King and his Courtier

When the former Chief Secretary to the Treasury, David Laws, revealed in his book on the coalition negotiations that the Governor of the Bank of England, Mervyn King, was invoked as a supporter of the Conservatives’ plans to cut public expenditure by $6bn in an emergency budget, there was something of a furore. According to Anthony Seldon’s book, Brown at 10 (2010, p. 458), Gordon Brown demanded to know whether Mr King had spoken to Nick Clegg during the negotiations. The Bank of England denied this, but the incident provides more than irony, given that this was probably the first time Mr King and Mr Brown had spoken since the former called for a plan for reducing the truly terrifying deficit (Seldon 2010, p. 361).

Given this history, you would expect Labour’s approach to the Bank of England to be suspicious, if not outright hostile. The Shadow Chancellor, Ed Balls’ interview this morning could be interpreted as such, given that he accused the Governor of being ‘loyal’ to the current government and not being true to his own ‘heart of hearts’.

On the other hand, Balls also sympathised with Mr King’s situation. The Bank of England, in a settlement engineered by Mr Balls when an advisor to Gordon Brown back in 1997, is responsible for setting interest rates, buying and selling bonds and setting inflation targets, without the intervention of Whitehall. During the credit crunch and subsequent recession, the Bank has opted to keep interest rates at close to zero and practicing quantitive easing – buying back bonds to ensure that cash circulates and keeps the economy active. Generally regarded as a success, the Bank has nonetheless had to explain to his political masters why inflation keeps exceeding the target of 2%.

Perhaps Mr Balls is embarking on a relatively subtle (for a man renowned as an ‘attack-dog’) excercise to win friends and influence Mr King. In accusing the government of failing to support the Bank of England’s efforts to boost the real economy by raising VAT and precipitating an unemployment crisis, Mr Balls is attempting to make Mr King a prop – willing or unwilling – in his efforts to paint the goverment as irresponsible in its handling of the economy. In addition, he is using a card associated with Mr Brown – highlighting the more interventionist approach of the American Treasury – or, at least, while that lasts.

Confidence in a political party is as much to do with lack of confidence in the alternative, and Mr Balls will be determined to turn the tables on the Conservatives as soon as possible. Mervyn King has already warned of the likely decline in living standards as wages stall and inflation rises – that much will be accepted by anyone still in a job and with a mortgage. Unemployment will be more of a political livewire, and with George Osborne reportedly complaining at Davos that he cannot get British companies to spend the 5% of GDP that they are hoarding in cash, Mr Balls will feel he is well placed to exploit this paradox of thrift.

Miliband of Brothers

The mood at the Labour Party Conference is said to be like a wake, with 49.35% of the delegates distraught and a chunk of the other 50.65% concerned that they may have elected the wrong brother. In contrast, today started off as a kind of retirement party, with most feeling that they were too cool to be there, but still prepared to listen kind-heartedly to elder statesmen Jack Straw and Alan Johnson (the latter showing what an eloquent, if unspectacular leader he might have been) before the new leader addressed the class of 2010.

The speech itself compensated for at least some of the speculation and criticism that has diminished the result but there is still an element of shock about Ed Miliband’s victory derived from the momentum of his campaign and the unpreparedness of David Miliband for defeat.

The Machinist

What Ed’s victory does show, for those who care to look, is an ability to position himself politically and the means to employ a formidable machine behind him. Ed learnt on the campaign trail – it seems to have been some time since his declaration speech in which civic empowerment, regulation of the banks and immigration featured strongly. Those themes recurred, up to and including his first leader’s speech, but the more important ones were criticism of the Iraq War, coming out for a living wage and the vehemence of his attack on ‘US-style capitalism’.

There was always an element of ‘stop David’ to Ed’s campaign – not that he necessarily instigated that mood, but he was ruthless enough to capitalise on it. David was discredited by being tied to the War on Terror after he refused to turn his back on the last government’s foreign policy, particularly the Iraq War. Ed sought desparately to nullify Ed Balls and Diane Abbot by stealing their natural constituency in the Trade Unions and did so. He then tacked rightwards in order to convince wavering party members and MPs that he was a credible, centrist candidate for the leadership. Ultimately, there are good reasons for arguing that six MPs swung it.

