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What next for the New Labour Project after Blair? |
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By Alex Nunn |
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"The NLP represents a second stage in the shift to neo-liberal hegemony in the UK. This second phase represents both important continuities and breaks with earlier neo-liberal reform but it does not represent a return to meaningful social democracy."
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Introduction As Prime Minister Tony Blair’s term in office nears its end, it is an appropriate time to revisit debates about the character and nature of the social, economic and political project that lies at the heart of the New Labour Project (NLP) and to consider its potential direction of travel after Blair. Previous analyses of the NLP have presented it as variously constrained by the straight jacket of globalisation, driven by, or choosing between, contrasting European and US policy options. Others, including the architects of the project itself, argue the NLP is a modern version of social democracy suited to the challenges of the 21st Century. By contrast, it is argued here, following a revised neo-Gramscian method, that the NLP needs to be understood in the context of a longer-term political project to secure the social, economic and political basis of neo-liberal hegemony. Important in determining the role of the NLP in relation to the advancement of neo-liberal hegemony are the ways in which the NLP recognised and sought to address perceived crisis tendencies and fractures in ‘first-phase’ neo-liberal strategies. The NLP represents a second-phase in that project, aimed at offsetting, controlling and over-coming weaknesses in neo-liberal hegemony. As such it is appropriate to view the NLP as domestically embedding neo-liberal adjustment in supportive domestic ideological, institutional, social practices and even in the organisation of capital itself. There has been much debate about the future direction of the NLP once the current Prime Minister leaves office. It is often speculated that the next Prime Minister is most likely to be Gordon Brown and that this may have implications including a decisive turn away from New Labour policy. By contrast, it is argued here that a significant proportion of the NLP’s second-phase strategies have been authored by the Treasury, under the strategic leadership of Chancellor of the Exchequer Gordon Brown. Drawing on key policy commitments made since the 2005 General Election, it is argued that in the event of a Brown Prime Ministership the future for the NLP after Tony Blair is likely to be ‘more of the same’, at least unless and until a resurgent Conservative Party is able to compete more effectively for the centre-right ground of British politics, potentially driving the party towards a genuine modern politics of social democracy. A Multi-Dimensional Model of Hegemony The NLP can only be adequately appreciated when placed in the conceptual context of understanding the dynamic construction of capitalist hegemony. In recent years, Gramsci’s concept of hegemony has frequently been associated with the study of global governance. Hegemony, in its Gramscian guise, refers not simply to the dominance or preponderance of power but, drawing on Machiavelli, results from a notion of power as a complex mixture of coercion and consent. Hegemony thus refers to the foundation of an entire social order in which dominant and less dominant classes and groups accept a particular compromise in which many issues are simply accepted as part of reality rather than challenged or questioned on a daily basis. In a hegemonic context, particular ideas about the organisation of political, economic and social relations are embedded within institutions, social practices and popular ideologies and narratives. [1] The Gramscian concept of hegemony has been widely used to theorise the apparent change in the political economy content of global governance since the early 1970s, explaining this as the rise of ‘neo-liberal’ hegemony driven by the emergent structural power of trans-national and especially mobile finance capital, notably in the work of authors like Robert Cox and Stephen Gill. [2] While the hegemony of capital per se is nothing new, what is qualitatively different in this specifically neo-liberal variant of capitalist hegemony is the extent to which the disciplinary power of global capital is not only directly exercised but ‘hardwired’ into the international system through the establishment of a variety of quasi-constitutional forms which shape and constrain the operation of ‘everyday’ politics in nation states, placing important legally-binding limits on the autonomy of national decision making, with important implications for the extent to which domestic polities can exert democratic influence. For the most part, Gill places this discussion in the context of state policies to constrain and undermine the power of important social interests (especially organised labour) other than trans-national capital, particularly over issues such as wage inflation, fiscal and monetary policy. However, it is necessary to go (sympathetically) beyond Gill’s formulation to show, in detail, how this global constitutionalism is embedded in the domestic context. The argument developed here is five-fold. First, by expanding the remit of Gill’s approach it is possible to identify in greater detail the ways in which the authority and position of capital is being ‘locked-in’. Specifically, this is done by focusing attention on a detailed examination of the domestic level to complement his more general focus on the global. Second, by recognising the implications of the dynamic character of capitalist hegemony, it is possible to identify change and persistence not only between different periodisations of hegemony but within them. Thus, it is argued that neo-liberal hegemony has included at least two discernible phases in its construction. In making this argument there are notable similarities with Karl Polanyi’s identification of a ‘double movement’, whereby the extension of the disciplinary power of capital is matched by a second and, to a certain extent countervailing, trend toward socialising and embedding that discipline in social and institutional practices which can sustain it. [3] Third, in developing this line of argument, it is necessary to show how the adoption of neo-liberal strategies is not merely enforced upon governments either by international markets, external institutions like the IMF or even by more powerful foreign governments, although each of these sources of pressure are frequently applied to some governments. Instead, it is argued here that many instances of neo-liberal reform, especially second-phase strategies to secure the social and institutional foundations of neo-liberal hegemony, are often willingly pursued by governments eager to enhance the ‘competitiveness’ of their domestic economy and society. This