While the election of New Labour in May 1997 was a result of a moral and social exhaustion with the costs of Thatcherism, on every crucial economic question New Labour was the continuation, extension and intensification of Thatcherism. This is not to say that there were no real and genuine achievements in Blair’s premiership – peace in Northern Ireland, the intervention in Sierra Leone and the establishment of a minimum wage. After that I struggle to think of any, though the right to roam and the opening of the natural legacy of our island to its inhabitants were worthwhile reforms. But the other side of the balance sheet weighs very heavily: the institutional, cultural and economic damage to our country is very marked indeed.
It was Labour’s first election victory since October 1974; they got just over 43% of the vote and gained 147 seats and a governing majority of 179. It was the largest majority and the greatest number of seats that Labour had ever won. The future story of Britain could have been radically rewritten. But of course it wasn’t, or at least it wasn’t in the way that was envisaged or indeed hoped for by the voters. Britain didn’t become more equal or more just or more noble, we became more unequal, more unjust and under New Labour more pious, self-righteous and self-congratulatory. We had new hospitals but we couldn’t keep them clean. We became multi-cultural and cosmopolitan but at the price of an open borders policy that at times looked designed to destroy the prospects and outcomes of the white working class. Focusing on the group it believed constituted the new middle ground of British politics, Labour eulogised a middle-class life defined by conspicuous consumption and the increase of debt-financed personal choice. This lifestyle had to be controlled by an array of policing, surveillance and audit powers. At least 25 Acts of Parliament and some 50 other measures have been introduced to achieve this since 1997, ranging from stop-and-search powers, sharing of government data, restrictions on peaceful protest and the extension of lawful detention.1 You and I might only experience this change of tone when being roughly questioned by security guards about photographing our favourite buildings, or indeed arrested while train-spotting at a mainline station, or perhaps undergoing criminal records checks if we want to volunteer at the local youth club, but the erosion of democratic and civil freedom is real enough. Against this background of a genuine and growing authoritarianism, an insistent litany of New Labour boasts punctuated the decade: no more boom and bust, Britain is open for business, things are only getting better … Meanwhile senior Labour figures were intensely relaxed about making the top 10% of the top 10% ever more wealthy, driven by New Labour’s love of undirected markets.
This is not the place to write about Iraq and how that finally broke the Blairite hegemony and revealed New Labour as shallow manipulators of truth and acolytes of whatever interest seemed the most powerful.2 The Iraq War was a clear foreign policy disaster, but what is interesting from a domestic point of view is New Labour’s inability to determine a separate British interest from that of the neocon view of the world then prevalent in Washington. If we had had a more confident and engaged culture, one that was aware of its interests and the necessary autonomy of its institutions, then the insights of well-informed academics, the Foreign Office and the military – who would have to pay the price of war – might have been listened to.
The essence of New Labour is not upheaval or revolution, but continuing exclusion, social inertia and the stripping away of assets and opportunity from those at the bottom of society. Economically all that Blair and Brown did was intensify what Thatcher had initiated and what Major had confirmed: support the City. Increasingly focused on the economy inside the M25, Labour ignored all the lessons about diversity and a mono-economy that it had touted as a criticism of Mrs Thatcher. It foolishly ignored Will Hutton, who for a crucial time was arguing for a British variant of the German stakeholder model.3 Unfortunately, through the twin axis of the unions and the markets, the established powers managed to derail an attempt to create a genuine alternative to the ongoing status quo. Yet, although Hutton was truly visionary in advocating worker share-owning and responsible participation, he partially under-estimated the need to create a new ethos as the precondition for a British variant of continental corporatism. In any case with total lack of vision, Blair and Brown believed in the idea that globalisation meant that the only option for Britain was to concentrate on what it did well and, since the only surviving prosperous industry was finance, every other economic possibility was sacrificed, including the very manufacturing base that Blair and Brown once denounced Mrs Thatcher for destroying.
In place of a genuine vision, we were promised by New Labour and Anthony Giddens – its intellectual architect – ‘a third way’.4 This was to be a progressive politics that charted a new middle between the old left of statist social democracy and the neo-liberalism of the new right. Yet what emerged theoretically, and later in practice, was not any new middle ground but a repetition and strengthening of the old left–right opposition unified as the worst legacy of both: the market state.
