Has he found his big idea?

It has been derided by both left and right. Yet Tony Blair's concept of the stakeholder economy could prove truly revolutionary. By Nick Cohen The first reaction of many was to snigger
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The Independent Online
THE LONG years of Conservative rule are coming to an end. The Tory party, the defector Emma Nicholson said last week, "seems class-ridden, prejudiced, fratricidal and distanced in ignorance from the mass of the people". The opinion polls indicate that most of us share this view. Labour's lead over the Tories (40 points at the last count on Friday) is so large that Tony Blair feels it necessary to warn his supporters not to believe what they read. Among Conservatives only the most ardent optimists believe they will win the next election.

Yet while the Labour Party seems set to sweep all before it, it has been a picture of timidity when asked to describe what it would do when and if it wins an election for the first time since 1974.

Mr Blair has faced repeated complaints from his own side that he has not shifted the centre of gravity of politics from the right but instead concentrated on abolishing Clause IV, being nasty to union leaders and reassuring Conservative voters that it was safe to switch to "new" Labour - the party of, to use a phrase cheekily and tellingly stolen from the Tories, "One Nation". Safeness, responsibility, caution have been the watchwords; the party seemed to be defined by what it was not, rather than what it was.

One rising Labour star, who wished to remain anonymous, said: "Until very recently I thought that we weren't winning the battle of ideas. The electorate appeared to hate the Conservatives but remain conservative. The only big theme we had was 'community' - a concept so nebulous it can mean anything to anyone."

Mr Blair shared these worries. A friend said that for the past year he had been a "restless man" who constantly warned his aides that Labour could not win the election simply by relying on the Tories to lose it. Labour had to find a way of saying where it would take Britain. The party must, he insisted, "tell a clear story", or give people a clear theme for what it wanted to do. Another friend said the Labour leader had been showing an "extraordinary" openness to ideas and willingness to argue - "he even makes time to read books".

Last week the restlessness and openness bore fruit and Mr Blair produced his big idea. It was this: every citizen should have a stake in the economy and society.

He told an audience in Singapore that what he wanted was "a stakeholder economy in which opportunity is available to all, advancement is through merit and from which no group or class is set apart or excluded. We need a country in which we acknowledge an obligation collectively to ensure each citizen gets a stake in it."

The Singapore setting was appropriate. The reasons for the success of the Asian tiger economies are the subject of much argument between Labour and Conservatives. Is it because they have low taxes and encourage enterprise? Or can the phenomenal rates of growth be explained by the willingness of government to intervene and create new industries?

Mr Blair emphasised a third cause: Asian societies encourage strong bonds between citizens. Britain could not import an alien culture, he said, but it could tackle the exclusion of the unemployed underclass from society and stress the need for long-term commitments to invest in everything from education to industry.

It was not a traditionally left-wing speech, but it could not be dismissed as yet more evidence of Labour's shift to the right. Mr Blair praised market economies but also committed himself with some passion to confront the danger that new technology and the global market will leave many behind with "their ambitions laid to waste".

Is this really the new politics "new" Labour is promising to bring to Britain? Is it any less nebulous than the notion of "community"? Does it have practical meaning and, if so, how will it change things?

AS SO often in the past, the Conservatives did not know how to deal with Mr Blair. Michael Portillo, the Secretary of State for Defence, said that Labour was stealing Tory clothes. "It was an idea that we had in 1979, when we enabled people to buy shares in the privatised utilities and industries of Britain," he said. "We were opposed tooth and nail by Tony Blair at the time, so if it is his big idea, he's just 16 years out of date."

The tune changed the next day. According to the Prime Minister, Labour was not aping the Tories but pandering to the unions as it always had done. John Major told a business audience on Wednesday that Mr Blair was putting "clear red water between the parties" and taking Labour back to the corporatism of the 1970s. Cedric Brown, the "fat cat" chief executive of British Gas, was in the audience and appeared on television defending Mr Major. "That'll get us a few hundred thousand extra votes," chortled a Labour strategist.

As the ideological temperature rose, what was possibly the most honest comment on the stakeholder society came from the Labour left-winger Ken Livingstone: "I haven't a clue what it means. If anyone does, could they let me know?" One Labour spokesman, struggling for an answer when asked, could only offer the supercilious comment that stakeholding meant stakeholding.

Tony Blair's short answer, released at the time of his Singapore speech, was a little more helpful. Stakeholding was an umbrella term for the kind of society that existing Labour policies could create.