is notable, as second-phase strategies frequently require policy autonomy from the short-term needs of capital, especially as directed through global financial markets. As such Gill’s focus on the increasing structural power of capital needs to be balanced with a Poulantzian notion of ‘relative autonomy’ [4] which can be brokered by a political class able to exploit the structural differences between classes and class factions, in the process exercising hegemonic leadership in a Gramscian sense. Fourth, governments at the forefront of this agenda on a global scale - and the New Labour government in the UK has perhaps been the most influential advocate of these strategies - have promoted not just their own competitiveness but have advocated the adoption of these strategies. The notion of hegemony is uniquely positioned to accommodate this empirical reality, explaining it as a commitment not to the competitiveness of national capitalism (as in for instance the case of post-war social democracy) but to the hegemony of capital as a generalised perspective operating on a global scale. Fifth, it is important to show that when embedded domestically, second-phase neo-liberal adjustment is about more than legal and constitutional agreements and in fact represents a fundamental transformation in hegemonic ideology, the institutional structure of governance and in the organisation of society and capital itself. Building on these theoretical foundations, it is argued that much of this project to secure relative autonomy and to implement the second-phase strategy of reform has been driven from the Treasury, under the leadership of Gordon Brown. Given the continued likelihood that Tony Blair leaving office will lead to the Chancellor becoming Prime Minister, it is suggested that this provides evidence that the result is likely to be an intensification rather than relaxation of these second-phase strategies. To advance these arguments, it is first necessary to locate the emergence and prosecution of the NLP in the historical and social context of the broader two-phase project to secure a neo-liberal variant of capitalist hegemony on a world scale. The Global Two-Phase Project for Neo-Liberal Hegemony The global project to secure neo-liberal hegemony began as a response to the emergence of structural weaknesses in the post-war social-democratic/liberal compromise. The post-war period is often seen as a ‘golden age of capitalism’ [5] characterised by stable and consensual growth, but had in fact always been based on a series of important contradictions. First, as early as 1958 Triffin [6] had argued that the system of dollar-gold convertibility in tandem with the need for the US to run a substantial deficit, to ensure global liquidity, created an unsustainable contradiction in the global financial system - a prediction that ultimately proved to be true, leading to the US strategic decision to end dollar-gold convertibility and to abandon fixed exchange rates in the early 1970s, plunging the world economic system into chaos. Second, the Fordist tendency toward technological innovation (albeit over what now appears to have been the long-term) and rationalisation began to lower ‘effective demand’ toward the end of the boom period as over-accumulation took-hold with the massive centralisation of capital relative to the labour force readily available for exploitation, and the limits of market size became apparent. The reconstruction of Western Europe and Japan increased intra-capitalist competition, added to global pressures of over-accumulation and limited the partial outlet that had earlier been available for surplus capital in the form of US FDI into Europe. The effect of this was felt as over-capacity, undermining the advantages of economies of scale, which Fordist production depended on. It was also felt as a developing inability to deal with the inbuilt tendency toward inflation, which had previously been offset by market expansion. Third, this competition began to highlight the rigidity of Fordist product specialisation as long-term fixed capital investment precluded dynamic alterations in product specification to meet differentiated market demand. The decreasing capacity to absorb internal inflationary pressures through external market expansion highlighted the class dynamics of the crisis. What would later be called “structural rigidities of an economic and social character” [7] posed a barrier to the maintenance of growth as organised labour continued to demand high wage rates and government expenditure. In this context, the state effectively became trapped by the pressure to maintain legitimacy and its inability to expand its fiscal base. Inter-capitalist and gradually also inter-state competition necessitated a confrontation with labour, but in many cases labour’s institutionalised position at the heart of the historic bloc made this politically unfeasible within the parameters of the hegemonic system. As governments grappled with this problem, most tried a variety of strategies, including printing money to avoid confronting labour. For instance, this was the policy in the UK under the Heath government, after an initial unsuccessful attempt to confront the trade unions in the form of the Industrial Relations Act. The result was ‘stagflation’ – high inflation and slow growth - as under-utilised capacity in production and the resulting high unit costs were passed on to consumers. The result of this predicament was a decidedly neo-liberal turn among many governments across the advanced industrial world. The full frontal assault on the post-war compromise was led by a range of ‘organic intellectuals’ of the neo-liberal project, including Hayek, Friedman and Buchanan, all of whom won Nobel prizes for their work. Institutions such as the international Mont Pelerin Society, the Trilateral Commission, the Institute for Economic Affairs and the Centre for Policy Studies were at the forefront of this assault, especially in the UK. Friedman’s critique of monetary policy and inflation management dovetailed with a wider neo-liberal philosophy. Both Friedman and Nozick argued that state intervention in the economy constrained individual freedom. [8] The barriers to resolving the crisis were thus ‘structural rigidities’ such as organised labour, legal and regulatory restrictions on free trade and capital movements and the institutions of the welfare state which offered large scale benefits to sub-ordinate classes and social groups. The workers that had been at the heart of the Post-War historic bloc were now conceptualised as part of the problem. More specifically, the institutions of democracy themselves were targeted for too easily translating working class calls for expansion into policy. For instance, Buchanan’s endorsement of the desirability of a distinction between ‘constitutional’ politics and a more accessible everyday politics was significant because it created the space for important aspects of economic and social management to be placed beyond the scope of