in taxes targeted at the wealthy but which will hit those on middle incomes too. By abandoning New Labour, Brown is gambling that voters will stay with him. Has the public mood changed so much that it is once again willing to give Old Labour a go? Brown is gambling that it has and that people no longer remember or fear the 1970s.
If the gamble works, Brown will have hauled the political centre to the Left, destroying the Thatcherite politico-economic consensus/settlement. If it fails, Old Labour’s return will be short-lived and most likely killed forever. The ideological stakes could not be greater. Nobody can argue anymore that voters do not have a choice in elections.
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[1] To be fair, Brown has always pursued a redistributive policy. But rather than through an obvious tax on the wealthy, Brown pursued redistribution by “stealth," channelling money to those on lower incomes through his complex tax credits. And don't forget his tax of choice - national insurance - which he first increased in 2002, raising payments by 1 percent.
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