David, on the other hand, was content to eschew the machine politics that are intrinsic to a party as bureaucratic as Labour and always appeared to be concentrating on the next battle. Set-pieces such as the Keir Hardie lecture or the King Solomon speech (oh, yes) were on a different level to any other in the entire race, but focussed too intently on the next General Election and not on the leadership one. For someone who raised so much money, David seemed determined not to spend it.

What is interesting in these circumstances then, is not so much that Ed won the leadership, but that doing so brought him dangerously close to ruin in his first day as leader. Admittedly, the press resented the defeat of their choice (and The Sun and The Times feature prominently in their caricature of ‘Red Ed’), but a General Election can never be won by moving from the left to the centre ground. If the candidate is not discredited immediately, he appears opportunistic. Moving left from the centre ground is a slightly different matter, as David Miliband’s public profile has suggested. This dangerous label, the uninspiring victory speech and the ghost of his brother put Ed Miliband on the defensive and if he deflected some criticism on the Andrew Marr show, he still had a lot to do today.

The New Labour Playbook and Ed

It was therefore reassuring that Ed’s speech was politically and emotionally sophisticated, (even if it had to be squeezed into the Obama formula of life story, narrative, pragmatism, unity). He has been criticised for ditching the ‘New Labour Playbook,’ but in reality it was always going to be impossible to triangulate when your party is the sole alternative to a coalition that is broadly based.

David Cameron was the first to see that the latest divisions in politics were not between parties but within them and by supporting Blair’s education reforms in 2006 he drove the wedge deeper between Old and New Labour. Ed Miliband appeared to understand this, heaping praise on the old New Labour (contradiction?) positions on law and order and Alistair Darling’s reaction to the financial crisis.

On the one hand, Ed Miliband will find it easy to triangulate on the deficit reduction plan.  But on the other, he had to hug the coalition tight on civil liberties, law and order and welfare reform in order to convince the public that Labour are still the party of ‘hard-fought British liberties’. He did so successfully, for the most part, while also finding space to attack the government for offering defendants in rape trials anonymity and their peculiar attitude to CCTV (which, crucially, also showed that he could tell a joke as well as his brother).

There were also some bold strides either ahead of, or to the left of the coalition, depending on your view. The much-vaunted ‘living wage’ formed a centrepiece, and the EU Agency Directive and ‘good society’ also got mentions. The ‘good society’ may sound like a neat counterpart to David Cameron’s big society, but with Ed as with every other activist who likes that term, I wonder if they know what they mean by it, and worry that they do.

One thing that Ed Miliband is very keen on is equality (The Spirit Level is appearently outselling even Ralph Miliband tomes at Conference – no word on A Journey). In this, he ought to be careful. As Tony Blair puts it, Labour needs to ‘get’ (another Ed-ism) aspiration. Ed’s associates, notably Neil Kinnock and Roy Hattersley, see left of centre-majorities as low-hanging fruit and both the impending fiscal tightening and the referendum on Alternative Vote (which won Ed the leadership) will encourage this tendency. On the contrary, Labour will have to fight hard for its reputation and landing blows on the government is only half the battle. The Party is unlikely to have an easy road back to power and will have to challenge itself before the public finds it fit for purpose.

Ed’s Long Shadow

All of which brings us to the Shadow Cabinet. There are two scenarios which will hugely influence Ed’s freedom to choose his team, and David is not the major player. Instead, the key will be the performance of Ed Balls and whether he floats or flops. Balls got approximately eighty first or second preference votes from MPs, suggesting that he will top the poll (unless David stands). If there are any notable shifts in voting in Balls favour, this will strengthen his claim to have an anti-cuts majority in the party and therefore close in on the Shadow Chancellor’s position.

It is in Miliband’s interests to have Balls onside, but Yvette Cooper has an eye for detail that would make her a surer touch in a very unstable playing field. Miliband has also suggested that he would prefer an emollient Home Affairs spokesperson who ‘gets’ civil liberties. Balls is soundest when on the attack, and Health would therefore be a very suitable post for his talents, given that it is an area in which the government is divided (the Lansbury reforms). Getting him to take a portfolio other than the Shadow Chancellor will be the first challenge for Ed Miliband. The second will be stomaching a handful of Blairite ministers, preferably at Education and Welfare and Pensions.