normal debate, in constitutionally embedded policy rules. [9] The resulting global reform project was expressed at a variety of different levels of governance. At the global level it was expressed through the harsh discipline applied to developing states through Structural Adjustment Programmes and later the adoption of the ‘Washington Consensus’. Domestically, states across the advanced industrial world adopted neo-liberal reform agendas characterised by trade and financial liberalisation, reductions in public spending and labour adjustment to increased flexibility, with the UK forming a text-book example. Throughout the 1980s the Thatcher government sought to fundamentally re-orientate society and economy, undoing the institutional bases of the post-war compromise, particularly with regard to the power of the working class, expressed organisationally in civil society through the trade union movement, electorally through the Labour Party and institutionally through the welfare state, nationalised industries and corporatist bargaining. A virtual war was fought with the trade unions, with the year long confrontation with the National Union of Mineworkers providing symbolic evidence of the government’s commitment to its strategy. Nationalised industries were privatised and other branches of industry were subject to global competition. A core element of the economic strategy was to subject key parts of the previously powerful working class to ‘cold baths’ to undermine ‘labour market rigidities’, preparing the ground for a more hierarchically fractured labour market to suit the needs of neo-liberal flexible accumulation. Economic reform was to be matched by greater centralised control of the state, simultaneously undermining institutionalised supports of the post-war compromise and creating enhanced opportunities for commodification. Direct privatisation was complemented by strategies to enhance the power of managers relative to workers in the public sector, notably the ‘New Public Management’ (NPM). However, by the early 1990s the Thatcher reform programme was running out of steam. Despite the continuation of institutional reform in some areas, [10] in others the project began to encounter resistance as public sector managers, particularly in local government, moved to block or passively resist further privatisation. The limits to first-phase economic strategies also became apparent. The ‘Lawson’ boom of the mid-1980s turned into bust and it was commonplace to speak of Britain being in ‘decline’ a fact graphically illustrated with the enforced ejection of the UK from the European Exchange Rate Mechanism in 1992. Underlying this highly visible sign of failure in neo-liberal reform were the symptoms of crisis: unemployment, low productivity growth, rising income inequality, failing infrastructure, a loss of faith in social policy and rising crime and fear of crime, accompanied by straightforward financial loss for those negatively affected by volatile property prices and high interest rates. As the sympathetic New Labour think tank, the IPPR, put it, the weakness of the UK economy was manifest in: ‘too many inefficient and poorly run companies, too many underachieving people, too little investment in research, innovation and physical capital and too frequent shifts in government policy’. (IPPR, 1997) [11] As Gamble, a leading commentator on UK political-economy, argued: The Thatcherite project proposed only a limited modernisation…The industrial power of the British working class was contained and its political influence was marginalised, but little was done to remedy the cycle of low pay, low skill, low investment and low productivity in which many sectors had become caught. Unemployment, which had been purposefully engineered in the early 1980s, reappeared in ‘structural’ form and there was a pronounced shift toward more casual employment. Whole-economy productivity also suffered, to the point where there were negative growth rates during 1989. A lack of investment in the physical infrastructure led to crumbling schools, hospitals and transport systems. High inflation and interest rates punished the very group - of new property owners - which had been at the centre of Thatcher’s attempted historic bloc: Two thirds of families who own their homes have suffered a massive increase in insecurity over the last decade, with record mortgage arrears, record negative equity and record repossessions. [12] Taken together these trends provided evidence of a broad based crisis in the attempt to secure neo-liberal hegemony, a fact noted by those at the heart of the emerging NLP. However, this set of crisis tendencies were not merely internally constructed but were shaped by the increasing need to accommodate changing patterns of competitiveness in the global economy, principally the need to shift from the comparative advantage strategies which resulted from some elements of the Thatcherite revolution to strategies shaped by ‘competitive’ advantage. In a number of publications the same range of issues were highlighted over and again: economic stability, stable and high levels of employment, productivity and higher wages set against a context of global competition for labour, securing investment in infrastructure and building social cohesion through tackling issues like crime and anti-social behaviour. The New Labour Project as a Second Phase in Neo-Liberal Hegemony The NLP has thus advanced as a second-phase project to secure neo-liberal hegemony by embedding it in ideological, institutional and social structures that can sustain it. It has also sought to re-orientate the organisation of capital as part of this same project to achieve competitiveness and has been complimented by a broad-based strategy to secure wide-spread support for and commitment to the programme of reform. It is thus a project of ‘deep reform’, going much further than first-phase strategies managed, to secure neo-liberal hegemony for the long-term. Ideologically, the NLP has sought to position itself rhetorically between a simplistically characterised depiction of first-phase reform strategies and the post-war embedded compromise. This process has involved the work of influential organic intellectuals such as former doyen of modern academic sociology and Director of the LSE Anthony Giddens, who set down the now infamous ‘third-way’ framework. As Paul Cammack persuasively argues, Giddens’ efforts were largely an exercise in discourse redefinition, taking in turn a range of principles which had been central to social democracy and adding a fresh interpretation to them to fit the political purposes of the Third Way. As Cammack shows in some detail, in doing so, Giddens subverts their political and social content providing a language of social and institutional reform for the NLP which obscures its real purpose: Casting himself in the role of Blair’s Minister of Truth, Giddens offers New Labour a set of slogans tailored to the needs of the age: individualism is solidarity; responsibility is emancipation; risk