What Giddens argued for was the inevitability of globalisation and its inherently unchangeable character; curiously, given his supposed triangulation of both market fundamentalism and statism, Giddens seemed wholly to accept the neo-liberal variant of markets, as if the fact of their dominance precluded any other account of market exchange and how markets might operate. New Labour and its intellectual godfather believed that neo-liberalism was the only conceivable economic future, and that the progressive duty of government was merely to recalibrate the role of the state in the light of this determination.
It was New Labour’s recognition of the manifest problems caused by the neo-liberal understanding of markets that led to its support of a strong centralising state. Giddens sought a renewed and recovered role for the state because he despaired of any other source or site of power – he wrote of social movements and associations of citizens as ‘sub politics’ and stated: ‘The idea that such groups can take over where government is failing or can stand in the place of political parties is fantasy.’5 This understanding of civic associations as merely special interest groups decries their real capacities and eulogises instead the role of the social investment state – having displaced society, the state will now provide the social capital to compensate for the damage that the market is doing. He looked ‘instead for a synergy between public and private sectors, utilizing the dynamism of markets but with the public interest in mind’.6 Just as the neo-liberal right accepted an unjust market and attempted to ameliorate its outcomes with injunctions to personal philanthropy, so the new left accepted an unjust market and attempted to mitigate its consequences through the state. It was supposed that only the state can deliver redistribution and the equalisation of opportunity. The end result of this theory is a massively powerful state squatting alongside a misappropriating and distorted market. And here we have New Labour’s true legacy: not a third way between the two opposites of individualism and collectivism, but a union of the two, which excludes any sort of civil society.
And why exclude society? Society is the home of families, of culture and of established practices and tradition. It is where people are born, live, work and die. It is the world of the ordinary, of loyalty and of security. As individualists, New Labour hated the world of tradition, ritual and established pattern. Instead it celebrated the world of glamour and the speed and innovation of the real movers and shakers: ‘risk [Giddens tells us] is not just a negative phenomenon – something to be avoided or minimised. It is at the same time the energizing principle of a society that has broken away from tradition and nature.’7
Giddens in the late 1990s denounced modern conservatism for being committed to two mutually exclusive political positions: tradition and market fundamentalism. As he wrote: ‘the continuity of tradition is central to the idea of conservatism … Nothing is more dissolving of tradition than the permanent revolution of market forces.’8 Yet New Labour embraced those very market forces and used the state as the new replacement for the society.
Essentially Blair and Giddens tried to create a third way without a third sector, but all they did was replicate and reinforce the state/market combination by unifying what they had hoped to transcend and using it to destroy all that most of us hold most dear.
From 1979 to the financial crisis of 2007/8, the story is less one of rupture between Thatcher and Blair than one of continuity. The fundamental economic settlement negotiated by Thatcher was not only accepted by Blair, it was intensified, augmented and celebrated. Indeed the Thatcher renaissance was only retrospectively constructed as a hallowed period during the warm glow of New Labour’s growth years, when the left congratulated the right for creating the economic conditions for prosperity and the left celebrated itself for garnering that tax revenue to fund the new social-investment state. In this regard Blair and Brown were only following Anthony Crosland’s injunction in the 1970s to go for growth, no matter what, and redistribute the proceeds later. In this way an increasingly monopolised financial sector which gamed the state was allowed to take root and grow. And of course grow it did; in fact the majority of GDP growth over the ten years since 1997 was in financial services, housing and the public sector. The only difference that Labour really made to the new right’s legacy was to turn the now massively powerful state created by Thatcherism’s hatred of left-wing democracy and institutional autonomy outwards, so that the centralised state could seek to manage everything via productivity targets and central dictates.