The Axeman Cometh

Labour underestimated George Osborne. “Where’s George?’ went the cry, assuming that Osborne was somehow the dark and scary underbelly of the Conservative Party, the sight of which would repel swing voters. Far from being hidden away, however, George was planning the election. And ultimately, he delivered.

Back in 2007, when Gordon Brown was riding high in the polls, Osborne saw that the rise in house prices had made a new swathe of people worried about the impact of inheritance tax on the estate they hoped to hand down to their children. Though it became an easy spot for Labour to jab at, it was in fact such a clever ploy to offer to raise the threshold, that Brown demanded that Labour adopt it.

Then came last year’s ‘austerity’ speech – the ‘we’re all in it together’ number. Again, some voters will have rebelled at the notion of cuts and it allowed Labour to fight a spirited rearguard campaign, but the speech had a more important effect. Firstly, it divided the Labour Party and called their economic management into question (subtly changing the terms of debate from the black eye given to the Conservatives over the banking crisis). Secondly, it got the chattering classes and the media obsessed with the idea that Britain was going down the tube – good for column inches. Finally, it allowed the Conservatives to criticise Labour’s plans to raise more taxes and to portray themselves as the party of enterprise and growth.

So Osborne’s latest coup de theâtre is just that, a political rather than an economic ploy. He has played up to the capital markets, helped in his cause by the fervours of the Greek debt crisis, and focussed the political light on what he would like to characterise as wasteful, or reckless spending.

Of course there is waste in government, as in every walk of life. Yet the notion that you should suddenly cut back on all of the systems designed to improve efficiency – and that might as well include cab fares – is ludicrous. ID Cards will be scrapped, but the savings will be so minimal that they aren’t even mentioned in news bulletins.

Some of these cuts will make a difference, though. The decision to abolish Child Trust Funds makes a mockery of the ‘Great Ignored’ that Cameron claimed to be fighting this election for. Instead, the poorest will simply become the new ignored, just as they used to be the old ignored.

Many will call the decision to give capital grants of £500 (in two instalments) extravagant. Admittedly, there was a case for means-testing the trust fund to return it to its original purpose of fiscally educating and capitalising the most socially and economically disadvantaged. And that is why the cuts announced by Osborne really sting – it’s not so much the £6bn, which we were all expecting, but the decimal point. Those extra £200 millions would have made up nearly half the trust fund budget, but instead they were culled, without study, without consultation, and within two weeks of taking office.

David Laws justified the decision by saying that those currently enjoying the benefits (and none are yet old enough to actually access them) will be better served by not being loaded with debt. What excuse is that? What kind of Liberal doesn’t believe in ensuring a widely distributed stake in the future? A minor modification to the scheme – to transform it into a voucher for higher education, for example, could have had the same effect and excluded the Liberal-Conservative fear that these payments are not socially-useful. Their very nature was that their utility was for the individual to decide, and what could be more Liberal than that?

Pushed to the back pages – page 42 in Saturday’s Guardian and not even on the front page of the BBC News website – was an interesting story. Britain’s borrowing estimates have been revised down by more than Osborne has just announced in cuts; £6.4bn. Income, capital gains and Value Added taxes all brought in more than expected – people are still earning and spending, which is a more useful measure of confidence than this misplaced faith in speculators.

Even so, the die is cast; the decision to cut spending has been made. The manner in which it has been taken is wearying. Among the cuts were ten thousand pledged university places in the sciences and technological courses. Also unable the escape the axe was the strategic investment fund, which directs investment to businesses that will drive future growth.

This government has a mistaken faith in the market to provide economic growth in Britain. In fact, laissez faire will not do, just as planning did not in the Post-War years. Osborne’s economic premise is that tax cuts are economically more efficient than spending. In this he is joined by his Liberal colleagues, who in 2005 were considering proposing a flat tax for the UK.