is security; enterprise is community; opportunity is redistribution; inclusion is equality; self-help is welfare. [13] It is worth noting however, that the Labour Party had been moving toward the central positions of the Third Way for several years prior to Giddens’ heroic efforts and prior to Tony Blair becoming leader in 1994. After the election defeat of 1987, the party instituted a ‘Policy Review’ process which resulted in the publication of ‘Meet the Challenge, Make the Change’, ending its commitment to unilateral nuclear disarmament, strongly redistributive taxation and nationalisation. [14] With reform of the party well underway, Clause 4[15] repealed and changes to the structure of the party to hand more power to the centre, this document was subsequently replaced in 1995 by ‘A New Economic Future for Britain’ which introduced the notion of central bank independence, uncritically accepted globalisation as fact and endorsed a platform of individualised competitiveness and industrial change: In this new global economy, one thing is certain: where technologies, raw materials and capital can be bought from just about anywhere by just about anyone, it is the level of skills in a company that makes the difference between success and failure. For this reason, a policy of national economic renewal must mean enhancing individual economic potential as the route to rebuilding the industrial base. [16] Before his death John Smith, then leader of the party, had established a Commission on Social Justice resulting in the publication by the IPPR of Social Justice in a Changing World which elaborated a remarkably Third Way social, economic and welfare agenda. [17] Building on this, a similar experience of ideological transformation among the New Democrats in the US and Giddens’ work, the NLP has pursued an ideological agenda which has set the purpose of public policy as coping with the challenges posed by an uncritically assessed external context of globalisation through ‘competitiveness’, as the following excerpt from the 1997 election manifesto makes clear: In economic management, we accept the global economy as a reality and reject the isolationism and ‘go-it alone’ policies of the past. [18] The emphasis has been then on providing a justification for neo-liberal reform which centralises the role of competitiveness, with the role of the state being to enable individuals to cope with the spectre of social risk that this demands. This is a very different approach to that taken in traditional social democracy where the emphasis was on protection from that risk. The essence of this was again positioning the NLP between the two apparently binary opposites of a post-war social democratic strategy of decommodification through welfarism and a Thatcherite first-phase strategy of competitiveness through comparative advantage, largely based on low cost production advantages within the externally protected EU market. In contrast, then, the NLP has been presented as a transition to competitive advantage based on high-skill and high-value added labour within a context of increased engagement with a highly differentiated global market for goods, labour and capital. It is thus an ideology for neo-liberal globalisation with ‘optional extras’ rather than an up-to-date definition of social democracy tailored to a project of limiting the disciplinary power of capital. Though the Prime Minister has clearly supported the competitiveness agenda, it is equally obvious that this is at least shared, and at most actually authored from within, by the Treasury. A brief visit to the Treasury website reveals a wide range of documents, publications and speeches by the Chancellor himself that leave no doubt about the central commitment to competitiveness, not just in the UK but on a global scale. This latter aspect is demonstrated in particular through an avowed commitment to transform organisations of global governance (for instance through Brown’s Chairmanship of the International Monetary and Finance Committee, the steering group of the IMF and key role with the G8 finance ministers group) and the global development agenda and also reform the European Union. Throughout, the commitment to securing competitiveness and high productivity growth is demonstrable and significant. As Cammack argues: The disciplinary forces that global competitiveness will unleash are vital to the continued sway of capital over labour in their own economies, and to the continued pressure on capital to seek to be ever more competitive. In other words, global competitiveness is to be promoted because it is the key to the maintenance and reproduction of capitalist hegemony within the advanced capitalist countries themselves. [19] The NLP has included a wide ranging programme of institutional reform, focusing on macro-economic policy, governance and public service delivery. On macro-economic policy, the NLP institutional programme of reform has been guided by the notion of the desirability of providing high-level signals to financial markets that the UK is avowedly in favour of neo-liberal globalisation, symbolically isolating macro-economic policy from ‘everyday’ politics, enshrining it in quasi-constitutional institutional structures. Gordon Brown, and his widely regarded ally Ed Balls, have repeatedly trumpeted their guiding principle of macro-economic policy making through an approach termed ‘constrained discretion’: Governments are in theory free to run the economy as they see fit. They have, in theory, unfettered discretion. And it is not only the fact that they have this unfettered discretion but the suspicion that they might abuse it that leads to market distrust and thus to higher long-term interest rates. That is why governments have sought to limit their discretion through rules…stability requires the discipline of a long-term institutional framework…Governments which lack credibility – which are pursuing policies which are not seen to be sustainable – are punished not only more swiftly than in the past but more severely and at a greater cost to their future credibility. [20] The key idea behind constrained discretion is that by making high profile and symbolic commitments to gain credibility with dominant blocs of capital – in this case finance capital acting through globally connected markets – the government of the day can gain additional manoeuvring space to launch a long-term political project that might in the short-term at least appear to be against the interests of some sections of capital. This is precisely what Poulantzas termed the exercise of relative autonomy. The commitment to gain relative autonomy, or constrained discretion, has duly been pursued through various high profile and symbolic gestures such as the granting of independence to the Bank of England, immediately after coming to power, and erecting a monetary, fiscal and public spending policy framework based on transparent rules. So responsibility for monetary policy was separated from ‘everyday politics’ by its transfer