Labour's new pragmatism is on the right track

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In 1965 Dick Crossman carelessly left, on the floor of Prunier's Restaurant, some cabinet papers which were then found by an observant diner and shown to Chapman Pincher of the Daily Express before being returned to the department. There was a huge fuss, with front-page stories in the press. Harold Wilson's nark George Wigg gave Crossman a severe dressing down. (Though Wilson himself breezily laughed the whole thing off.)

John Prescott's papers, details of which were on BBC's Panorama last night and which have also caused a big fuss, were left in the rather more humdrum surroundings of a broadcasting studio in his own department. But then they were rather more interesting than Crossman's, revealing as they did that privatisation - or partial privatisation - is one of a wide range of options being considered for London Underground. The soothsayers lick their lips. One old Labour figure, Prescott, hits turbulence only days after another, Frank Dobson, irritates some of his colleagues by failing to shut down a running story that a no-holds-barred review of NHS spending will consider everything from hotel charges in hospitals to ending some prescription charge exemptions.

Both events disrupt the smooth and inexorable progress of the new administration. Can the revenge of the Blairites be far behind? In fact, those two episodes were sharply different from each other. One, that of the health review, hints strongly at events that won't happen, the other, that of the Underground, points at ones that may well happen. But they both accidentally reveal quite a lot about the character and the direction of the new government.

Take the Dobson affair first. Dobson travels to Wales to address a conference of health managers on the very day Alastair Darling, Chief Secretary to the Treasury, formally announces the establishment of fundamental departmental spending reviews. Having warned the managers that they face a difficult winter, and pressed by reporters to say what the review will mean for the NHS, he refuses to rule anything in or out. And by the morning a story floating the possibility that patients would be charged for GP visits is up and running.

The Prime Minister did not wake up to hear the BBC morning news leading with reports that patients were to pay for GP visits and think "yippee". Nor did the Blair spin doctors roll over and kick their legs in the air with glee at the fact that Dobson, by conscientiously emphasising that the whole point of fundamental spending reviews was to examine everything, had allowed the story to run. Particularly when Dobson's interview on the Today programme failed to kill the story off. That was left to a later statement by Dobson that the NHS would continue to be free at the point of delivery, an interview by Peter Mandelson on Sky television, and a statement reaffirming the manifesto commitments to health by Blair himself. And yes, the unworthy thought that Dobson was doing a little freelance work by floating the worst possible outcome in order to pre-empt it flickered momentarily, and wrongly, across one or two of the more conspiratorial minds in Downing Street and in the Cabinet. But the idea that intriguing Blair henchmen put the black spot on Dobson through selected briefing doesn't stand up.

For one thing Dobson had been in a difficult dilemma. If he started down the slippery slope of ruling X out he would soon be asked about Y and A and B and C. Ironically, he, of all people, would almost certainly resign rather than tear up the manifesto commitments on the NHS. But he had got the distinctly New Labour, anti-tax-and-spend message, that these fundamental reviews are the business. Indeed he had read with some dismay a story in the Daily Mail a few days earlier holding out the possibility of drastic changes to prescription charges. It was widely assumed within the NHS that such reports had emanated from the Treasury. Certainly the Treasury had been far from unhappy at the statement that there were no sacred cows in the NHS review: if that were the case, after all, other spending ministers had better watch out. Think what might happen, so the reasoning went, in less protected departments in the NHS. Dobson thought he was loyally following a prescribed Treasury line designed to emphasise the seriousness of the spending reviews. It was therefore a little puzzling for him to find that Treasury ministers were not, in private, prominent among his defenders once the story broke last Friday. Rugs appeared to have been pulled from under his feet.

The Prescott episode is altogether different. There was every sign yesterday that Downing Street was even more relaxed about the disclosure of the papers on London Underground than Wilson had been in the case of Dick Crossman all those years ago. There was strong backing for Prescott's angry claims that the BBC had "stolen" the papers but more importantly floating of the privatisation of the London Underground is distinctly "on message". It is much easier to justify it as being consistent with the manifesto. And faced with the tightest of spending constraints, there were few cabinet ministers who would not prefer it if the private sector carried the strain of Tube investment - even if it meant giving them a measure of control over the Underground network - if that was was a way of ensuring funds for health and education in the future.

And that is a point which goes far beyond the arguments over presentation. But what both these incidents illustrate is the extent to which the old arguments within Labour have become blurred and even realigned. For policy is no longer a matter of ideology in the way that it once was. This after all is the first Labour government in which preservation of the NHS is sacrosanct but privatisation is perfectly possible. The Blair view of privatisation (in the trading sector) is utterly pragmatic; if it can work, while meeting standards of regulation that ensure the travelling public benefits, then fine. It is a sign of the extent to which the old dividing lines no longer apply. Was not John Prescott one of the first senior Labour figures to break taboos over the injection of private finance into public services?

And was not Frank Dobson, however imperfectly, doing his best to defend a difficult and agreed cabinet line? This doesn't mean that the conflicts won't be intense, but that many of them will no longer will be on the old left-right lines. In the difficult debates about next month's Budget, Gordon Brown, being a prudent chancellor as well as a leading moderniser, may well prove keener to raise revenue early in the cycle than Tony Blair, jealous guardian of the spirit as well as the letter of the manifesto. The Prescott and Dobson incidents are not of the first importance; but each illustrates in its own way the decline of old-style ideology in the modern Labour Party.