Don't get too cosy...

April 26, 2002

Forget the warm words, Tony Blair is 'Tory-lite', say Richard Roberts and David Kynaston.

"Budgets, like babies, are always little loves when they are first born," Anthony Trollope once remarked. Some see in last week's massive injection of cash into the National Health Service a return to the cosier world "Before Thatcher". Such fond hopes combine wishful thinking on a heroic scale with a fundamental disregard for recent history.

We forget too easily how Margaret Thatcher completely changed the political, economic, social and, above all, psychic landscape during the 1980s. Huge chunks of industry were privatised, collective traditions inside and outside the workplace were shattered, and marketisation was on the march in both the economy and the institutions of civil society. Low direct taxation and unabashed materialism took Britain down the American road.

Then - so it appeared - everything changed. Nigel Lawson's boom imploded spectacularly and for several years the twin scourges of negative equity and job insecurity fed corrosively off each other - triggering a protracted emotional spasm against Thatcherism.

Symptoms included widespread Schadenfreude at Thatcher's fall in 1990 and the success five years later of Will Hutton's The State We're In . But the state we were in was one of denial - until, in May 1997, Tony Blair's velvet revolution provided a cathartic release.

Whatever new Labour's warm words about "community", "values" and the rest, there was in tax-and-spend terms no difference between it and the Tories. "Men not measures": the 18th-century cry was never so apt. In practice, new Labour had made the cynical calculation that however potent anti-Thatcherite emotionalism might be, its policies needed to stay within the Thatcherite grid.

"We accept, indeed embrace, the role of free enterprise in the economy," Blair explicitly reassured the City during the campaign.

During new Labour's first term, Blair showed himself to be Thatcher's heir, as money became ever more society's lingua franca . Hutton's dream of an inclusive, "stakeholding" capitalism was ditched in the face of the all-pervasive American import of "shareholder value". Simultaneously, the spread of private-finance schemes saw a continuing erosion of the public realm. Abetted by a benign international economy, "Tory-lite" worked, bestowing unprecedented, guilt-free prosperity and the lowest unemployment for a generation.

Yet, the consumer boom put public services in the spotlight. Private plenty led to enhanced expectations, which turned into disgruntlement over delivery. The boom itself contributed to the problems - by pricing essential-services workers out of homes near to work and by choking the roads with cars and trains with passengers. It was a public-services crisis born of affluence, not of poverty.

The boom also filled the chancellor's coffers - between the last Tory budget and Gordon Brown's latest, the tax take has risen from £0 billion to £400 billion, an increase of £26 billion a year. It is now claimed that an extra £8 billion or so a year will make the vital difference to public services.

It will certainly make a difference to Britain's economic performance. Studies suggest a clear correlation between low tax and economic growth. Higher direct taxes distort corporate and personal behaviour and deplete and demotivate the talent pool.

The spending side of new Labour's new deal is even more problematic. On the NHS, pouring even more money into a largely unresponsive single-provider monopoly service has been greeted with scepticism and the newly resurrected internal market will provide a debilitating, audit-obsessed, ersatz substitute for the management disciplines of a real market. Essentially the same is true of higher education, where a continuing dirigiste owner - the state - stands in increasingly illogical contrast to the individualist, consumerist aspirations of its culturally Americanised students.

Our value judgements are neutral, but as historians we believe that it runs counter to the post-1979 grain to attempt to ring-fence public services from the marketisation that prevails elsewhere. Blair, having taken Labour so far along the path of often covert Thatcherism, surely knows that in his heart.

Richard Roberts is a reader in business history at Sussex University. David Kynaston is visiting professor at Kingston University. The authors' City State: A Contemporary History of The City of London and How Money Triumphed is published by Profile, £7.99.

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