to the Monetary Policy Committee which sets interest rates according to predefined rules and measures of inflation, reporting to the Chancellor publicly if inflation is not kept within a narrow band on the preferred measure. Following similar themes, fiscal policy is based upon the principles of stability promoted by transparency, credibility, responsibility (in ‘prudent’ spending policies) and efficiency. Discretion is constrained through the Code for Fiscal Stability which sets out a variety of mechanisms for reporting spending plans and analysis and budget implications alongside an independent monitoring and auditing process undertaken by the National Audit Office. In addition, two fiscal rules were established: the ‘Golden’ rule that the government will only borrow to invest rather than to support current spending and the ‘sustainable investment’ rule that public debt will be held within a fixed and openly declared proportion of GDP. Each of these features, however, is only relatively constraining because the actuality of their operation is typically open to substantial variation at the behest of the Chancellor. For instance, on monetary policy the Chancellor selects the members of the MPC and sets the inflation target to be achieved and the measure by which inflation is to be estimated. On fiscal policy the Chancellor established the rules-based framework and together with the Treasury has proved adept at redefining the measures by which the rules are interpreted, gaining space for further manoeuvre. This relative autonomy has been used to pursue a programme of rapid public spending rises which have been used to gain autonomy from other potentially powerful constraints on a labour government: trade unions, public sector professionals and critical intellectuals. Spending increases have been used as evidence of the NLP’s commitment to its social-democratic heritage. However, across a range of areas additional cash has been used as a mechanism to secure substantial institutional and social reform which the previous Tory government had been unable to achieve, especially against the bulwarks provided by these three critical groups in the institutional structures of the welfare state. So while the Tory governments had been able to attack, discipline and slim down the public sector, it has been New Labour that have been able to more holistically steer it toward a neo-liberal orientation. The need to secure commitment from key groups to public sector reform rather than antagonism has been the first lesson learned from stalled first-phase reform. This reorientation has thus not just been about dismantling the institutions of the state (as in first-phase reform) but recognising the need for state capacity to secure competitiveness in a global economy, especially with regard to ‘deprived areas’ characterised by a large proportion of residual and de-commodified labour, ripe for commodification and entry into the global labour force. The need for state capacity to secure competitiveness is thus the second lesson learned from first-phase strategies. Public sector ‘Modernisation’ was to be based on four principles of reform: national standards, devolution, flexibility and choice. Oft repeated in White Papers and ministerial speeches, they have also become closely associated with the Prime Minister himself. [20] ‘High national standards’ are synonymous with performance management and centralised control, presented in de-politicised terms as technical and managerial and directed not by politicians but by ‘experts’ in inspection agencies like the Audit Commission, the Office for Standards in Education (OFSTED), the Healthcare Commission and a plethora of other sectoral bodies. ‘Devolution’ in this context refers to the delegation of powers and freedom to public sector managers. The third principle - ‘flexibility’ - appeals both to notions of responsive services and to greater management freedom. Together, they thus provide the incentive for successful managers within a framework of centralised control, made possible through the link with national standards, inspection and monitoring initiatives. In this system, managers and organisations ‘successfully’ implementing centrally designed modernisation gain ‘earned autonomy’ - additional institutional freedoms, for instance from detailed financial regulations, to vary staff terms and conditions, or the range of service provision. Such freedoms are available for instance to Foundation Hospitals, City Academies and local government. The fourth principle – ‘choice’ – explicitly extends rational choice theory as a mechanism for securing institutional efficiency and overcoming ‘producer interests’. Continuing the central themes of the NPM, it is thus promoted as generalising the advantages available to the affluent in terms of choice of provider. The massive amount of information produced by inspection and performance management is to be made available to the public, better enabling ‘consumers’ to make informed market choices between schools, clinicians and hospitals. As the introduction of market related ‘top-up’ fees in higher education shows, choice may also pave the way for the modern form of voucherisation. This then formed the main basis of the pseudo-debate between the main electoral parties in the 2005 General Election with each claiming greater credibility for their model of delivering it; though the Conservative option failed to fully reflect the transition from first to second-phase hegemony. Taken together, these four principles provide the framework for breaking up ‘monopolistic’ public sector provision, creating market opportunities for capital. Even where public provision remains, it is to be within competitive structures which ape market conditions. In education, a variety of initiatives have undermined the role of the Local Education Authority, giving more scope for individual schools to be run independently and in competition with one another. In health, regulatory reform promotes the transfer of some aspects of secondary care to the private sector (Department of Health, 2001; 2003a), and hospitals with Foundation Status can vary the services they offer, dispose of assets and borrow from the capital markets. GPs operating under the new GP contract can also vary the services they offer. In social care, a massive transfer of care provision has seen the proportion of social care provided directly by the public sector fall from nearly 100% in the early 1990s to 12% in 2002. Public housing has already, or is in the process of being, transferred to Registered Social Landlords or new arms length management organisations (ALMOs). Just as in macro-economic policy, the Treasury has been in the lead in driving public sector reform. While it is often Tony Blair that takes the heroic stand in public statements and speeches with regard to the government’s commitment to facing down the trade unions and other critics of its modernisation programme, it is the Treasury that has established the institutional framework