Britain’s Labour party has come a long way from 1994, when a charismatic Tony Blair, the new leader of a party then in opposition, forced through the repeal of clause four of its constitution–the one that promised nationalization of the means of production and distribution. Not all of the comrades, as they styled themselves, were pleased, but after 15-going-on-18 years in the wilderness the sweet smell of a return to power induced at least a temporary suspension of faith in red-in-tooth-and-claw socialism. Blair appealed to the blue-rinse ladies of Middle England in a way that prior Labour leaders had not. And in a way that Gordon Brown, the senior partner in the Brown-Blair relationship, could not. So Brown had agreed not to contest the leadership, in return for a promise that, as chancellor of the Exchequer in the next Labour government, he would have complete control of economic policy.
The combination of a smiling Blair and a Brown pledged to restore his party’s lost reputation for fiscal prudence by holding the line on spending proved a winning combination. In 1997, Labour displaced the sleaze-ridden, worn-out Tories, riven with feuds since deposing Margaret Thatcher in 1990. Building on the solid economic foundation willed to them by Thatcher, Blair and Brown profited from a growing economy–though Brown made the unfortunate boast that he had eliminated the cycle of “boom and bust.”
The period of peace within the usually fractious Labour party was broken when Blair decided to lead the party into a third general election in 2005, denying Brown the leadership the chancellor claimed he had been promised. It is difficult to describe the ensuing rancor between these partners, as Brown pressed Blair to step down, and Blair refused to do so. You had to be there. I remember once popping into No. 10 Downing Street to see the prime minister, only to run into Brown, who asked what I was doing there. I responded by asking how he had managed to cross the barbed wire between the PM’s digs and the chancellor’s, at No. 11. He was not amused.
There were brawls over every aspect of policy. Blair wanted to reform the public services to make them consumer- rather than producer-driven; Brown felt that parents and patients lacked sufficient knowledge to make intelligent choices of schools and courses of medical treatment. Blair wanted to adhere strictly to his campaign promise not to raise taxes; Brown insisted that the promise applied only to income taxes and proceeded to impose some 60 “stealth taxes” that directed 5 percent more of the nation’s income to the Treasury than it had collected in the Thatcher years. Only when Brown wanted to raise the marginal tax rate on high earners from 40 percent to 50 percent did Blair fight back.
Brown finally prevailed in 2007, forcing Blair, his popularity eroded by time and his backing of George W. Bush’s Iraq policy, to step down. Brown was finally in command–no general election needed, since the leader of the majority party is designated by the Queen as her first minister–and the spending spigots were opened. Flash forward: When Labour met in Brighton last week for its annual conference, it trailed the Tory party by up to 20 points in the polls, and in some was running third behind both the Tories and the Liberal Democrats.
What happened on the way to a fourth Labour term? Time is not kind to a party that has been in power for more than a decade: It runs out of intellectual energy and becomes corrupt. And if it is soft on crime–Brown refused to fund an adequate prison construction program–it will be blamed for the social ills that see street crime soaring, alcoholism on the rise, feral children prowling the streets, and third-generation families on the dole.
Brown, moreover, has nothing like Blair’s fine, light touch. He is so uncomfortable on television that it is said that he has taken lessons in smiling but didn’t get to the part where he learns when to smile. He is impatient with subordinates, dour as the son of any Scottish manse might be, and clannish: hardly a crowd-pleaser. Which may be why he cancelled plans to hold a snap election in the autumn of 2007 after the polls showed he might lose–adding cowardice to the other charges against him.
And then there is the recession. Brown can rightly claim to have taken sensible steps to cope with it–bank bailouts, stimulus spending, the usual Keynesian measures–but his earlier spending spree and refusal to save in the fat years left the country’s finances in a state that has the rating agencies considering downgrading British sovereign debt.
So when Brown strode to the podium at last week’s conference, he had a tough job–energize the faithful who were walking the corridors seeing defeat as inevitable, and woo back some of the Middle England voters Labour has antagonized with everything from its wild expansion of the public sector and stealth taxes to its ban on fox hunting.
Everyone is agreed that Britain’s fiscal condition is unsustainable, and the budget gap must be closed. This means some combination of spending cuts and tax increases. Brown decided that his ticket to his first victory in a general election–he has never had to face the British electorate, his position being the gift of his party–is to spend and tax.
He told the conference that he would increase the minimum wage every year–in the face of record teenage unemployment. He will spend more, not less, on schools–even though his schools minister says he can make do with £2 billion less. He will set up a £1 billion “innovation fund” to encourage “the creativity and inventions that are essential to the economy,” while at the same time charging entrepreneurial foreigners working in Britain, in addition to U.K. income taxes, £30,000 each (spouses also have to pay) for the privilege of being there.
“Child benefit and child tax credits for families will continue to rise every year,” Brown promised, although officials are saying privately that the child tax credit will actually be cut for all save low-income families. All this spending, according to Brown, is to be paid for by the usual rooting out of waste–shades of Barack Obama’s health care plan–and, more important, higher taxes. “We will raise tax at the very top,” to 50 percent. At present, the marginal rate of 40 percent applies to earnings in excess of £35,000 (about $60,000); Brown would add a bracket–50 percent on earnings in excess of £150,000 (around $240,000). (The top U.S. federal rate of 35 percent cuts in at $372,950 for an individual.) So an additional £10,000 would net the earner £5,000, and if he decides to spend it, 17 percent of that remainder will be absorbed by VAT, the national sales tax, leaving a bit more than £4,000 in spending power. The rest will be fed into Brown’s spending and income redistribution machine.
Brown believes that Labour can contrast this plan to tax and spend with the Tories’ plan–to be firmed up at this week’s party conference in Manchester–to cut some spending and, as the economy moves to sustainable recovery, reduce the tax burden.
This might sound odd, unless you know Gordon Brown. After all, the recession has not produced a European lurch to the left. Spain’s leftish government is in deep political difficulty despite, or perhaps because of, an unemployment rate approaching 20 percent. Angela Merkel just won reelection in Germany, and in the process acquired a tax-cutting, free-market coalition partner to replace the left-wing group with which she has had to cohabit. Nicolas Sarkozy has pushed ahead with reforms in France, and Silvio Berlusconi remains popular in Italy despite the country’s economic troubles and his well-publicized escapades.
But that matters not to Brown, who has a deep conviction that he has been put on earth to be his brother’s keeper. He often says that he refuses to walk on the other side of the road if someone is in need. He does not believe that British voters prefer lavish lifestyles to greater social justice. All admirable. But he also does not believe that people work for money, at least beyond a certain income level, and that higher taxes reduce incentives to risk-taking and entrepreneurship. They wouldn’t for him, and in arguments he often points out that they don’t seem to for me and my rich American friends.
Nor does he believe that government is incapable of accomplishing some of his goals–in particular, he scoffs at reports of inefficiencies at the lumbering NHS, which employs 1.5 million people, more than any institution except the Chinese army, the Indian railway, and Wal-Mart. In short, he is an old-fashioned, unabashed, high-spending, high-taxing, big-government redistributionist. He has seen the past, and it worked. Now it is up to Britain’s voters to decide between his views and those of the modern, public relations-savvy, Old Etonians who run the Tory party.
Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).