In an economy run for the many not the few, long-term unemployment would be tackled by, for example, letting local authorities build new homes and by modernising the welfare system so that poverty traps would be abolished and the young were encouraged and perhaps forced to take work. There was the usual emphasis on education and training and a commitment to ensure fair treatment for workers.

But, Mr Blair's supporters made clear, stakeholding meant something more. It was not just a new way of dressing up old policies but an idea that could evolve and provide the creative impulse for a Labour government.

The present Labour leadership is fond of pointing out that when Baroness Thatcher came to power she did not have rafts of policies but a few principles to guide her. Privatisation, for example, was not in the manifesto but developed logically from the initial "private good, public bad" philosophy. Stakeholding, the argument runs, could have the same role in a Labour government.

All very well, but what is the philosophy that will provide this guiding principle? For the time being, some Labour leaders' answers are vague. In one of a series of speeches yesterday in which Labour frontbenchers rushed to show loyalty to their leader, Marjorie Mowlam, the Northern Ireland spokeswoman, set forth her view.

"Tony Blair's vision of a stakeholding economy can, for me, be defined in one word: 'people'," she explained. "Politics, though it is too easily forgotten, is about people. A country is its people. What we have seen over the past 16 years ... is a separation of government and politics from the people ... a separation of the economy from the people." Jim Hacker, of Yes, Prime Minister, would have been proud of such views. On BBC Radio's Today programme, Donald Dewar, the wily Labour chief whip, was all but silenced as he struggled to explain how stakeholding would help ordinary people.

But there are other voices, outside Westminster, that speak with more confidence. These are the handful of theorists who developed the idea of stakeholding in Britain and have seen both Labour and the Liberal Democrats take it up.

To varying degrees, they see it as a theory that could initiate and justify the transformation of the welfare state, lead to an attack on the City's power to wreck the long-term strategies of British industry, usher in constitutional reform and promote the creation of a centre-left coalition which could keep the Conservative Party out of office for a generation. High hopes for a theory that has its origins in American universities decades ago and was all but forgotten for 20 years.

DESPITE Mr Portillo's claims, stakeholding is an idea that comes from the centre-left. From centre-left American economists, to be precise, who launched an attack in the 1950s on the free-market economics Mr Portillo holds dear.

According to free-market theory, companies are owned by their shareholders and are run by managers who are answerable to them. The American critics pointed out that these notions did not begin to describe the real world. Managers were technocrats doing what they wanted. Shareholders had little or no control. In successful companies, the people who mattered were the workers, who had to be persuaded to give their best to a corporation, the suppliers, who had to be persuaded to provide good raw materials, and the customers, who had to be persuaded to buy the finished product. These people were "stakeholders" and they had to as much right as shareholders to have their interests considered. Indeed their interests might have to be given priority over those of shareholders if a company was to prosper.

That argument is ancient economic history. During the era of Thatcherism, stakeholding virtually disappeared as an idea as free-market economics reigned supreme. But as the Conservative economic "miracle" turned to ashes, serious thinkers set about reviving the old idea.

The two most significant figures in Britain were Professor John Kay, who runs the consultancy London Economics, and is frequently cited by Labour leaders as an influence, and Will Hutton, author of the surprise bestseller of 1995, The State We're In. Both emphasise the importance of long-term investment and the building of trust; both denigrate the ease with which shareholders can undermine their companies by supporting a hostile takeover and both called for substantial reforms of the City and corporate law to encourage long-term investment,

Professor Kay argues that the question of who owns a company is almost meaningless. Successful companies have a history and are social organisations based on trust. They are not just places where "people find it expedient every morning to renew their contracts with each other".

The business theory is now influencing politics. Both Labour and the Liberal Democrats have taken up stakeholding language with enthusiasm. It allows them to break out of the old arguments about the relative merits of nationalisation and privatisation. It also enables them to develop the very 1990s theme of "responsibility".

All kinds of policies that seem to have little to do with economic theories of the company follow. If Britain is to be cohesive, then the poor and the unemployed must be given a stake in society. But in return for benefits, they must be ready to work and train. If they shirk, they face the risk of having their welfare payments docked, as Gordon Brown, the shadow Chancellor, has warned. Responsibility cuts both ways.