which has transformed modernisation from a stated policy principle to an actual programme of institutional change. Through the public spending framework, the Treasury has gained virtual high-level control of all other spending departments, negotiating and setting detailed policy targets – Public Service Agreements – which then drive the policies to be put forward and implemented by them during a Spending Review period. Such is the power and institutional embeddedness of these targets that few who have experience of working inside or on behalf of a central government department can fail to be aware of their centrality. Yet again, the Treasury appears to have driven and shaped the existing NLP. Social reform has focused on both engineering a transfer in the supply of labour power and in improving labour productivity. Expanding the supply of labour power has proceeded against a background analysis of a range of implications arising from globalisation, technological changes in production practices and demography, particularly in relation to household composition and organisation. A series of publications published by the Treasury, [22] the DTI [23] , the DWP [24] and the DfES highlighted low productivity, persistently high levels of unemployment, previous strategies of comparative advantage based on low paid work and rising inequality. Specific social groups were identified as at risk from failure in competitiveness. The solution to the social risks of economic competition was not cast in terms of protection from the market but in terms of increased flexibility to adjust to the demands of rapid change. Initiatives to expand the supply of labour have thus targeted the long-term unemployed and increasingly those that have been pushed out of active labour market benefits entirely into ‘inactive’ benefits such as Incapacity Benefit which have long been argued to be a refuge for people discarded in the process of first-phase neo-liberal reform. Long-term exclusion from the labour market, though, is useless to a government interested in increasing the productivity of capital. As such, a raft of initiatives targeted at inactive communities, either of place or interest, have aimed to bring them closer to the labour market, either to actually gain employment or, and more importantly, at least compete for it. Such initiatives have included Action Teams for Jobs, Employment Zones, Pathways to Work Pilots, Working Neighbourhoods Pilots and targeted jobs brokerages and intermediate labour market schemes. The interesting theme of such programmes is the extent to which they aim to engender a social transformation from below to improve the ‘employability’ of specific groups or geographically concentrated communities. The implication is that this aspect of social transformation is about securing what Marx called primitive accumulation, based on access to an expanded reserve army of labour power. This emphasis on facilitating an expanded reserve labour army is suggested particularly by the increase in emphasis that has been given to tackling long-term inactivity as the formal employment rate has risen on the one hand and on the other the lack of sympathy in government for measures to protect against unemployment, through for instance enhanced regulation on the practices of employers. While it is recognised that insecure employment and a precarious relationship with the labour market is a key route into long-term poverty, the emphasis is not on regulation to protect vulnerable groups from this risk, but interventions to enhance the capacity of these groups to manage and cope with it. The recognition of the operation of poverty traps which prevented the long-term unemployed taking poorly paid work have been tackled through minimum wage legislation to ‘make work pay’ and a variety of in-work benefits have aimed to increase the incentives for low paid families (and women) in particular (with voucherised subsidies to access private sector childcare being an important component of this) to access work. However, little has been done to close pay gaps or to address inequality and European initiatives to regulate insecure, temporary, casual and part-time work have been routinely resisted. The emphasis therefore is on equality in front of capital – to compete to sell labour power – rather than of outcomes. At the same time as pursuing measures to secure expanded primitive accumulation and to improve the functioning of the labour market for capital, the NLP has also centralised a concern to improve the skills and capacity of the workforce to enhance the relative productivity of labour. As such, the NLP has sought to increasingly focus on the skills needs of business, a theme, for instance, that has been central to establishing the Sector Skills Development Agency and a network of sector skills councils in more then twenty economic sectors. In addition, the Learning and Skills Council was established to organise skills provision on the supply side. All these organisations have a specific emphasis on providing the workforce with the skills necessary to cope with the competitive demands of globalisation. Again, the Treasury and Gordon Brown have been key in promoting these two complimentary aspects of social reform in the NLP. The Treasury has developed a model of economic growth which sees growth over the long-term as determined by five key drivers. Two of these, skills and employment, have been central to driving the policy development and implementation process in each of the spending departments, again through the Public Service Agreement targeting process. Consideration of the wide range of policy documents that the Treasury has published under the Productivity in the UK series [25] leaves no debate about the commitment of the Treasury to the broader NLP agenda on employability and relative productivity. The Treasury’s model of economic growth has also, unsurprisingly, driven policy toward the productivity of capital itself. Pursuing concerns to increase the productivity of the economy the Treasury has intervened in the organisation of capital itself to improve flexibility and competitiveness at firm level, through three main categories of interventions. The first is the setting of the micro-economic policy environment through macro-economic policy, regulation and labour market reform to create competitiveness and flexibility. In micro-economic policy a variety of interventions are aimed at securing flexibility to achieve gains in competitiveness through letting less productive firms leave the market quickly to be replaced by newer more productive firms or to innovate to increase their own productivity. The tenets of ‘endogenous growth theory’ [26] are followed with the emphasis being on the spill-over of innovation between and across sectors. A second category of measures are designed to promote modernisation and investment in the fixed capital stock. Alongside investment in the social infrastructure, the NLP has emphasised the necessity of investing in the renewal of physical