Britain: New Labour in Power… Did Things Get Any Better?

By Ciaran Mulholland in Socialist View Spring 2001

NEW LABOUR’S theme tune during the 1997 election was the D:ream song "Things Can Only Get Better". The choice of this song was apt - Tony Blair's approach was timid and promised little, instead focusing on the record of John Major in order to win a majority.

After the election there was little enthusiasm for the new regime, rather a hope that things just might improve and overwhelming relief that the hated Tories were at last gone. Now that the next General Election is imminent the question can fairly be asked -did things get any better? And, importantly did New Labour in power deliver anything that a Tory administration could not have delivered?

Tory spending plans

In the first two years New Labour continued as the Tories left off, desperate to persuade the City of London that they were "safe". The Bank of England was given enhanced powers over the economy and spending was held down. In a scandalous move benefits for lone parents were cut. A minimum wage was introduced but was set at a poverty level at the behest of the employers. Similarly New Labour bent to CBI pressure when introducing new trade union legislation. The result has been no loosening of the legal straitjacket that impedes workers who try to organise.

The most dramatic action of New Labour in the early days was to bring two generations of free education to an end by the introduction of fees for university students. The result has been a drop in the number of applications from working class young people, especially for longer courses such as medicine. The fact that the cabinet, almost to a man and a woman, had benefited from the introduction of free education in the post-war period did not seem to deter them as they moved to ingratiate themselves with the market.

It is almost certain that a Tory administration would not have introduced reforms to the House of Lords or have devolved power to Edinburgh or Cardiff. Apart from these limited measures, however, there is little else that New Labour has done that a more mainstream Tory regime could not have, especially given the relatively favourable economic situation of the last few years. Some of Jack Straw's measures on crime, and his vicious attacks on refugees in particular, would put more liberal Tories to shame. In essence New Labour did not challenge the prevailing belief in the "market" and did much less than all previous Labour governments to ameliorate the worst effects of the system. In the last year there nave been improvements, albeit marginal ones, for some of the poor. The weekly income for the poorest pensioners rose from £68.80 in 1997 to £92.15 in April 2001. Child benefit has risen by 25%.

Spending on education and health was screwed down until 1999 but has begun to rise in the last year. The extra sums pledged have so far made little difference, however. This is because huge sums are required just to make up the accumulated shortfall from years of underspending, especially the decades- long lack of investment in new schools and hospitals. Further increases in spending will help, but only so much. Many of the NHS's problems, for example, are problems of the system. Much ill health is a result of inequality; and New Labour is on record supporting inequality; And of course, in the last analysis, Gordon Brown can only deliver on his promises if the economy stays on course. As we shall see he has not, despite his boasting, abolished the cycle of boom and bust. And a new recession will mean that all bets are off.

Increasing inequality

New Labour has presided over a widening gap between rich and poor. Average household income in Britain is now £23,000, up 19.6% on 1996 and up 8.6% on 1998. This increase was concentrated in richer areas - Surrey saw an increase of 12.5% over the last two years. Overall, after-tax incomes have risen less under this government than under six of the last seven governments since 1964 (the exception is the first Thatcher regime from 1979 to 1983, a time of deep recession). Alongside this paltry rise in income, there has been a fall in the social wage, or the benefits a worker can expect to receive from the state, such as free education.

Poverty remains endemic in Tony Blair's Britain. The biggest concentration of poverty is in Liverpool. The central L16 postcode area has 65.8% of households earning less than £10,000 a year. In Vauxhall, Liverpool, the average annual household income is only £9,000. A few miles away in Heswall, the Wirral, the comparable figure is £46,000.

The richest one fifth of the population have seen their share of post-tax national income rise from 36% to 45% between 1978 and 1998-1999. The incomes of the chief executives of the 100 largest companies rose by 20% last year to an average of £717,000. In 1983 there were 7,000 millionaires in Britain. Now there are 77,000.

Benefits have been increased but not to the extent that would be required to lift people out of poverty; The government ignores the effects of the social fund in their calculations on poverty; In February 2000, 709,000 claimants had an average of £9.42 deducted per week to repay loans taken out to buy essentials. They were thus reduced below the official poverty line but were considered to be above it by the government. Overall there are half a million more people living in poverty now compared to 1997.

By 1998-1999 there had been no decrease in the proportion of children living in poverty (still about one third).

The Child Poverty Action Group (CPAG) estimate that the number of children in poverty will fall by 1.2 mil- lion over the next two years due to government measures that are now being implemented. This will leave 4.5 mil- lion in poverty even if the target is met.

According to the CPAG the first two years of New Labour were "dire for poor children" and the cut in lone parent benefits was "arguably the first real-term cut in the level of social assistance paid to any group of claimants since social assistance was introduced in 1948". Some record!

Britain's infrastructure is collapsing. Nowhere is this more clear than on the railways. It is clear that the private sector can deliver profits but that it cannot deliver good public services or safety; A massive programme of public spending is required. New Labour is not delivering.

In the late 1960's net public sector investment reached 7.5% of gross domestic product (GDP). Last year it was a pitiful 0.4% of GDP. In real terms public investment was a tenth of its level of thirty years ago. As a share of GDP it was a twentieth. Public investment in Britain is less than in Germany (1.8% OF GDP), Italy (2.2%), the US (2.8%), France(2.8%) and Japan (7.9%).

