Where It Had All Gone Wrong

William Keegan writes:

Older readers may recall that I usually spend August in a delightful Provençal village near Vaison-la-Romaine.

Often there have been guest columnists, but occasionally I would write from there and the words Vaison-la-Romaine would appear at the top of this column.

Not this year! With my barrister wife having been summoned to jury service in the middle of the month, we had the briefest of trips (yes, lawyers are now summoned for jury service).

That was how I found myself, unusually, back in London in mid-August, and listening to the BBC instead of French radio.

Thus it was that I was able to catch a wonderful conversation between the historian Peter Hennessy and the former Labour Party deputy leader Roy Hattersley.

I hope that the present Labour leadership were able to listen to it, because there were lessons for them to draw.

Very gently, Lord Hattersley was able to point out where it had all gone wrong.

At one stage he said that whenever he criticised his Conservative colleagues in the House of Lords – about, for instance, the commercialisation of the National Health Service, the neglect of housebuilding or light-touch regulation of the financial system – they were always  able to retort that New Labour had started it.

He was generous about the younger Tony Blair, who worked for him in opposition in the 1980s – "lucid, loyal, hardworking, very clever" – but sad that Blair had come to politics too late, without roots in the Labour movement.

That was part of Blair's appeal to what turned out to be New Labour's fair-weather friends in the "centre" and even the "centre right".

Of course Labour's majority would probably have been lower without Blair in 1997, but I agree with Hattersley that John Smith would still have won handsomely, and the Labour party would have preserved its soul.

Hattersley emphasised that he was brought up to believe that trade unions were a force for good and that public spending was good for society.

But in the 1970s the unions behaved "hideously", public spending had got out of control, and "the Labour party has not recovered" since.

There has surely been an over-reaction.

As the common refrain from the Bank of England onwards is that low real wages are keeping living standards down, and as even the Bank's governor believes the fiscal squeeze has inhibited the pace of recovery, it is surely time for the Labour party to regain the courage of the convictions of Hattersley and others when it comes to economic and social policy.

Hattersley was always considered to be on the right of the Labour party: he believes in market forces and advocates public ownership only when it makes sense, not for antiquated doctrinal reasons.

A consistent theme of his throughout his career has been an emphasis on equality – a concern he shared with those great Labour luminaries Hugh Gaitskell and Tony Crosland, their common hero in turn having been RH Tawney, with his celebrated book The Acquisitive Society.

By equality Hattersley has never meant absolute equality, which, in common with most people, he regards as impossible; no, as he emphasised to Hennessy, his belief is that it is the duty of governments to try to offset or mitigate the inequality imposed on people by society.

Now it so happens that concern about inequality is all the rage these days, being manifested by everyone from leading American economists such as Paul Krugman and Larry Summers to the bestselling French economist Thomas Piketty and my new friend Mark Carney, governor of the Bank of England.

I have referred before to the impressive speech Governor Carney made at the Financial Times conference on "inclusive capitalism" earlier in the summer, when he observed that all the research suggests that "relative equality is good for growth".

Carney even talked about that concept dismissed by the right wing, namely the social contract.

It is becoming clear that the governor cares deeply about unemployment and the low level of real wages – deeply enough to have accepted an invitation to address the Trades Union Congress annual conference next month.

Meanwhile the present chancellor is on record as wanting even more cuts in the public services if the Conservatives win the next election.

Such a programme would undoubtedly hit the poor most, serving to aggravate inequality. George Osborne and his ilk seem to have a visceral hatred of public services.

It is as extreme as the obsession of the old left with nationalisation for the sake of it, as opposed, à la Hattersley, to public ownership on its merits.

Quite apart from anything else, I sometimes wonder whether it ever occurs to the "cutters" that the public sector not only provides essential services, but that it is also a major customer for the private sector's goods and services.

Moreover, even people unfortunate enough to be on "welfare" or "handouts" buy from the private sector.