Steve Richards: The dividing lines between the parties remain blurred

So will the Tories fall into the tax-cut trap once again? It will not be so straightforward

Tuesday, 6 January 2009

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As the next election moves closer I read regularly that the battle lines between the two main parties are clearer than they have been for decades. I have written something similar myself more than once. But having watched Gordon Brown's new year interview on Sunday and David Cameron's speech yesterday I do not believe that this is the case, or more importantly that the two leaders are sure they want us to believe in a deep ideological divide. The famous dividing lines are more blurred than they seem.

Let us take first the case of Gordon Brown. There is no doubt that the recession has freed up the Prime Minister to articulate a little more clearly what he really thinks. In his new year message he hailed with a genuine conviction the ending of "unbridled free markets". Brown has never been a champion of wholly unrestrained markets and has spent much time agonising with colleagues over the correct balance between markets and the state. But from the mid 1990s until recently he did not question the efficacy of markets so openly in public.

However, this does not mean Brown is returning to the 1970s. If anything he remains too determinedly expedient. In an aside during his interview with Andrew Marr on Sunday, Brown stressed that he was responding pragmatically to events rather than out of an ideological fervour: "By the way, this is not a debate between Keynesians and Monetarists. All economists agree that if the economy cannot move because private sector activity is not working and the markets are not working to the best effect, then the Government has got to step in..."

His remarks echo Alistair Darling's Mais lecture delivered towards the end of last year when the Chancellor also made clear that the Government had not become disciples of Keynes or of anyone else. Roughly translated Darling indicated in his lecture that he was busking it rather than following an ideology.

Brown busks it too. He has not metamorphosed from Mr Prudence to the quadruple-barrelled Mr Wildly Reckless Old Labour. The first portrayal was anyway a masterful disguise that enabled Brown to implement other policies that would have normally sent the right wing media and the markets into a state of fuming panic. The second is equally misleading. The VAT cut was an example of New Labour populism (misjudged populism, but an attempt to please nonetheless) rather than left wing idealism. More widely Brown acts only when he has the protective clothing of international support. In his new year message he did not just refer to the hyperactivity of his government, but of "governments".

When the election is called Brown will present his policies as a pragmatic commonsense response to a global crisis, ones that were espoused by governments on the left and on the right. He will seek to isolate the Conservatives as the ideological dogmatists returning to the 1980s as they advocate immediate tax and spending cuts.

But will the Conservatives fall into the trap once more? It will not be quite as straight forward as that. Cameron is busking it too, but he is alert to electoral dangers. As he busks it he seeks, more than he did, to reassure the right wing commentators in the newspapers and on the blogs, but also to woo non-Tories who he needs if he is to win an election.

At one point during Cameron's speech yesterday I became almost giddy with excitement as he promised "combining the progressive, family-friendly culture of Scandinavia with the creativity and dynamism of Silicon Valley, the savings culture of Japan, Germany's apprenticeships and manufacturing strength, France's high-speed rail system and America's strong mayors giving their cities real economic leadership". All he missed out was a pledge to create a football team as skilful as Brazil's.

But now that he has succumbed to his party's obsession with tax cuts Cameron's challenge will be to explain how any of this will be paid for. His only precise policy yesterday was an immediate spending cut to finance a tax reduction for savers. As Barack Obama prepares to make a massive fiscal stimulus and other countries follow suit, Cameron is virtually alone arguing for a spending cut without specifying where the axe would fall.

Even so he is very careful not to go too far. Yesterday he would not even commit his party to implementing the tax cut at the next election. Evidently in his unresolved, precarious balancing act between appeasing right wingers and being credible, Cameron still yearns more for a whiff of credibility. He still has much work to do to make it all add up and is not yet ready to fight an election. But I suspect he will campaign arguing that he can navigate the economy towards stability with policies that have been framed pragmatically and will resist any temptation to fight an ideological crusade with Milton Friedman on one shoulder and Margaret Thatcher on the other. The proposed tax and spending cuts will be relatively small. Even when significant philosophical differences between the parties are highlighted the details remain vague. Peter Mandelson made two substantial speeches at the end of last year putting the case for government intervention in certain circumstances. But he did not specify too precisely what those circumstances should be. That is because he is not sure himself. Already he has held several anguished conversations with ministerial colleagues about the future of the car industry, but they have been far from decisive beyond a sense that the Government has not got much spare cash to help out even if it wanted to.

Similarly the ideological analysis of Cameron and indeed Nick Clegg is also conveniently vague. In their different ways both have argued that the crisis is explained by poor regulation and not a wider failure of markets. That is the easy bit. Before the current crisis there was not much space for more stringent regulation in a country that was so sceptical about government interference.

What should be the balance in the future? Cameron blames the early decision of Brown to remove the Bank of England's regulatory powers, but there had been several lapses in the 1980s and 1990s when the Bank had been in control. The light touch culture, instigated in the Thatcher/Reagan era was as much to blame as the regulatory structure.

This is not to argue that underneath the surface there are not vivid dividing lines. Brown has always had more faith in government as a potentially benevolent force, an instrument that can help people fulfil their potential whatever their backgrounds. Cameron still looks more to the economic orthodoxies of the 1980s and from Day One of his leadership put the case for a smaller state.

They have one experience in common. Both of them are leaders who know what it is like to lose elections and who are determined to make as wide an appeal as possible when the next one comes along. That means the dividing lines will be less clear cut, not least when they are being erected during a deep recession in which neither of them knows what will happen next.

s.richards@independent.co.uk