Adrian Hamilton: A creeping defeatism is overcoming Labour

You have to go to a party convention to understand how shut off they are
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"Of course it's all in a bubble here, so one shouldn't exaggerate Brown's success," said an MP cautiously after acclaiming the Prime Minister's speech in Manchester on Tuesday ("definitely 7 out of 10, his best ever at a conference").

Bubble isn't the half of it. You have to go to a modern party convention in Britain to understand just how shut off they are, particularly when the party is in power. Surrounding everything is security – security barriers, armed police, endless private security personnel, pass checks, scanners and metal fencing.

"We're holding our meeting in Manchester, because we want to show we're at the heart of real business Britain," went the publicity. It was a sick joke. There was no way that the delegates at the conference, coccooned in a special guarded area, ever saw what was going on in the outside world, and even less chance that any Mancunian would see what was going on in the armed camp set down on their city centre.

It's not simply an issue of inconvenience, it's a problem of political isolation. A party can't renew itself within this kind of unreality and a democracy cannot be vital when the governing party is so removed from the real world.

And removed it was. All party conventions are hot houses. But Labour's conference wasn't a hot house, it was cold and cheerless. This was partly intended. All the efforts of party managers were bent to lowering the temperature so that the leader could shine and the potential rivals would diminish. They needn't have worried. David Miliband diminished himself without the help of others with his bananas and Music Hall grin.

There was some excitement on the left at the heady whiff of a US government leading the way to nationalisation, the sense that the time had come round for populist policies to punish the rich, protect the poor and pour public money into state aid. But it had little real resonance with ministers, who seem too defeated to embrace socialism all over again.

If the Foreign Secretary got the loudest cheers when he turned and complimented his leader, it was not out of affection for Brown. It was sheer relief that Miliband had not done the opposite. The same relief was visible in the reception of the Prime Minister's speech. Most delegates had feared he would fluff it.

They should have looked to the disinterest outside before they got too excited. As a party political, Brown's speech was well-crafted. As a Prime Minister's address, it was a world away from the fear and constraint that most people are feeling. Curiously for a leader who was basing his pitch on his experience in economics, it had virtually no economics in it at all.

There was plenty of references to the dire financial crisis and the tough measures he was taking to curb the free spending ways of the banks, but nothing at all about the impact of this crisis on the actual economy other than a repetition of the claim that Britain was better placed than most to cope.

That had something to do with the venue. Stopping short-selling, condemning bonuses, proclaiming regulation goes down well with the party faithful but is pretty irrelevant to the scale of the financial crisis now upon us. Yet the problem also arises from the ambivalence of the Labour approach to the economy at present.

On the one side they are keen to build up the size of the problem, the better to present the Prime Minister as the only safe pair of hands for the task. The worse the slowdown, the greater the perceived benefit. On the other hand, the Prime Minister is desperately anxious not to draw attention to the role in the crisis of his own stewardship as Chancellor. So he keeps referring to the problem as a "global" one as if somehow we were divorced from it all, mere passive spectators on a crash caused by others.

That's not how the ordinary voter beset by rising fuel prices, falling house values and tighter credit, along with the threat to jobs of the construction downturn, sees it. They feel the pain and want a government that looks as if it has a real handle on the causes and effect. On every opinion poll the Prime Minister has lost that confidence. Tinkering with insulation for the elderly won't bring it back.

If Gordon Brown does survive until the election – and it would be a fool who didn't put in all the caveats – it will not be because he's wowed the conference. Nor will it be because he has his party's loyalty. It will be because most MPs are now resigned to defeat. Given that they assume they'll be wiped out, better surely to hang on to the perks of parliament and the benefits of ministerial office for another 18 or 19 months than risk losing it all now by changing leader for a lesser figure and facing an early election. Fatalism not belief is what is keeping Brown buoyed