Blackpool plays host to ghosts of the Twenties

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HERE IS a story from Blackpool. A brilliant, fluent left-wing politician gets fed up with the deflationary impact of the exchange rate mechanism. The pound is overvalued and 10 per cent of the workforce is jobless. The Government is in crisis. He and his friends reckon the economy is being run for the City and the bankers, and that the politicians need to take charge.

The outsider and his Labour-left supporters want the pound to free-fall, while a massive programme of retraining and investment gets Britain back to work. He argues his case in articles, pamphlets and private briefings for the Labour leadership. But neither the leader nor his Treasury team will listen. The anti-inflationary orthodoxy is too strong. The outsider storms out. He is ruthlessly marginalised by the party leadership. And he has taken tea with Tony Benn.

We are talking here about Bryan Gould, are we not? We are not. All the above details except one come from Robert Skidelsky's history of the events of 1929-31, Politicians and the Slump. The extra fact was given by Mr Benn himself at a fringe meeting on Sunday evening: and he was only a young boy in 1927, when he took tea with Oswald Mosley.

I have wrung out every similarity between the two cases I can think of, and the comparison stops there. Mosley went fascist, and I think we can be pretty sure that Mr Gould will not. Indeed, he is an almost indecently fair-minded and generous fellow, unfascistic in every way. The nearest he has ever come to Mosley's 'trained and uniformed force' is probably watching the Dagenham Girl Pipers.

But echoes of the events that convulsed British politics in the years just before and after Britain was forced off the Gold Standard in 1931 are too loud to shut out. In government, though it was a Labour one, an anti-inflationary, strong-pound policy was being pursued with a determination that threatened to split parties.

Philip Snowden, Labour's Chancellor at the time and now a figure almost as reviled by the party as Mosley, had a hatred of inflation that mirrors John Major's, and to a lesser extent John Smith's. He talked about the 'microbe of inflation' being 'always in the atmosphere', and went one further than Mr Major (though not Nigel Lawson) in wanting independent control of monetary policy by the Bank of England. Churchill said of him what might be said of certain modern politicians: 'Treasury mind and the Snowden mind embraced one another with the fervour of two long-separated kindred lizards.'

The trick for today's Labour politicians is to avoid the traps that most of their predecessors tumbled into in the late Twenties. To the right, the trap of arid, do-nothing orthodoxy that gives no hope to the people most hurt by recession; to the left, command economics and other semi-revolutionary fantasies.

Labour leaders have always had to become little bridges between the insurgent idealism of their followers and glum realities. Yesterday Gordon Brown was going about the same old task rather well. He hailed a 'new economics', while making it perfectly clear that he favoured a tougher version of the ERM, not no ERM. And although a statement on Europe from the party's National Executive Committee contained attacks on 'monetarist excesses', it suggested that Labour would still like to see (one day) a single European currency. But if it ever happened, as Labour's leadership must know, it would entail the very dominance by bankers that Mr Gould (and Mosley, and the party activists) warned against. Even so, the leadership won the votes.

In return for all this relatively orthodox rigour, Mr Brown had to pretend to take seriously the idea of a windfall tax on wicked speculators. As he knows perfectly well, this would merely send them, as well as British Aerospace, to Taiwan. But one of the troubles with being a bridge between fantasy and reality is that you have to keep one foot in the realm of fantasy.

The windfall tax idea had come about because the conference indulged in a little gentle class warfare, with money-market men doing service as today's equivalent of the top-hatted bosses of yesteryear. A typical example came from John Edmonds, of the GMB, who Ewas roused to righteous anger - not a pretty sight - by 'cocky young men' celebrating their pounds 500m gain from speculation THER write erroragainst the pound. It was he who advocated the windfall tax that Mr Brown did not laugh at.

The general mood was one of angry, bewildered alienation from the world of international currency flows and City mores: a rerun of the debate in the Twenties about the City vs manufacturing. Again and again, the flat voices of the Midlands and North rose against the wicked South.

It would be wrong to dismiss this as a quaint historic irrelevance, and to conclude that nothing has changed in the real war of ideas between Labour and the Conservatives. Just one day into conference, it is clear that the huge cost of trying to defend the pound has renewed Labour's confidence in its old emphasis on industrial and social investment. Mr Edmonds noted: 'These were British dealers, working for British high street banks, making more money in an afternoon than our top 10 engineering companies invest in a year.' Robin Cook, Labour's industry spokesman, compared it to the extra money Labour proposed to spend on the NHS over two years being blown in a few hours.

Had Labour been in power, it would have done the same - whatever it says now - but that's politics. The party will never again be quite so defensive about its spending plans.

For the time being, this will be the limit of the revolt against Labour's economic orthodoxy. If we had more rational politics, where parties reformed according to the great issues of the day, Labour would now split, as would the Conservatives, and the two real camps - anti-European- union-inflationist and pro-union-monetarist - would confront one another.

A referendum campaign, rejected by Labour yesterday, would have been a de facto temporary realignment along these faultlines. This is why the leaders of the two main parties are so opposed to it: the ultimate triumph of party management over public debate. The anti-Maastrichtians will have to work together covertly, outside the party systems, an experience all rebels have found intolerable.

Mr Gould has bravely embarked on a lonely, conscience-stricken campaign where, on yesterday's evidence, Labour will not follow. He is being efficiently written out, just as Mr Brown writes himself in. Mostly, party management is all. Its brutal philosophy was explained most clearly by another figure from that earlier crisis, Labour's disciplinarian deputy leader, Arthur Henderson. 'The plural of conscience,' he snarled, 'is conspiracy.'