Flat taxes have been successful in Eastern Europe, where wages tend to be lower than neighbours (unlike the UK, and particularly if immigration is restricted). Ireland, which was lauded a few years ago for its low taxes and booming economy, is now one of the countries teetering on the brink of the Eurozone debt crisis. Lower taxes in themselves will not save the British economy. Instead, we will rely as always on our infrastructure and ingenuity. The Boy George has certainly learnt to colour in between the lines, but he hasn’t yet attempted to join the dots.

So Long, Blairwell

Memories of the Blair Administration; Tony’s Ten Years, by Adam Boulton

For a very brief two years, Tony Blair was almost forgotten in Britain. Gordon Brown’s premiership was the dominant political story and Blair was away from the daily accountability to the media that British politics make unavoidable. Suddenly, Blair’s bid for the EU Presidency and the apparent fatality of Labour’s fourth term have put Blair in the spotlight. The Sky News anchor, Adam Boulton, hasn’t taken his eye off the story, so that his account, though it certainly isn’t the first, and surely won’t be the last, is timely.

Boulton structures his narrative around the ‘Blairwell tour’ – the Prime Minister’s attempt to highlight his own achievements through a departure schedule of speeches, meetings and summits. Unlike most of the public, Boulton was relatively admiring of the Blair’s victory lap. They had been on a long journey together, as the comely title suggests, and Blair had dominated the political scene in a way that did not just play to his strengths as Thatcher had, but had constantly disorientated the opposition.

Moreoever, as Boulton clearly feels, the exit was classic Blair. In a typical display of imperviousness, the Prime Minister shrugged off the constraints that he had placed on himself, and in turn had been enforced on him by backbench rebellions. Further, he did so in a way that genuinely cemented a policy agenda; securing a deal on the EU budget to unfreeze France’s Common Agricultural Policy; keeping troops in Iraq to complement the US surge, and ensuring that Public Finance Initiatives (PFIs) and Academies continued to revolutionise the delivery of public health and education.

The story was, and still is, unfinished. Blair is a Statesman without a State, behind him so many wasted years and the wish he had gone further, and in front of him nothing certain – two well-intentioned foundations, a fragile international role and a reputation that is still to be secured. Boulton gives the impression that Blair is closer to where his instincts are, but pet projects are no substitute for achievement for a man who has held executive office.

A History Yet To Be Written

Boulton is hardly one-sided, but the EU Presidency affair has shown the limits of Blair’s powers. There are a whole host of questions still to be asked of Blair’s career, most of which Boulton serves to highlight, rather than answer.

First, what was the ultimate effect of Blair’s announcement that he would not seek a fourth term? Clearly, it put the third term constantly on edge, and much as commentators have tried to resolve the issue, it has never quite been answered.

Secondly, there is a question over Blair’s style. Peter Hennessy is perhaps the foremost historian of British government today, but he has never studied beyond the wasted energies of the first term. Two things stand out from Boulton’s account. Blair was the most presidential of Prime Ministers. He disliked the legislature and sidelined the Cabinet, though he always kept it well-stocked in ‘Big Beasts’. But given the sheer amount of law that made it onto the statute book, was it really the case that New Labour governed poorly?

The answer may lie in Blair’s upper middle-class penchant for self-abasement, so brilliantly captured by the ‘Yo Blair!’ episode. What is no longer remembered is the more important part of the conversation – where Blair offered to sacrifice his credibility in the Middle East to give Condoleeza Rice the opportunity to make a deal. Blair sacrificed an awful lot in his ten years, and failed to cover his core base. Some commentators say Blair killed triangulation, others interpret his whole career in that fashion. Certainly, the last word has yet to be written about the ‘Third Way’.

Another question that seems particularly resonant today is the degree to which New Labour’s naivety impeded its efforts to govern, at least for the first term. Preparation for government has become increasingly crucial as ambitions and bureaucracy grows. New Labour were underprepared when they came to power, and promised more tangible objects than any government before. The result was a plausibility gap.

The other New Labour preoccupation was the media. Boulton is understandably keen to defend his side and in any case, he believes that it was Alistair Campbell’s one-man-war on the press that so discredited Blair.

