New Labour v.s. Old Labour

New Labour was forced by political circumstances to adopt neo-liberalism and the Conservative European, Foreign and Defence policies, and so abandoned traditional Labour party ideology. Discuss.

New Labour began government with a promise not to increase spending above Conservative plans for the first two years of their government along with no increases in basic or high income tax. The government was strongly pro-Europe and wanted Britain to play an active role in the policy making decisions of the EU along with a future promise to join the monetary union. Foreign policy took on an ethical role with the government promoting human rights and intervening to stop abuses. Alongside this they also increased spending on foreign aid and made the FCO more transparent. This essay will examine to what degree these policies which Labour undertook were a result of being politically constrained to adopt Conservative positions on the economy, Europe, foreign and defence policies.

On economic policy the new government didn’t increase income tax and constrained its spending to the Conservatives spending plan for the first two years of office (in fact, Major had actually said he would have spent more than Labour had his government retained power). This was largely due to New Labour being politically obliged to distil the view that the party was economically incompetent and to align themselves in the public’s mind that they could successfully run the economy. This explains a lot in why the government constrained fiscal policy (by adopting the Conservative budget) and also why it made the Bank of England independent, effectively constraining itself in monetary policy too.

It is argued that New Labour adopted neo-liberalism as this was the reigning orthodoxy and they wouldn’t have been able to get to power whilst peddling the ideology of socialism. Although they did revoke Clause 4, which was rewritten by Tony Blair in 1994, this was of more symbolic significance than anything practical. Clause 4 had stated that Labour would press for the nationalisation of private industries, but this had never properly been implemented except in a few natural monopolies (arguably to preserve capitalism by injecting these failing industries with state investment) by any Labour government despite having the opportunity to do so. Rather than adopt a neo-liberalist economic policy, it is actually the case that New Labour experimented with a new idea: the Third Way. This ideology supposes that capitalism should be tempered with help for those unable to work, but that communities (friends and families) should be more involved in the provision of this assistance and that the support is only there for those who genuinely need it rather than those who are just unwilling to work. This shows a recognition by the party that there was a public view that the welfare state was being abused by those who didn’t contribute to it, and the party adapted their policy to reflect this demonstrating how politics has transgressed into statesmanship.

New Labour’s Third Way was different to Conservative neo-liberalism because Labour wanted to preserve the welfare state, and if this meant they had to trim excesses to sustain it then that is what they would do. Furthermore the government actually increased the tax take to 42% of GDP, up 5 percentage points over 5 years. They managed this, whilst sticking to their electoral promise, by increasing taxes in excise duty and the sales tax whilst simultaneously benefitting from a booming economy which increased tax receipts.  They used this extra money to finance an increase in education and health spending, which could be seen as a reversion to Old Labour in that they still demonstrated a tax and spend policy, despite their ‘new’ ideology. Perhaps unintentionally a lot of this increase in spending actually went to wage increases and the hiring of more middle-managers rather than an increase in quality and service, as was likely intended.

Another argument used to show that New Labour was now pro-business was their support for private finance initiatives (PFIs) to involve the private sector in provision of public services by tendering out contracts for firms to finance, build and then maintain a public service (e.g. a prison, or hospital) for a period usually of 30 years. However it is wrong to believe that this shows that the government was committed to reducing the size of the public sector and to outsource this to private sector for neo-liberalist ideological reasons. On the contrary, the reason New Labour did this was to actually extend the amount it could spend on public services by delaying having to pay for the increase in expenditure until future generations and more importantly; future governments. Between 1997 and 2005 there were 68 new hospitals built across the country. 64 of them were PFI built. It wouldn’t have been possible for the government to build so many hospitals and invest in healthcare had they not been able to outsource this and delay the cost for the future, particularly whilst they were trying to present the image that they had changed and were committed to maintaining a credible budget.

New Labour presented an image of themselves as prudent economic guardians, with an intelligent Chancellor (Gordon Brown) who was constrained by monetary and fiscal policy bonds from returning to Old Labour ways of taxing and spending. This mediatic government successfully portrayed themselves as wanting a new way, through the revocation of Clause 4 and electoral promises. However, this was not the case, the government was not neoliberal in ideological practice but still had the socialist tendencies of tax and spend to increase the welfare state, regardless of whether this appeared to be initiated by the public or private sector.