infrastructure with private sector investment marshalled through the Private Finance Initiative (PFI) and through vehicles such as Urban Regeneration Companies and Urban Development Corporations. Efforts have also been made to secure increased private sector investment in the fixed capital stock, again to facilitate increased productivity. A number of reviews have been commissioned to improve access to investment capital, especially for Small and Medium sized Enterprises. [27] A third set of measures aim to develop, apply and disseminate new production and product technologies and practices. For instance, tax incentives have been applied to induce investment in research and development and ICT. Dissemination of new and improved production practices and technologies is attempted through regional interventions and the development of business clusters (following advice from Harvard Business School guru, Michael Porter). [28] Universities are also encouraged to play the role of both developing new technologies and practices and disseminating these. [29] The NLP has received much attention for its grounding in an electoral strategy of winning ‘middle England’. While the electoral appeal has been somewhat over emphasised because of the collapse of the other major electoral party, New Labour clearly appealed to the core concerns of Thatcher’s crumbling historic bloc and broadened this to develop a ‘catch-all’ political appeal. We are a national party, supported today by people from all walks of life, from the successful businessman or woman to the pensioner on a council estate. Young people have flooded in to join us in what is the fastest growing youth section of any political party in the western world. We are a broad-based movement for progress and justice. New Labour is the political arm of none other than the British people as a whole. Our values are the same: the equal worth of all, with no one cast aside; fairness and justice within strong communities. --- Tony Blair [30] In addition to this broad based electoral strategy has been a more complex strategic alliance. At the top lies a small layer of organic intellectuals in the form of key individuals and organisations which produce relentless papers justifying existing policy or generating new (sometimes marginally critical) policy ideas, but safely within the confines of the overall political-economy perspective. Below this, a broader and more materially based alliance rests on ‘partnership’ and institutional reform. This is a well embedded material structure which Whitfield (2001:157) calls the Corporate Welfare Complex with at least three broad elements: ‘a contract services system which includes (1) a shared client/contractor ideology, value system and vested interests in which the state outsources an increasing range of services and functions; (2) an owner operator infrastructure industry; and (3) a system of tax relief, subsidies and concessions to business’. [31] The role of this Corporate Welfare Complex is significant, not only in the way that it grants special benefits to capital, but in the way that it has been used in the NLP to build a wide supportive base for a hegemonic doctrine of modernisation, economic development and social order. A relatively small number of consultancy firms and a larger number of consultancy units in universities are increasingly commissioned to provide the intellectual basis for organisational development, reform or strategy under the guise of ‘evidence based policy making’. A crucial feature of many of the university units is that they were often responsible for critical research about Thatcherite restructuring. In that context, the several million pounds a year spent on securing their ‘support’ through tying them in to relatively bounded evaluations and policy research commissioned by the various elements of government might appear to be good value. At a local level a wider range of other consultancy organisations are also heavily involved in local and regional governance. As, international political economist Kees van der Pijl notes, this group are central to the ‘cadre function’ of the hegemonic class, performing the role of transmission belt for the prescriptions of the higher level organic intellectuals to be implemented at a local, regional and institutional level. [32] Additional to this, are an increasingly embedded web of institutional linkages between the state and capital. The privatisation of state and public service functions provides one arena for this. Again, there are a multitude of different types of privatisation which go beyond the asset sales of the early privatisation period. Increasingly, in the use of the PFI a wide range of business sectors (if not always a wide range of businesses) are tied into the functioning of key aspects of the state (in particular health and education design and even delivery). For instance, a traditional PFI contract typically includes design, build, finance and operate functions, with each of these performed by at least one private sector partner in a complex and long-term contract between the state and a consortium of capital. These relationships are long-term with some of the ‘partners’ being involved in this contractual relationship for twenty-five to thirty years. The new wave of PFI schemes such as the Local Improvement Finance Trust (LIFT) or Building Schools for the Future (BSF) programme involve even more complex relationships between consortia at a national and local level. Such deeply entwined relationships are being created in multi-levelled poly-centric governance structures too, with increased opportunities to bind the state, capital and civil society together in webs of formal and informal governance in regulatory bodies, Local Strategic Partnerships, Inward Investment agencies, regional institutions, local forums and Area Based Initiatives. These relationships assist in the development of strategic alliances which embed the logic of the NLP, especially as these governance and delivery structures interact with the structure of knowledge production and dissemination which extends between the leading edge organic intellectuals at the heart of the project and the cadre consultants and managers who reproduce it at local and institutional level. These processes are augmented by increasing mechanisms for community ‘participation’ in a multitude of different and disparate mechanisms, often without actual power or where the scope for exercising it is heavily constrained and limited to choosing from a menu of options or by the boundaries placed by hegemonic ideologies and perpetuated through advice disseminated by public managers, government organised conferences and management consultants. The role of these structures is to spread an ever wider net to draw in support and community ‘ownership’ of the NLP at a local and community level. In each of the five areas of NLP reform described above: ideological, institutional, social, economic and in relation to supporting strategic alliances, the Treasury, under