Memories of the Blair Administration is unsurprisingly journalistic in style. That need not be an insult. As Timothy Garton Ash has observed, journalists and academics like to use each others professions as insults, but interesting facts need to be taken to their full conclusion. There is a lot of history still to be written about the Blair Administration, something that the Iraq War Inquiry is doing as we speak.

Man on Wire

David Miliband has had a mixed few years, and specifically, a mixed few weeks.  A few weeks ago he made a speech to the Labour conference (the graveyard slot) that most media described as unhinged, and that I heard one Labour member describe as brilliant.  This week he could be lauded as Europe’s saviour, or he could reverse the West’s recently improving but schizophrenic relationship with Russia.

Of all the decisions Gordon Brown has made in his short premiership, two stand out as almost uniquely successful.  Bringing Mandelson back into the Cabinet was one.  Elevating David Miliband to the foreign office was another. 

Miliband was the strongest candidate when Brown faced the prospect of a stalking horse after Blair’s departure.  When Brown’s premiership was on the rocks, it was to Miliband that first plotters, and then James Purnell turned to, as the last great hope.  Miliband betrayed both (persuaded by Mandelson to remain in the Cabinet), and as a result saved the government and condemned himself to be passed over for the Labour leadership.

But Miliband’s inertia within the Labour Party are only a part of the story of his decline.  As significant has been his confinement in the foreign office.  It is a position – perhaps the only one – that does not offer a weapon with which to consolidate support to use against Brown.  Instead, it offers one of the most difficult conundrums in British policy – one that can’t be solved by money, that offers no easy choices and no photo ops; how does Britain deal with Russia?

Miliband is an intellectual, not a conviction politician, which shows itself more in his Russian policy than in anything else.  This week, when Miliband should be making his pitch to be the EU High Representative of Foreign Affairs (the best way to restore his credibility in the Labour Party and ride out possible opposition), he has to walk the high-rope that is a diplomatic visit to Moscow.

Going, Miliband was optimistic.  On his Foreign Office blog he wrote,

“We don’t always see eye to eye with Russia, but we share the same global challenges and it is important that we work on them together.  And as we are both permanent members of the UN Security Council and members of the G8 and G20, there is a wide range of questions where, by working together, we really can make a difference.”

The implication is that Britain is giving up the passive resistance that has been the hallmark of Anglo-Russian relations.  Over the past three years, the Litvenenko affair, the British Council controversy and the Georgian war have been unprofitable.  It quickly became clear that Russia would not compromise, and that Europe did not have the unanimity to respond.

In recent weeks, Russian has shown some receptiveness to the American State Department’s re-setting initiative.  In return for the USA withdrawing its missile defence system, Russia made a vague statement on imposing sanctions on Iran.

I can only assume that Miliband’s visit is part of these developments.  However, it has hardly gone to plan.  The Litvenenko affair has been allowed to resurface, putting Miliband in an impossible bind. 

To be contrary, and go against the mood (very current, unsecure, but potentially powerful), or stand up for individual cases and abstract principles?  Either way, the issues are unavoidable.  Extending NATO or the EU to Russia’s borders could raise the chances of war (probably with Ukraine).  Too much emphasis on business means sacrificing the Russian civil society Miliband said he was keen to hear from to the dictates of the Kremlin.

Wittingly or not, Miliband’s visit has raised two uncomfortable debates at a time when they could least be afforded.  On the one hand, Labour faces a choice between a realist (dealing with the Russian government as is) or ethical (actively seeking to influence the internal balance) foreign policy.  Secondly, he raises the question of Europe’s approach.  Are European interests best served by trying to close the door on Russia, or by engaging with her?

The latter is the most immediate concern (the former is age-old, and still unresolved).  The Lisbon Treaty was designed to streamline European decision-making and maximise Europe’s collective influence.  The argument that Miliband seems likely to provoke could yet be good for Europe, but it is more likely to create divisions than to resolve them.  Britain will be seen as an awkward partner, or European countries simply will not be able to agree.

As for Miliband’s EU prospects?  They will not be helped, although Russia is not the most significant issue at stake.  Whether a diplomat can be an intellectual and still be effective is a serious question that was raised by Bill Clinton’s presidency.  Miliband may answer it.