New Labour didn’t adopt the Conservative European policy of the ‘empty seat’ and eurosceptic sentiment. Conversely, they embraced Europe and played an active role in the Union, even promising to pave the way for an eventual British adoption of the euro currency providing the assessment test was met. There are a variety of reasons New Labour took this tact on Europe, despite being previously anti-Europe and wishing to leave the common market. Firstly, the Conservatives were in disarray over Europe and were seen to be tearing themselves apart over this matter. Labour wished to pick up easy votes from them by supporting Europe – something the median voter agreed with. Secondly, the Liberals/SDP had gained lots of support and votes largely on the basis of them being Europhiles which the public believed in. Finally, the party was ideologically supported to a strong European community due to its social policies, which leftist grass-root supporters hoped would mean a tempering of neo-liberalist policy and protection of the welfare state. This was aided by the rise of young Europhiles in the party such as Tony Blair and Gordon Brown.

Whilst in power New Labour was an ardent supporter of European expansion to extend the reach of the union. This was to increase the size of the free market so larger economies of scale and greater market access could be reached; something which could be argued to be pro-business. But furthermore, more fundamentally there was a desire to incorporate the social dimension of worker rights (e.g. the working time directive, limiting the amount of hours worked per week) into Britain without this being seen as a socialist overthrow by the incumbent government. A larger Europe, which would automatically be English speaking (as opposed to French or German), would increase British influence and diminish that of the French and German, allowing Britain to export its ideas to a larger audience abroad.

The Foreign and Defence policy was slightly more interventionist and humane than the Conservative doctrine of maintaining the status quo but otherwise leaving the world to itself. New Labour believed that global powers should intervene to prevent human rights abuses with military force if necessary and the promotion of human rights was one of the reasons for the desire of European enlargement to indoctrinate this view abroad. Despite this commitment, and the introduction of arms trade regulations to stop British-manufactured weapons being exported to abusive regiments, there was still examples of firms circumventing legislation in order to export weapons abroad, often to regimes with records of human rights abuses (for example Indonesia). Despite New Labour ideology on promoting human rights when it came down to money the government was happy to ignore their beliefs in order to maintain the arms industry which employed 415,000 people in 1996 and brought in £5.1 billion to the country. Evidently this shows the statecraft-ship of political parties as they are willing to forgo their ideological beliefs in order to placate interest groups.

The government on coming to power implemented a strategic defence review to see where money could be cut from the defence budget. Between 1999-2002 defence spending fell from 2.7% of GDP to 2.4%. They managed to do this without causing any dissent demonstrating the successful mediatic abilities of this renewed party. Despite these cuts, the government could have gone further in reducing the size of the territorial army or by scrapping the purchase of 2 new aircraft carriers. The fact that they didn’t may show that they adopted, in a sense, the Conservative policy on strong defence and protection of the shores.

In conclusion, there was a massive shift in ideology within the Labour party, New Labour wanted to portray itself as a young party with a new team which was completely different from Old Labour on both policies and ideology. A lot of these new policies could be regarded as being a continuation on the Conservative policies which Labour was forced to adopt by the electorate. However despite adopting Conservative views on the economy this was only to a narrow view and in practise the party reverted back to its old ways of tax and spend but managed to display their actions as part of an attempt to make capitalism more inclusive and hence managed to forgo public fears of socialism by successfully manipulating the press. The only policies that Labour could be accused of adopting from the Conservatives were that of the economy and foreign/defence policy. New Labour’s policy on Europe was completely the opposite to the Tory standpoint as Labour was pro-Europe and wanted Britain to play a significant role at the European table. It could be argued that to a degree the party was forced to adopt Conservative foreign/defence policy, by agreeing to keep and maintain the nuclear missile system the Labour party was turning its back on the previous desire for unilateral nuclear disarmament. Other than this though the Labour party generally kept the consensus and didn’t need to actively adopt Conservative policies, on some issues the Labour government actually changed the consensus, for example through the change in policy on arms exports and foreign aid. Finally, although the Labour government was forced to abandon Clause 4 and official connections with socialism in order to win over political appeal, the party was still very socialistic in its tendencies but was able to overcome this by successfully using the media and electoral promises to give of the right impressions of an economically prudent party.

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