the leadership of Gordon Brown, has led the reform agenda. Ideologically, Brown has been influential in setting the overall strategic framework for the NLP, particularly the emphasis on competitiveness to meet the challenge of globalisation. In institutional reform, particularly of the public sector, the Treasury has been highly influential in promoting the use of the market failure model with public intervention only justified where it is market correcting rather than market replacing as in the social democratic ideal. Macro-economic policy has been determined by the need to generate confidence and credibility with international financial markets. The Treasury and Gordon Brown have also driven privatisation in many areas of the public sector, especially in health and education, through the PFI a tool that the previous conservative government had invented but failed to make widespread use of. Through the use of Public Service Agreements, the Treasury has maintained a virtual stranglehold on all other government spending departments, directing overall strategic policy objectives for social reform and often limiting the available alternatives for achieving these. In economic policy, the Treasury has clearly driven the overall policy agenda to achieve productivity growth. In building the supportive strategic alliance, the Treasury has supported the approach toward securing electoral success, generating a supportive ‘evidence base’ and building partnerships with strategic parts of the private sector. In short, the argument here has been that the most likely future Prime Minister, after Tony Blair leaves office, has fully supported the key aspects of reform under the NLP. The next section briefly assesses the evidence of the likely future direction of the NLP should Gordon Brown become Prime Minister. Gordon Brown in the Third Term and Beyond Since the historic third successive general election victory of May 2005, Gordon Brown has made a variety of key announcements which offer evidence of his likely commitment to continue the NLP as described above without any major shift in emphasis. The focus on social adjustment to enable competitiveness has remained a key concern. This was a substantial theme in both the Prime Minister’s and the Chancellor’s speeches to the Labour Party’s September conference [33] and the election manifesto, [34] all of which stressed the need to continue the transition to a higher skill and higher value added economy in order to meet the challenge of global competition. A major focus of this adjustment continues to be around education, skills and training, with further reform promised. [35] The focus on widening the reach and scope of the formal labour market, and in particular pushing the long-term unemployed back into competition for work is also to be continued and enhanced through reform of the inactive benefits system. [36] Additional emphasis has been lent to the role of private sector growth and enterprise to take advantage of decommodified labour in deprived areas. [37] The emphasis on restructuring capital in line with the overall objective of increased international competitiveness also continues. For instance, the Chancellor’s speeches continue to focus on this theme and several measures have been announced to strengthen the policy emphasis on restructuring capital to make it more knowledge intensive. [38] Conclusion This article has argued that the NLP represents a second stage in the shift to neo-liberal hegemony in the UK. It is argued that this second phase represents both important continuities and breaks with earlier neo-liberal reform but it does not represent a return to meaningful social democracy. Rather it attempts an ambitious project to embed neo-liberal hegemony in ideological, institutional, social and economic practices that can sustain it. If first stage neo-liberal adjustment can be argued to have dismantled the construction of social democracy in each of these areas, the NLP, as a second stage, is more about reconstructing the basis for a revised hegemony. There is currently widespread debate about the potential future direction of the NLP once the current Prime Minister Tony Blair steps down sometime between November 2006 and mid 2007. It is widely thought that when this happens, the current Chancellor of the Exchequer Gordon Brown will become the next Prime Minister, though there may also be challenges through the machinery of the Labour Party for the leadership. However, assuming that Gordon Brown does become the next Prime Minister, this essay argues that there is unlikely to be any serious change of direction from the leadership of the party at least. Gordon Brown, through the auspices of the Treasury in particular, has been a central figure at the heart of the NLP. He was influential in setting the overall ideological framework for the NLP, arguing in particular in favour of the need to adopt a more open response to globalisation based on competitiveness rather than limiting the scope of global markets. He has also driven key aspects of institutional reform, particularly those associated with privatisation and the adoption of a market-first model, with public intervention strictly limited to areas of market failure. The Treasury has been at the heart of social reform, particularly to secure broader commodification of labour through drawing ‘excluded’ groups back into the formal labour market and also increasing the relative return to capital by enhancing labour productivity, principally through reforms to skills provision and demand. In economic reform, the Treasury has again been at the heart of attempts to drive up market-based productivity by providing incentives to invest in the fixed capital stock. More recent evidence from policy measures promoted by the Chancellor and through his reaffirmation of the basic principles of competitiveness in a global market in speeches suggests that his view of the future direction of the NLP is not vastly different to that which has been put in place already. The evidence about the likely preferred policy intentions of the most likely future leader of the Labour Party and thus Prime Minister then suggests ‘more of the same’ after Blair. However, it needs to be remembered that this argument rests on two key assumptions. The first is that Gordon Brown will be the next Prime Minister. The second is that it is the policy intentions of the leadership of the Labour Party that will determine the actions of the government. With a resurgent Tory Party and increasing back-bench unrest in the Labour party there is potential scope for other pressures to act on the trajectory of government policy after Blair. Alex Nunn works at the Policy Research Institute at Leeds Metropolitan University, where he undertakes applied commissioned research on behalf of government departments, public bodies and trade unions. More details of his work and publications can be found at: http://www.leedsmet.ac.uk/lbs/pri/staff/AlexNunn.htm.
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