Harriet and the heroine: battle royal in Blackpool

Barbara Castle was brought down by the old party warriors of her day. She should remember that when she tries to defeat Harriet Harman's pension plans
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The battle between Barbara Castle, 85, and Harriet Harman, 46, over the future of pensions is a curious event - a mighty clash of swords between the moderniser of yesterday and the moderniser of today. Whoever wins, the blood of a good woman will be spilt on the floor at Blackpool next week.

For in her finest hour, Mrs Castle was the woman who very nearly succeeded in shaping the old union-bound Labour party into a modern social democratic force. How extraordinary to find her now shoulder to shoulder with one of those who destroyed her - Jack Jones, pensioners' champion, but formerly one of the granite-hard, trade union rocks upon which her ship foundered.

"Who exactly is Barbara Castle?" asked a timid young colleague, making some of us feel old. I first remember her when I was eight or nine at a May day rally in Battersea Park. There she stood on the back of an open lorry, flaming hair blowing in the spring air, flaming oratory billowing out into the wind. She wore a diaphanous red scarf and she looked like a Soviet poster. I fell in love with her as did so many others.

But those were not her finest hours, those days as a socialist heroine and keeper of the eternal Bevan flame. They may have been her most enjoyable hours, for playing La Passionaria - even in the moderate climes of British politics - is far more fun than the hard grind of real politique. (Fun in lots of ways - for her publisher charmingly regaled a party a couple of weeks ago with a story of Aneurin Bevan making a "passionate" pass at her once upon a time.) No, her finest hour was in 1969, the year of her defeat which led to Labour's defeat, the year she performed her great act of bravery.

As Secretary for Employment and Productivity, her socialism lead her to a firm belief in a prices and incomes policy. But the explosion of unofficial strikes beyond the control of the unions threatened not only a fair distribution of wealth, but also the public's sense of good order and justice in those far-off days with virtually no trade union law.

For my young colleague, this is a flavour of the times: a wild cat walk- out at the Girling brake factory was the last straw for Castle. It was the 57th there in 18 months and led to the lay-off of 5,000 other car workers in an inter-union dispute over an oil valve. Undaunted by the Siamese symbiosis between Labour and unions, known sardonically as Tigmoo (This Great Movement of Ours), she set out to change the law in a White Paper, "In Place of Strife".

Castle proposed legal sanctions: no strikes without a 28-day cooling- off period and compulsory strike ballots - no more factory gate show-of- hands decisions. Suddenly, the socialist darling became the demon. Ms Harman knows the feeling. The left and the unions - Jack Jones, in particular, leader of the mighty TGWU - rose up against her. Jim Callaghan, embittered Home Secretary greedy for Wilson's job, ratted and by June, despite strong public enthusiasm for it, the policy fell - to be replaced with a much- mocked commitment by the unions to "Solemn and Binding" agreements with no legal force. The next year, perhaps partly as a result, Labour lost the election.

So what has become of Mrs Castle's brave modernising instincts now? Is it the call of the wild, personified by Jack Jones, that summons her back to her more romantic youth? I see the old fire in her eye. As the pensioners' Passionaria, she will ride into battle at the conference and stir the cockles of many an old heart. Raise pensions for all! Return to the (very short) time when they were linked to earnings not to prices!

She is right, the real value of the state pension is falling fast. But the demise of the National Insurance system is as necessary now to Labour and Ms Harman, as reform of trade union law was to Mrs Castle's party. It is one of the last great sacred cows lying across the tracks (so sacred, in fact, that Peter Lilley still pays vigorous verbal obeisance to the principle). Labour's commitment to increase universal benefits - child benefit and pensions - in its last manifesto helped cost it the election. It attracted few votes and was so expensive it scuppered any more imaginative spending plans.

Ms Harman is no Barbara Castle. A delicate, middle-class English rose, not a fire-brand, she is a product of a more modern party where women can be ordinary mothers, not role-model revolutionaries. But she has been torched by the old guard of the party just as Castle was before her, for her decision to send her son to a grammar school. Castle, being childless, never knew the agonising personal dilemma of the London Labour politician deciding where to educate their children. Many in the Labour Party of the Sixties and Seventies now feel some guilt for sacrificing their children's interests by send them to bad schools to further their parents' political ambitions. Harman did what every decent mother should.

If her run-in over education was bruising, then this pensions battle runs mainline into the heart of old Labour. For the dream of Beveridge's welfare state was that all would pay in and all would pay out, with the universal pension as the bedrock of the scheme. In those days a universal pension made sense because to be old was almost certainly to be poor. Nowadays that has changed beyond recognition. Each year the newly retired are better off and the distribution of wealth everywhere, including among the old, is changed beyond recognition.

The bottom third of pensioners are poor and there will be many poor for a long time - though a higher proportion were on social security in 1979. The middle third have small occupational pensions that take them just above benefit level. And a top third is now pretty well off. This top group is growing fastest, as more and more retire with reasonable occupational pensions.

Ms Harman wants any available money to be targeted on the poorest. An increase in universal benefits - pensions or child benefit - does nothing at all to help the poorest because they have it deducted from their income support. Even in Beveridge's day, the pension was never enough to live on alone and had to be topped up for those with no other money. In other words, universal benefits target the better off, not the poor.

Mrs Castle is calling for an increase for rich and poor alike, an expensive homage to the old National Insurance ideals. It would cost pounds 5.5bn - money that would have to be raised in taxes or taken from other spending projects.

Underlying this fierce debate is a last-ditch attempt to hold on to the National Insurance principle - but increasingly people are questioning why the state pays out so much to those who do not need it.

To anyone under 40, National Insurance means little more than extra bits taken off their pay. They have little idea of the fine spirit it embodied 50 years ago. They have no idea what it entitles them to, since there is no real insurance fund and the sums paid out are decided at the whim of the government of the day. It is now a sham and a fraud.

But when Mrs Castle rises to the podium at Blackpool we shall hear the high rhetoric of the old days - all the romance that surrounded the post- war birth of the welfare state. It will the last gasp of a bygone era. If Jack Jones yet again manages to haul out the unions to dish Labour's modernisers, someone ought to remind Mrs Castle of what he did to her - and to the party in 1969. Old ghosts will arise, charmingly seductive to the nostalgic, but they are the voices of a past Mrs Castle would do well to remember.