The ideas of Labour's Frank Field on creating a new welfare system - described as dangerous by some and as inspired by others - move to centre- stage. Mr Field wants employees and employers to be forced to contribute to new corporations which would build up privately invested funds to pay national insurance benefits and pensions. Contributors would be stakeholders as their money would remain their own and not be handed over to the Treasury.

Stakeholding can be used to justify democratising Britain's centralised constitution. If people are stakeholders they should have real power in the running of their cities, hospitals and schools.

Finally back in the world of economics, there is the touchy subject of reforming the financial institutions, the role of which conflicts with everything stakeholder economics stands for. Labour says little in public about taking on the City, but its economics advisers are thinking about it.

Put together, it all constitutes a far-reaching programme. But not everyone is happy; many Labour supporters who want the party to be adventurous listen to the rhetoric about stakeholding and despair.

"I HAVE been on Labour policy committees for 30 years," said Professor Peter Townsend, the country's leading authority on the welfare state, "and I'm despondent. Ideas like Mr Field's are, to be honest, half-baked."

Professor Townsend said that all the talk about giving the unemployed a stake would be meaningless unless Labour was prepared to change its cautious economic policies and commit itself to creating jobs in the public sector and fostering new industries. "You can't train people for jobs that aren't there," he said. He also highlighted the great problem which has been hidden by Mr Blair's One Nation rhetoric: what happens when stakes (or, to be very old Labour, classes) conflict.

Sir Iain Vallance, chairman of BT, describes his company as a stakeholding one. But he admits that he can save money by sacking workers (which does not do much for their stake in the company or society) and then has to decide whether to pass the savings on to consumers who have one claim or shareholders who have another. Unipart calls itself a stakeholding company, but refuses to recognise trade unions.

The reaction to Will Hutton's surprisingly successful book illustrates the difficulty stakeholders have in resolving competing claims. Mr Hutton was strongly criticised for his plans to persuade the middle classes to abandon socially divisive private schools by bringing back grammar schools. The wealthy would then have a stake in state education, he said. Well, they might, replied his critics, but it is hard to see what stake the children condemned to sink secondary moderns would have in society or why their interests should be sacrificed.

All these criticisms of the dangers and blandness of stakeholding may seem to make it an easy idea to file under "meaningless concepts" and dismiss. There are, however, many who are wary of treating Mr Blair's big idea with contempt.

Professor A H Halsey, the veteran ethical socialist who has influenced Mr Blair, said he did not think stakeholding was new. "There have been no big ideas since the French Revolution," he declared, magnificently. "It is another way of phrasing the old left-wing aspiration of giving everyone full citizenship. You must remember that the world isn't changed by think-tanks and academics but by politicians who have the will to make it a better place - or build the New Jerusalem as we used to say. I think in his mild way Mr Blair has the will."

The conflicting reactions to stakeholding will not be resolved until Labour is in power and can demonstrate what it means by deeds rather than words. But the confused and angry Conservative reaction suggests that the Government regards stakeholding as a threat. For all the confusion about what it means, there is a faint chance that the idea may not only help Labour win an election but even - can it be possible? - change the country.

What they said about stakeholding

The economics of the centre and centre-left today should be geared to the creation of a stakeholder economy which involves all our people, not a privileged few. If we fail in that we waste talent, squander potential wealth-creating ability and deny the basis of trust upon which a cohesive society - One Nation - is built.

Tony Blair in Singapore The development of an underclass of people, cut off from society's mainstream, living often in poverty, the black economy, crime and family instability, is a moral and economic evil.

Tony Blair

What I believe we are seeing is the tip of a plan which is nothing better than fancy packaging for new burdens on business of one sort or another. John Major

It does not venture into an exciting new territory beyond modern Conservatism. It is an idea from European social democracy circa 1980: the sort of thing that Sweden, France and Germany are now beginning to abandon, but which counts as modern in today's Labour Party. David Willetts MP

When Mr Blair has reached the limit of his willingness to defend our national interest in Europe, who would be the stakeholder in Britain? Not only Labour's old friends, the trade unions, and the same old pressure groups. No. Under Tony Blair, they will be joined as corporate stakeholders in Britain by Brussels.

Brian Mawhinney

Labour's latest sound-bite is only a new disguise for their old corporatist ideas...Far from increasing the rights of the individual, they would impose ever-greater central-government regulation and control.

Michael Heseltine

What does he mean by making us all "stakeholders"? I remember when Labour made us stakeholders in the nationalised industries. That just cost money and gave us incessant strikes. Lord Tebbit