Why The New Tony Talks Old Labour; powerplay; if taxes must rise

THERE is a late addition to next week's Labour Conference Fringe programme: "Red" Tony Blair speaks out on redistribution of wealth. Soak the rich! Fleece the fat cats! Socialism now! (late bar).

No, it doesn't quite work. Blair may have uttered the unmentionable last week, but I don't think he'll be holding any banners for it. Nevertheless, the PM doesn't use words lightly, and Labour activists are speculating in fascination on why he decided suddenly to talk suddenly about the redistribution of wealth.

No political party has weighed its words more meticulously than New Labour. Focus groups famously forged an entire new Labour vocabulary in the 1990s, called "warm words". Old concepts relating to class politics, power and poverty were done away with and new, voter-friendly terms used in their place. Poverty became "social exclusion". The old Labour commitment to a "fundamental and irreversible shift of power to working people and their families" was replaced with a promise to govern "in the interests of the many rather than the few".

Redistribution of wealth, with its connotations of the politics of envy, was the ultimate no-no. It was socialism red in tooth and claw. The best that New Labour was prepared to offer the left was mild- mannered social inclusion - bringing poor people up rather than dragging rich people down. Asked directly at the last election whether he was concerned about the rich apparently getting richer, Tony Blair said he wasn't. Equality of opportunity was the intention, not equality of outcome.

So the fact that Tony Blair dusted down the R-word is highly significant, even though Labour spin doctors insisted it did not signal any imminent increase in income tax. And I think it would be wrong to dismiss this rhetorical switch as merely a cynical bid to win over Labour activists in revolt over Iraq, as has been widely argued.

Certainly the Prime Minister should be worried about next week's Labour conference getting out of control. Opposition to unilateral action against Saddam Hussein is very widespread. I haven't spoken to one person, left or right, in the Labour party recently who has had a good word to say about Blair's coat-tailing of George Bush.

But if Mr Blair was trying to send a message of comfort to his reluctant troops, you might have expected it to be more directly related to the Iraq crisis. A stronger commitment to the UN, perhaps. Or a promise to listen more closely to the fears of other European nations. Talking about redistribution isn't going to stop war critics like George Galloway or Tam Dalyell in their tracks. Nor are the unions, with their manifold grievances, going to be placated by a couple of sentences.

Anyway, the redistribution speech seems to have been in gestation for rather longer than the current Iraq crisis. It dates back to Gordon Brown's Budget, which is now being seen as something of a defining moment in Labour's fiscal thinking.

It came as a shock to many in the party to discover that tax- raising could actually be popular. Opinion polls conducted after the 1p rise in national insurance contributions (which has the effect of a 1p rise in income tax) showed that the budget was well received by two out of three voters. Gordon Brown's personal ratings leapt. The issue that everyone thought had lost Labour the 1992 general election seemed to have lost its sting.

However, not everyone is convinced that the British electorate has overcome its tax aversion. There could be other explanations for the 2002 budget success. First of all, it isn't clear that everyone understood that the increase in national insurance was a tax hike. People won't be paying it until next year, anyway. We are notoriously illiterate when it comes to taxation. Ask yourself this question: how much more tax are you going to pay as a result of the 2002 budget? I certainly couldn't answer. The NI increase may turn out to have been Gordon Brown's best ever stealth tax rather than revealing a sea- change in public attitudes.

On the other hand, it may be that people have accepted the argument that, if public services are to improve, they should pay a little more for them. We are a shopaholic nation, spending way beyond our means in the longest consumer boom since the 1950s. It may be that the message has got through to people that public services ought to receive a share of this cash, and that direct taxation is the best way to pay for it.

Of course, history tells us that while people have generally told opinion polls that they are willing to pay more for things like the NHS, they tend to vote with their wallets in the polling booth. This could happen again, especially if there is an economic downturn. We are talking here about fair-weather attitudes, since most people haven't yet been affected by the stock-market crash and the economic slowdown. It stands to reason that at some stage a price will have to be paid for the current consumer boom. Since the Tories are not likely to gain office for the next decade or so, it is going to be Labour who are in power when that price has to be paid.

In fact, the coming economic uncertainty is already becoming a factor in this government's calculations. Gordon Brown's forecasts for future growth have had to be scaled back. There was always a problem about how the current massive increase in public spending was going to be financed in the next parliament. The Institute for Fiscal Studies (IFS) pointed out last year that there was a (pounds) 7 billion hole in the Chancellor's numbers in years five and six of the current spending plans. Since then, with shares plunging and the world economy slowing to a crawl, forecasts of government revenues have had to be cut. It may well be that Tony Blair is sending a signal now to Britain that taxes are going to have to go up in future and they had better prepare for it now.

Mind you, that still doesn't explain why he chose to revert to Old Labour language to deliver this warning. Perhaps the simple answer is that he has finally been persuaded that it is time to call a spade a spade. For the reality is that one of the few things this government has actually succeeded in doing is redistributing wealth. The IFS, the leading authority on all things fiscal, confirms that the poorest fifth of households have seen their after-tax income increase by 2.5% in each year since Labour came to office. Those in work but on low wages saw earnings rise by 3%. Meanwhile, earnings for the top fifth of income earners rose by less than 2% a year. That may not seem like a big difference, but in periods of high growth top earnings would normally be expected to grow faster - much faster. During the Thatcher years the low-paid remained static or fell further behind while top earnings leapt off the scale.

Labour still have a lot to do. Only half a million children have been raised out of poverty in the first five years. Millions more languish in relative and absolute poverty in sink estates in areas like Dundee. But the government can claim that it has made life measurably better, at least for low-wage-earners in work. It has restored a degree of intellectual credibility to the idea of redistribution. The irony is that while New Labour are rediscovering income tax, all the main parties in supposedly social-democratic Scotland have turned against it.

Copyright 2002
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