And of course the economy was not transformed either – yet Labour had imagined or at least pretended to something very different. In Gordon Brown’s first budget speech as Chancellor in July 1997 he was very clear about what type of economy he wanted to create: ‘It is essential that consumer spending is underpinned by investment and industrial growth. Britain cannot afford a recurrence of the all too familiar pattern of previous recoveries: accelerating consumer spending and borrowing side by side with skills shortages, capacity constraints, increased imports and rising inflation.’9
But in fact, Labour witnessed the manufacturing sector slip to a rump of 12.4% of overall output by 2007. According to research from the Financial Times: ‘The rate of decline in the manufacturing share of the economy under Labour has been 2.7 times faster than under Mrs Thatcher’s government.’10 Britain’s overall economy has performed under Labour in almost exactly the same way as it did during the Thatcher and Major administrations. There has been no real renaissance in our rate of growth since 1997: it has averaged just over 2%, a little bit lower than under the previous regimes.
And in examining the rest of the Chancellor’s first speech, it is hard to deny that skills shortages are still with us and may well have increased, and with consumer spending financed by credit accelerating rather than reducing, blowing asset bubbles throughout the economy, it is hard to see quite where Labour has met its own declared aims.
But perhaps most telling of all is the rising inequality under Labour stewardship – though some might claim the rate of increase has slowed, this is still an economy that has failed to balance enterprise with fairness.
The equality report commissioned by Harriet Harman found that inequality was higher now than in the 1950s, with the distribution of wealth far more unequal than that of income, wages and earnings.11 The top tenth of households had wealth above £853,000 and the bottom tenth had less than £8,000, making the top tenth 100 times better off.12
Housing is another clear indication of current contemporary inequality. Those who were renting, whether privately, from a local authority or from a housing association, had the least total net wealth. Social tenant households, the report found, have median financial and non-property wealth of £15,000, which rises to £18,000 when including non-state pension rights.13 Some 90% of social tenant households had total wealth of around £105,000.14
Those households that own their homes outright were found to have median total net wealth of £411,000. When housing and private pension rights were excluded, the median was £75,000.15 In the ninetieth percentile for this category of households total wealth reached £1.23 million.16
All of which shows in stark relief who has benefited from the economic model of the last thirty years: the wealthiest 10% of society. Across a broad spectrum of indicators, it is the wealthiest 10% and those with the highest academic qualifications who still come out on top, despite government efforts to improve the chances of the very poor. With an increasing specialisation of the economy in certain sectors such as the service industries, and technological developments profoundly affecting the types of labour that are in demand, many low-skilled workers have been left far behind. It is also these workers who have the lowest percentage of asset wealth and it is their children who start life on a lower social standing than their peers, and who increasingly struggle with inter-generational inequality (as David Willetts has admirably pointed out) to escape the position into which they are born.17
Differences in equality have also become concentrated in particular areas of the country, as households in southern England, and London in particular, have benefited from rises in house prices, whilst growth in other areas has been less pronounced. Those already well-off individuals have become increasingly wealthy, passing this wealth and social standing on to their children, whilst those at the bottom end continue to be disadvantaged from birth.
Since the mid-1970s, inequality has widened significantly in the United Kingdom. Inequality has traditionally been measured through changes in incomes and changes in real annual wage growth. Looking at the Gini coefficient, a popular measure for income inequality, for the period 1979–2008, one can see a consistent rise in inequality in the UK. The Gini coefficient can range from 0 to 1, where 0 corresponds to complete equality and a value of 1 is the ultimate form of inequality where one person is receiving all income.
According to the Institute for Fiscal Studies, throughout the Thatcher years inequality rose dramatically from a value of 0.25 in 1979 to 0.34 at the beginning of the 1990s under Major’s government. Following this initial peak, income inequality fell slightly throughout the early to mid-1990s, rising again under Blair’s first term to peak at 0.35 in 2000–1. The level of income inequality went on to fall again in Blair’s second term, which saw inequality levels return to those of 1997–8, only to rise again to reach 0.36 in 2007–8.
When compared to other OECD countries, the United Kingdom has also remained above average in terms of income inequality throughout the 2000s. Whilst the UK saw a Gini coefficient of around 0.34 in the mid-2000s, fellow OECD countries such as Germany had a coefficient value of around 0.29, the Netherlands one of 0.26, while Sweden saw a level of income inequality of approximately 0.24. These figures indicate a clear continuity in Britain over the last thirty years, where income inequality has risen dramatically, concentrating income gains at the top of the scale.
