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After Mandelson, Can New Labour Avoid an Electoral Challenge? An Open Letter to John Prescott

Ken Coates

DEAR JOHN, The abrupt departure of Peter Mandelson from the Government has provided the newspapers with a splendidly juicy scandal, much enjoyed by many readers. Most Labour members have also been perfectly happy to see the back of the Governmentís spin-doctor.

In your interview with the Independent newspaper you are quoted as saying: "With the support of Gordon Brown we have decided that public expenditure is there to uphold the economy in the traditional Keynesian way." In modern terms, this would mean close co-operation with Oskar Lafontaine and the other socialist and left coalition Finance Ministers, to put in place a full-scale job creation policy all across Europe. It would mean some higher taxes, and much more borrowing. It would mean ending the crucifying interest rates imposed by the Bank of England, which are designed to "squeeze out" jobs (often in the North) in order to restrain inflation (for the middle Englanders in the South). British interest rates are more than double those in Europe, and it is already clear that employment here is beginning to rise again. High interest rates mean that the pound is over-valued, making our exports too dear for overseas customers, whilst our imports are artificially cheapened, flooding British shops with low priced goods. So factories close. Urgent action to bring down interest rates and the artificial value of the pound could perhaps be the beginning of a return to "the traditional Keynesian way".

What means are left open to Labour Party members to change these policies since the powers of Party Conference, and the Party structures in the country, have been so eroded? Most Party supporters think jobs should have priority, not inflation. How do you advise them to act, to secure this change?

British unemployment is massively camouflaged, by the fact that its victims are forced on to other benefits, so that they will not count in the employment statistics. But the social cost of unemployment squeezes spending on welfare, and pushes the Government to seek economies in the budget for pensions, student maintenance, benefits for lone parents, and funding to aid the disabled. Eighteen months of New Labour have been a period of misery for large parts of these constituencies.

There are very many reasons for deploring various policies of New Labour both at home and abroad. But, as all too often happens, the Government gets away with misbehaviour overseas because it does not always directly impact on electors in Britain. But the Government cannot get away with the mean-spirited attacks on the poor, and the savage cuts in their living standards. Britain today is three times richer than it was during the formative years of the welfare state. Yet there is continuous and increasing evidence of the crisis in the Health Service which is under-funded in key respects. There is a running crisis in the schools. Alistair Darling has announced that the Government aims to "save" £750 million in benefits paid to disabled people. Yet British spending on support for people suffering sickness and disability is already proportionately lower than that of any other country in the European Union. People claiming Incapacity Benefit will now be paid less if they receive private pensions, or health insurance payments above the limit of £50. The test to qualify for the benefit is being made more difficult.

Further "savings" will come from people claiming Disability Living Allowance (DLA). The hated Benefit Integrity Project which scrutinises the claims of people on higher benefit rates is due to go in April. But 12,000 people have lost their benefit as a result of two yearsí operation of the project, and many people on lower rates have also experienced cuts or even withdrawal of DLA. The Government has also moved the goalposts for those appealing against refusal of Incapacity Benefit. Lay assessors have been removed from Tribunals.

Most Labour members would like to reverse these decisions. What means remain open to them to do so, in the restricted democracy of New Labour?

Every member of New Labourís leadership team is a product of the social and educational revolution which transformed Britain in the post-war years. All of them went through periods of higher education, and all received maintenance grants if they needed them. None of them were compelled to pay tuition fees. But New Labour has put an end to free access to higher education. Now the regime of fees and loans is working to the detriment of poorer families. Many people feel that to incur a debt on graduation, perhaps as much as £12,000 or £15,000 is too much of a risk in the present uncertain economic environment. Mature students in particular have been frightened off by the new regime. There are 10% less applications for places from them.

Yesterday, Britain was one of the more generous providers of student grants in the European Union. Today it is among the worst. When we look at the New Labour ranks sitting on the front bench, arms folded, faces content with the large measure of power which they think they hold, confident in the support of the massed ranks of New Labour clones on the back benches, it is important to remember that all of them have joined together to kick away the ladders they came up by.

All this is worthy of censure, and demands action to restore the welfare principle. How, within the Party, can people do this? Is it not understood that if you close down the normal channels of democracy, people will have to make their protests outside?

The same complacent amorality becomes apparent if we examine the situation in which an unprecedentedly large intake of New Labour women MPs could troop through the lobbies in order to curtail the benefits of lone mothers. For these successful women, solidarity is a word to use on Sundays. Unfortunately, the House of Commons does not sit on Sundays.

