Tribune – news, features and comment from Britain's left-wing magazine

IF WE were to judge by some of the headline claims alone, the economic landmark erected by the Government this week would provide Tribune readers and much of the Labour Party with a sense of hope and promise, if not sheer delight. “The End of New Labour” was a widespread but erroneous verdict. Equally, “The Return of Old Labour”.

The motivating factors behind some ground-breaking departures from the economic legacy of Thatcherism were nothing to do with ideology and everything to do with pragmatism in a crisis. Nevertheless, from its reservoir of social democratic justice – largely untapped for some years – the Government has shifted the political landscape to define more clearly a purpose which lies closer to the values of Labour.

The shibboleth, bequeathed by Thatcherism and embraced by “new” Labour as a sacred tenet, that the rich and wealthier should not pay more taxes has been broken. And the sky has not fallen in. The Bank of England avers that banks may have to be fully nationalised before this is all over and the Treasury does not demur.

The initial reaction from the markets was to send stock rocketing in the biggest single rise in one day, Labour closed in the polls to within reach of being a serious contender again at the next election while the Tories, as MP Jon Cruddas put it, looked “like kids splashing about in the shallow end”. MPs and the unions gave the package an enthusiastic welcome, as did the CBI and the conservative Institute for Fiscal Studies. Even James Caan of Dragons’ Den loved it.

Although the economic efficacy of the Government’s biggest gamble will take time to gauge, a symbolic leap has been forced on the national thinking that has enabled previously taboo policies to become acceptable. Few now would quibble with the Government stepping in to force the recalcitrant banks to start lending again. In taking such a decisive step the Government has indeed, left behind an old economic order and replaced it with new marker buoys.

Symbolism is a powerful political tool, never to be underestimated, and the message from the pre-Budget report – the Tories were right on one thing, it was much more than that – is a progressive one. But behind the symbolism there are both short and long-term doubts over the impact, beneficial or otherwise, on working people and their families as well as jobless people and their families.

With unemployment heading for three million there was comparatively little to see in terms of a cohesive job-creation package of the sort that can be expected, for example, from Barack Obama given his pledge to create

2.5 million jobs as a response to the economic crisis and which are in place in other European countries.

The rapid response initiative to help people who lose their jobs is to be welcomed as is the scheme to ensure that vacancies that do occur are filled quickly, so long as there is no unfair coercion.

The £1.2 billion sacrificed to cut VAT will have precious little effect on the budgets of the poorest families while doing little to boost the spending avalanche Chancellor Alistair Darling is trying to set off. More of that could surely have gone more effectively in child credits to help get the pledge on eliminating child benefit back on target.

But the really big catch lies in the estimated £37 billion of public spending cuts which are reportedly expected to be made after 2011 to pay for the package. That means cuts, and more reliance on the private sector, in health, education and local government. Although there is a silver lining. Such is the scale of the cutbacks that the Treasury is apparently keen to review costs on Trident, with a view to significant cutbacks, and on the full introduction of the proposed national identity card scheme.

It was a bold and risky economic re-routing into those ubiquitous “uncharted waters”, but politically it has raised the banner for social justice, shown the Tories dead set against it and delivered a genuine choice for voters at the next election. That is something for Labour to build on.