According to the Office of National Statistics’ survey on Wealth and Assets, the total wealth in Great Britain, which includes private pension wealth, for the period of 2006–8 is estimated at £9.0 trillion. In this period, the wealthiest 10% of households were 4.8 times wealthier than the bottom 50%. The wealthier half of households for this period had 91% of the total wealth, while the poor half had the remaining 9%. This unequal distribution is reflected in the Gini coefficient for the distribution of total wealth, calculated for the first time in 2009, which was 0.61 for the period 2006–8.
A study conducted by the IPPR in 2002, which focused on personal rather than household wealth, found that while wealth creation grew at an unprecedented scale in the period 1979–99, from £500 billion to £2,752 billion, the distribution of wealth was increasingly concentrated among the rich. According to its figures, the wealthiest 2% of the population held 24% of the wealth in 1985. By 1996 this had increased to 26% and by 1999 it had reached 30%.
From 1978 to 1996, the IPPR study found that the percentage of people with no financial assets, no property or savings or capital of any kind, had doubled from 5% to 10%. The number of people in this position had increased the most in the 20–34 year-old age group. And this exclusion of millions of people from any access to financial assets remained at similar levels throughout the subsequent Labour government, with the percentage of people with no savings reaching 34% in 2000–1 and 46% of individuals in the lowest income groups having no savings whatsoever, indicating that the economy over the last thirty years has done little to improve the ability of the very poor to acquire assets and accrue wealth.
One last and very striking statistic. For the years 2006–8, the ownership of net financial wealth was much more unequal than that of property and other physical wealth. Fully half the households in Britain owned a mere 1% of net financial wealth, while the top 20% owned 84%.
And indeed this fact is the most telling and the most troubling – for inequality is troubling less because of the disparity itself than because the lives of those at the bottom increasingly resemble those of a lower and abandoned caste. Indeed what we have produced over the last thirty years is capitalism for the privileged few, and indebted servitude for the many.
The original visionaries of the right wanted a society, an economy and a culture of widely distributed property, innovation and distinction. For them, the totalitarian logic of the statist left could be resisted by an enfranchised and liberated citizenry that could extend its independence and foster a truly free society because it participated in a vital economy.
Instead the last thirty years, under the aegis of both right and left, have introduced a new economic form via debt and low wages: serfdom. The radical politics of the future must address the needs of the new serfs.
1 The Convention on Modern Liberty lists some fifty individual restrictions on, or removals of, traditional rights, liberties and freedoms since 1997. See http://www.henry-porter.com/Legislation/What-We-ve-Lost.html.
2 My objection to the invasion of Iraq is not on the basis of illegality as I think that this debate is beside the point. If the US and the UK had wished to intervene in Rwanda (and tragically they did not) and sought the approval of the UN Security Council, and if for reasons of geopolitics the Chinese had not sanctioned it by virtue of their burgeoning interests in Africa, would we still argue that any such intervention in Rwanda would be illegal and therefore wrong? National interest is expressed just as easily through a UN veto as it can be through unilateral action, and in this respect voting at the UN should not constitute an ultimate barrier to the moral and political demands for military action. Legality in this regard is a formality that can either serve or frustrate the good and the good ultimately should decide in matters of state action whether military intervention was right or not. International law in this respect is no guarantor of morality or rightness – hence to focus on it as if it were is to get the world wrong. There is no avoiding the responsibility to do the right thing whether it is sanctioned by other nations or not.
3 Will Hutton, The State We’re In, passim.
4 See Anthony Giddens, The Third Way: The Renewal of Social Democracy, Polity Press, 1998.
5 Ibid., p. 53.
6 Ibid., p. 100.
7 Ibid., p. 63.
8 Ibid., p. 15
9 Gordon Brown budget speech 1997, as quoted in the Financial Times, 2 December 2009.
10 Chris Giles, ‘Lofty ideals give way to thwarted hopes’, Financial Times, 2 December 2009.
11 John Hills, ‘An Anatomy of Economic Inequality in the UK’, National Equality Panel Report, 2010, p. 60.
12 Ibid., p. 62
13 Ibid, p. 212.
14 Ibid.
15 Ibid.
16 Ibid.
17 See David Willetts, The Pinch: How the Baby-Boomers Took Their Children’s Future – And Why They Should Give It Back, Atlantic, 2010.