The left that's left in New Labour

The difference between the two parties is that Labour would plough savings back into the public sector
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Tomorrow, Gordon Brown will set an inflation target at least as tough as the the Government's own projection of 2.5 per cent. Although his speech will also lay out some important reforms of the Bank of England and the Treasury, once again this will be essentially Iron Shadow Chancellor Brown. We've had fiscally austere Gordon Brown, pledged to maintain for two years the awesomely difficult limits on public spending laid down by Kenneth Clarke. Now it's the turn of monetarily ultra-prudent Gordon Brown pledging Labour to a counter-inflation record at least as good as the Tories' now, and significantly better than they managed in the late Eighties.

While Brown will no doubt rightly emphasise that it's the poor who suffer most when governments lose their grip on inflation, this is a speech to reassure the City as much as the electors. And there is no point in pretending that all this won't make some in the Labour Party just a mite uneasy. OK, we're pledged to constitutional reform, which has the great advantage to an incoming Labour government of not costing very much. But otherwise, just how are we going to be different from the Tories? Isn't it, they will ask once again, all a bit, well, bleak?

Which is why the arrival of two readable little books of unashamed New Labour propaganda ought to cheer up those in the party who from time to time suffer inner doubts about Tony Blair's own unshakeable conviction that a Labour government, especially if it can secure two terms, will be a good deal more radical than they fear. The first, Why Vote Labour by the MP Tony Wright, is one of a three-part series from Penguin, by a thinker in each of the three main parties, and brought out for the election. The other, much the more specific on policy, is What Labour Can Do by Richard Layard which, as his fellow economist Gavyn Davies pointed out yesterday in The Independent, is a "very helpful" antidote to the idea that nothing can be achieved by a Labour government without increasing spending and borrowing. Some of it is party policy; some of it isn't. But it ranges from humane welfare reform that rewards the working poor, through an extension of family credit, lower bottom rate taxes and a minimum wage of pounds 3.25, to an education system that pulls up the lamentable standards of the lowest-achieving schools, to the illiteracy programme announced by David Blunkett this week, to green taxes and a radical competition policy which has little patience with the notions of "national champions". And there is quite a lot more.

Layard's analysis, reinforced in recent lectures by both Brown himself and David Blunkett, demonstrates that neither equality (of opportunity) nor the role of the state have been abandoned by Tony Blair's Labour Party. It's true, of course, that revisionism about Labour's past comes thick and fast - whether it's Blunkett declaring in his lecture last week that "any government entering the 20th century cannot hope to create a more equal or egalitarian society simply by taking money from one set of people and redistributing it to others", or Margaret Beckett, one time left-wing firebrand, saying in a BBC TV interview on Sunday that she was "neither ruling in nor out" privatisations by a Labour government. What Layard's book, in particular, helps to demonstrate is how much room that leaves the left. Especially if you realise that the use of higher income tax for the well off or state ownership of trading industries were a means to an end, and not ends in themselves.

But as with equality, so with the role of the state. Not all Tories want to shrink the state. Sir Edward Heath's lofty dismissal of some of the dominant notions in his own party is shared, for all the protestations, by some of his less outspoken colleagues. But the centre of Tory gravity - reflected, no doubt, in what will emerge in the manifesto discussed by the Cabinet yesterday - is shifting inexorably towards progressive reduction below the 40 per cent share of GDP that the state takes. What's refreshing about Layard is how relaxed he is about keeping a level that is not much higher than 40 per cent, but is not much lower, either.

Not that this won't mean some real pain for some. The windfall tax belies the notion that Labour's programme is an Arthur-Daley, nobody-gets-hurt kind of politics. And welfare reform, as Layard implies, means a transfer of some benefits, such as top-up pensions, to well-regulated private insurance. In time a new system of student maintenance loans may be augmented by starting the erosion of state-paid university tuition fees - which for the well off is little short of a scam. But the difference between the two main parties is that there is every reason to expect the savings to be ploughed back by Labour into other parts of the public sector, such as health and, above all, an education system that starts to provide equality of opportunity.

Tony Wright quotes approvingly the remark that services that are only for the poor end up as being poor services. This is a critical difference between new Toryism and New Labour. In the NHS it will mean halting the flight by the prosperous from a health service that Nigel Lawson, no less, regarded as one of the most efficient deliverers in the developed world. The same goes for education. Wright quotes, again approvingly, but without endorsing his prescription of reintegrating the best of the private sector in the state system, George Walden's condemnation of an "apartheid" in which 7 per cent of children in private schools collect "80 per cent of the GCSE and A-level league table prizes".

None of this would happen overnight; much of it, perhaps not even in the first term. But here's the point: Labour cynics talk easily about Tony Blair having got "his betrayal in first". That's one way of describing it; another may be that Blair, as Margaret Thatcher very differently did in 1979, will deliver more than he promises.