Even so, nearly a quarter of all families in Britain are now headed by a lone parent, usually a mother. This is by far the highest proportion anywhere in the European Union. Families with one parent are among the poorest in the community. Recognising this, some years ago they were given slightly better child benefits, and other enhanced payments. This was the result of a policy decision to ease their poverty, and improve their health, which often suffers during the stress of lone parenting. But New Labour has deliberately worsened the conditions of these vulnerable people. Since last July, new lone parents and their children have suffered a cut of up to £11 a week in their entitlements.

Britain was already top of the child poverty league in Europe. The recent cuts push even more children into deprivation.

All this causes dismay among Labour supporters. How should they register their protests? When you were a militant seaman, would you have given them the same advice they are getting now? With the Party closed for discussion, where can they express their feelings but at the polling booths?

It is when we look at pensions that we see how very plainly New Labour is simply old duplicity. How many times have you, John, reiterated the promise that pensions would be linked to increases in the cost of living or to increases in average earnings, whichever index was the higher? Not a single senior Labour spokesman can be found who has not made this promise many times over. No one who was in the House of Commons before 1997 can avoid responsibility for this promise, which was reiterated individually and collectively in every contest in which the Labour Party was engaged from the time that Mrs Thatcher severed the link, in the earliest period of her premiership. The Barbara Castle formula, linking pensions to average earnings or the Cost of Living Index, whichever was more advantageous to the pensioners, was not extinguished from Labourís conscience easily. But the act of piracy which neutered the Labour Conference did ensure that the customary democracy of the Party was suspended when Barbara tried to assert Labourís original commitment to the elderly. Today, we are further from justice for our pensioners than we have ever been. But none of the major tax cuts on the rich, which brought about a reverse distribution of wealth in Mrs Thatcherís day, have been corrected in Tony Blairís.

A recent report from a major insurance company showed that one-third of British pensioners live in poverty, and are forced to cut down on essentials. Two-thirds exist on an income below £100 a week.

Even if pensions had continued to be tied to earnings the basic state pension would still be too low at £87.85 a week, £23 more than the current level. Married couples would get £37 a week more: not enough, but an earnest of more civilised treatment to come, perhaps.

Barbara Castleís scheme was well thought out, and cheap to run. It could and should have been extended to lower paid workers and to carers. Its destruction means that there will be an over-riding division between richer and poorer pensioners, and it means that the poorer people will be the losers. Even the aims of the Government have been shrunk. The current goal of 20% of average earnings as a minimum is below the level of the early 1980s, and no more than the present means-tested £75 guarantee. This is half the amount which Age Concern believes an old person needs for subsistence.

Last winter was mild, but more than 21,000 people died of cold-related diseases. The previous year saw 38,000 deaths. The winter fuel payment of £20 for single pensioners, or £50 for those on Income Support, is nothing like adequate to meet the needs. But coal mines are closing because the market signals that their coal is not "needed".

These, John, are the issues on which Old Labour supporters can decide the extent of the fidelity of New Labour to old values. All of us will agree with you that "we need to keep away from rhetoric" and move back on to what you call issues of substance. But such substance is not a purely verbal matter. Socialist values demand action. If your new alliance with Gordon Brown could bring about action, much of the disillusionment of the past eighteen months might be dispersed. The programme needed to restore confidence is, unfortunately, now extensive. But if you could reverse the worst of these inequities, it would be a start, and many people might then be happy to give you such moral support as would enable you to go further. The first post-Mandelson cabinet could resolve, tomorrow, on the following:

  1. instant implementation of the Castle formula for determining universal pensions, linking payments to average earnings or the cost of living, in the way we have just described;
  2. instant annulment of student fees, and restoration of an appropriate grant system;
  3. an end to "economies" at the expense of the disabled and the sick, and the implementation of a comprehensive programme of rights for disabled people, in agreement with their own associations; and
  4. an end to the intimidation of lone parents and the restoration of their necessary benefits.
This post-Mandelson cabinet, initiating such policies as an earnest of good faith, could put an end to the need, now already very pressing, for independent or alternative political candidatures to appeal directly to the electorate in defence of the values which Labour used to recognise in near unanimity. A change back to acceptable policies could invite those who support such values to concentrate their attentions on the recovery of the Labour Party, from the amorality of New Labour, and on the renewal of its now sadly impaired mechanisms of democratic accountability.

However, we must face the facts. The departure of Peter Mandelson may not be sufficient to give us back what we have lost. If it is not, then it seems inevitable that New Labour must face a challenge at the polls from the old, the young, the sick and the disabled, but also from all those others, ever more numerous, for whom conscience is a voice which must be heard.