The Market Abandons New Labour

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Alan Milburn's plan to hand NHS patients to Bupa adds a new intensity to Labour's privatisation plans. However, his party's other market-driven flagships are sinking, stuck in the doldrums or simply failing to leave the dock.

The government has reversed its strategy on university fees, student loans, Railtrack and Education Action Zones. The 'Public-Private Partnerships' for London Underground and British Nuclear Fuels are near to collapse. The same scheme took flight in air traffic control but is currently in slow spiral descent. Adding this to Blunkett's downgrade of cannabis from class B to class C, and his announcement that the hated asylum vouchers are to be scrapped has led many commentators to talk about 'U-turns', and a newer, bolder and more progressive New Labour.

The policy changes are real, although Blunkett's 'anti-terror' laws, Milburn's Bupa plan and Patricia Hewitt's planned Post Office privatisation show that the government is still ready to slash and burn state services and civil liberties. Most commentators believed the 11 September attacks lay behind the change of heart. Will Hutton claimed, 'The "war" against terrorism... is generating a culture in which public action has again become respectable.' Somehow the need to mobilise armed public sector workers - the army - means Labour will now be nice to unarmed public sector workers in health or education. Other Fleet Street wise heads see a new 'boldness' in the government brought about by military success. Peter Kilfoyle, who represents the 'Old Labour' right wing worried about Blairite excess, believes that the military action in Afghanistan 'helped create a more radical second term administration and undermined the influence of control freaks who had attempted to enforce a presidential system on British politics'.

The traditional social democratic left are unhappy with the relentless pro-market policies of the current government, but are scared to align themselves with any genuine opposition. Desperately they hope the Afghan adventure might add a few Keynesian soft touches to the regime. It's a miserable prospect, implying equitable funding for British higher education must be paid for with Afghan blood, and a half-decent British transport policy will grow from cluster bombing the east. Strangely, no establishment commentator acknowledged the traditional and obvious link between war and reform. As cabinet ministers built support for bombing, they wanted to close 'second fronts' at home by ditching or modifying some of their more unpopular policies. The build-up to war began during Labour conference, where ministers were exposed to activists deeply unhappy about policies on rail, student loans and other issues. At fringe meeting after fringe meeting members of the party's rank and file showed they were willing to give the leadership support for military action, but that this support was qualified. Giving these people some good news on home policy in return held together Labour's fragile pro-war alliance and helped insulate the party from some of the very widespread opposition to the war.

However, the main reasons for Labour's U-turns have nothing to do with 11 September. Nor, sadly, are they due to overwhelming campaigns against Labour's pro-market policies, although the general distaste these have created has helped. The main reason for the changes is that Labour's policies have simply and absolutely failed in their own terms. Labour shifted on student fees and loans because they made the party's target to increase student participation impossible because the financial burden on young people was deterring huge numbers of potential students.

On rail, Labour did not abandon the market-driven solution--rather, the market abandoned Labour. Prescott and then Byers forced the party to stick with the Tory privatisation, only to find that the share price collapse meant Railtrack could no longer raise capital in the city. The widespread popular disgust with Railtrack post-Hatfield certainly hurried the firm's demise, but in the end Railtrack wasn't killed by a popular campaign - it committed suicide.

Similarly, Education Action Zones self destructed. Businesses were supposed to step forward with donations in return for control of the curriculum in selected local education authorities - the money didn't arrive, and test results in the zones actually declined. A few corporations got to buy a few favours from the government, but the schemes had largely collapsed by the time they were killed off.

More market-driven schemes seem set to fail even before they are launched. The London Underground PPP is shaky. The British Nuclear Fuels sell-off is only still afloat because Patricia Hewitt promised the firm could leave behind all its liabilities with the state - a new nationalised nuclear clean-up authority to carry the dirty can while BNFL floats freely away. Similarly, the new private air traffic control system has only been kept flying by giving the private operators breaks on charges and pension payments.

Public hostility to these schemes hurried their deaths, and the failures give hope to those fighting the privatisers. Labour's confusion also opens possibilities. While some high profile projects have been killed off, in the main the government has no idea how to replace them. Byers wants a halfway house between privatisation and nationalisation to take over rail. However, his 'company limited by guarantee' does not exist and will have to compete against private asset-stripping bids for the tracks. While Ford boss Ian McAllister has 18 months to dream up a new scheme, one train executive noted that the track is 'going down the toilet'. Similarly, the government has fallen into confusion and infighting over the replacement for student loans, alternately proposing and rejecting speculative 'graduate taxes'. The government's shaky grasp on events makes the task of opposing it that little bit easier.