Low public investment

The squeeze on public investment begun under the Tories has continued under New Labour. Net capital spending last year was £3.2 billion. This is only 60% of 1996-1997 levels and less than a quarter of the 1992-1993 level. New Labour is now planning spending of £4 billion a year under Public-Private Partnerships (PPPs) over the next few years. PPPs and the Private Finance Initiative (PFI) will enrich the private sector and impoverish the public sector. Hospitals built under PFI have fewer beds and staff and ultimately cost the public more. Public spending under New Labour actually fell between 1997 and 2000. Only this year has it finally returned to the level last seen in 1994.1995. Furthermore spending in 2001 is likely to come in at £5 billion less than the figure announced.

The truth about unemployment

New Labour would like to claim that mass unemployment is a thing of the past. The number out of work and claiming benefit has now fallen through the one million mark for the first time in 25 years. Unemployment had actually been falling since 1992, from 2.96 mil- lion to 1.6 million by the time of the 1997 election. What New Labour conveniently forget is that when they were in opposition they attacked this same figure as a fraud given that the Tories had made 30 changes to the method of calculation in order to massage the figure downwards.

For a time they put more emphasis on the International Labour Organisation count, which includes all those looking for work, not just those claiming benefit. This figure now stands at 1,560,000 but it too paints a misleading picture. Paul Bivand, senior research fellow at the Unemployment Unit argues that: "the ILO definition excludes large numbers of people for one reason or another. For example, people with family responsibilities who nevertheless want to work, people who have given up hope of finding work, and people who are sick or disabled."

Professor Stephen Fothergill of Sheffield Hallam University believes that "the true level of unemployment since 1997 has fallen. Now I suspect the real level is somewhat below three mil- lion. It is a significant improvement but it is not as big as we would wish to see. There is still a huge problem which is not picked up by the official figures." One distorting influence is the number of people on sickness benefit. In the early 1980s only half a million people were classified as long term sick. The figure now is two million.

The National Institute of Economic and Social Research found that only 30,000 of the 145,000 who found work under the New Deal would not have done so without it. And whilst many jobs may have been created they are often characterised by poor wages and conditions.

The Economist admits that: "the British people are doing better by working longer and harder, not by working 'smarter'". Typical are the 400,000 jobs in the modern day sweatshops -the call centres. The Independent on Sunday (25 February 2001) recently quoted one 17 year old in South Wales on his experiences. Many of his friends had gone straight on to the dole after leaving school and he was glad to land any job. "I'm working twelve hours straight, five days a week, answering call after call. It's sales support and I'm getting lots of customer complaints to deal with. It just stresses me out, and my supervisor shouts even more if I can't deal with the problems."

A TUC survey has revealed bullying, impossible sales targets, not getting wages on time and hostility to unions. Staff are forced to report sick in person rather than phoning in, to put up their hands when they wish to go to the toilet and being timed there, are given only three seconds between calls and are not allowed to take more than three days leave at once.

A new world recession

A new world recession now looms. Manufacturing output in Britain has been falling since last summer. Rates of return (or profits) for manufacturing companies have fallen to 6%, the lowest rate since 1993. Manufacturing lost 106,000 jobs last year, mostly in textiles, leather and transport equipment. The number of manufacturing jobs actually increased under the last Tory government. Under New Labour manufacturing output has only risen by 4% since 1997 and 300,000 jobs have gone in the sector in total.

Economic problems are rippling around the globe. Manufacturing is also in decline in Germany; Europe's largest economy; where export orders fell 2.5% in November. In early January, the shares of America's largest commercial bank, the Bank of America, were suspended after panic selling was prompted by fears that it had made heavy losses.

The main global stock markets have been marking time for three years. About £2,000 billion has been wiped off the value of American stocks alone, leading to plummeting consumer confidence. Savings there are at historically low levels, credit at historically high levels. Clearly this is an unsustainable situation. Manufacturing activity in the USA in December 2000 was at its lowest level since the end of the last recession in April 1991. Over 133,000 jobs went in the USA in December, the highest figure since records began.

At the time of writing Turkey is in economic freefall and there is concern that Russia will default on its foreign debt (which totals a massive £32 billion). Japan remains in a deflationary spiral and the stock market there is nearing a 15 year low. The leader of the Japanese employers federation has recently warned "the possibility that a financial system crash will be induced is strong" (Guardian, 12 January 2001).

According to economist Stephen King of the HBSC Bank "there are now sufficient signs of distress to suggest that the (British) economy is likely to lurch over the edge during the course of 2001." If the world's two largest economies (the US and Japan) go into reverse a world recession is inevitable.

New labour's second term

The steel workers of Corus or the deprived on the inner city estates around the country have little to thank Tony Blair for. Despite this New Labour will almost certainly be returned to power. The memory of the havoc wreaked by the Tories is too fresh and as yet there is no credible left wing alternative. The fuel revolt, the anger of the Rover and Luton workers and the many dozens of localised public sector disputes up and down the length of Britain are a portent of things, to come. The New Labour government has been characterised above all else by luck and by a craven bowing to the market. Their luck is about to run out. A second term for New Labour will be very different from the first. The bowing of Tony Blair and Gordon Brown before the god of the market will prove their ultimate undoing. A new world recession may have a temporary stunning effect on the working class but will ultimately lead to titanic battles as they rediscover their strength in struggle.

What is clearly needed is a political alternative on the left to New Labour which has been an out and out bourgeois party for some time. The Socialist Party in England and Wales, sister organisation of the Socialist Party in Ireland, now has six local councillors and will be standing a number of candidates in the forthcoming general elections. Our candidates will be raising the need for a new mass party of the working class, a demand which will find an increasing echo in the coming period.

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