Cutting Labour back to size: an old story with a new twist

Gerry Hassan
18 January 2010

The mainstream media coverage of the future of public spending has become entirely focused on the need for future spending cuts. The only issue left in doubt that of timing, the degree of brutal language used and the areas which are supposedly meant to be exempt: the latter thus combining hardness and special pleading!

Nick Clegg, Lib Dem leader, got into a small amount of bother transgressing the boundaries of this new consensus when he talked of the need for ‘savage public spending cuts’.

Larry Bogad of the University of California, Davis earns special marks for describing the power of this ideological dogmatism as a ‘hegemonologue’ (many thanks to Stephen Duncombe of New York University for this reference; for Larry Bogal’s writings see Whether this catches on we will see, but it is clear that the determination of the elites who gave validation and gained from the ideas of the ‘weightless world’ and ‘the knowledge economy’ are not going to give way voluntarily, or because the evidence is stacking up against them.

This ideological prism is combined with a very personalised, superficial interpretation of domestic politics in which the stock of Gordon Brown is low and not trusted, while David Cameron’s is higher and trusted more.

Thus, Brown’s recalcitrance in not coming out and admitting the need for public spending cuts has been used to point out his stubbornness, lack of clear-headness and inability to be honest. The entire Labour debate is presented as the need to get Brown and his acolyte Ed Balls to admit what everyone else has: that there have to be stringent cuts.

Normally this debate is conducted without any reference or understanding to British political history. So Daniel Finkelstein in The Times has to be thanked for placing the current events into a time frame in his recent piece. In doing so, however he locates the entirety of Labour history in a perspective that justifies the dominant political and economic interpretation of the present crisis, which makes you question his interpretation of past events at least a bit.

Basically Finkelstein argues that the Brown/Balls disagreement with everyone else in the Labour Cabinet is the time-honoured debate Labour have in government when things go wrong about the need and scale of cuts in public spending:

The scene of senior Labour men arguing about public spending is one of the most common in the party’s history. Every Labour Government we have had has been punctuated by a deep division of this sort, requiring late night summits and dramatic deals.

Finkelstein cites Ramsay MacDonald, then Prime Minister, and Philip Snowdon, his Chancellor in 1931 trying to win the Labour Party to cuts, particularly to unemployment benefits. They failed to and defected to the Tories. He then cites Labour in 1951 in the dog days of Clement Attlee’s administration debating Hugh Gaitskell’s proposed cuts. Then comes the bitter and agonising debate in 1976 under Jim Callaghan when at the behest of the IMF Labour had to preside over major public spending cuts which heralded the onset of the age of monetarism.

The mindset of groupthink and clinging to economic orthodoxy are transparent. The 1931 cuts were at the behest of City financers to maintain a classical economic approach as the pound and the country’s commitment to the Gold Standard (a form of managing currencies in relation to the price of gold) came under threat. The main targets of the pain were the poor. Suffice it to say that once Labour fell from office the need for economic conformity diminished and Britain left the Gold Standard while the pound devalued.

The 1951 crisis saw Labour pay for the rearmament of the Korean War with the introduction of prescription charges, eye and dental charges in the NHS, a mere three years after the service was set up. This episode led to the resignation of three Labour Cabinet ministers including Nye Bevan, and the start of a decade of Bevanite v. Gaitskellite intra-party feuding; the sort of stuff which still makes the Brown dog days seem small fry! The incoming Tory government under Churchill soon cut back funding for Korea as an armistice was negotiated.

The 1976 crisis, we now know, saw Labour taught a lesson by the markets and IMF to see if it could deliver savage public spending cuts. Jim Callaghan and his Chancellor, Denis Healey, delivered, only to find out later that the supposed scale of cuts had been much over-stated and that much of the pain could have been avoided – not least because North Sea Oil was about to come on stream.

Finkelstein makes the ridiculously superficial point, also citing the 1968 mini-crisis involving Wilson post-devaluation, that the lesson we should draw is that Prime Minister and Chancellor need to remain united, whereas the nasty Gordon Brown is on the opposite side of the argument from his Chancellor, Alistair Darling.

While Finkelstein has done us the service of bringing history into this debate, the lessons are surely quite different. In retrospect, it is now clear that each of these episodes saw the need for cuts completely over-stated, and that the real driver of events was the power of financial markets and their desire to bring Labour and any idea of alternative political paths to heel.

In 1931 Labour should have had the confidence to abandon the Gold Standard. In 1951 it should not have put the Korean War above the NHS. After it won in 1964 it should have devalued much earlier than 1967, avoiding the need to deflate the economy when the rest of Europe was growing. In 1976 it should have defied the IMF. All these episodes were about the need to show political determination in the interests of the British people as a whole and for social democracy rather than bending to the city and its media tycoons.

Where does this place Brown and Balls? I would not go as far as Seamus Milne in seeing them as suddenly joining “the side of the angels”. Does Gordon Brown, imbued as he is in Labour history, remotely understand this state of affairs at the end of the longest ever continuous period of Labour Government in the UK? Milne says Brown and Balls are taking a more “left” line than Mandelson and Darling. But new Labour has deformed and distorted too much for such terms to apply to it any more.

What the current political dispensation shows is that the New Labour experiment of governing by backing the City and finance capital has come to a close. Labour is being brought to heel by the brutal realities of the markets who permitted it to benefit from unregulated growth from which the bankers and their friends gained the lion’s share, but who won’t take a fair distribution of pain in the downturn.

Finkelstein throws a lot of invective on Brown commenting that he is “a poor leader, that no one likes him, that he is a loser” and continues that such criticism lets him off lightly, “this verdict, damning though it is, is too kind”. Such personalised attacks, reminiscent of the way the media systematically treated Tony Benn or Neil Kinnock, tells us more about the prejudices of the anti-Labour press (and Murdoch) than about the Prime Minister.

Yes, we need a historical and economic interpretation of current events. But not just one that takes the bankers’ viewpoint, à la Finkelstein. We also need to understand the historic failure of New Labour to ever amount to being a genuinely progressive force in British politics and not pretend that Brown has suddenly become a lefty and is no longer the bankers’ friend. Even if he’s not wrong to resist the demand for cuts he helped ensure the hegemony of language and attitudes that makes his resistance seems merely graceless and unreasonable. 

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