Opening shots in Labour’s class war could backfire

A tape recording of Kenneth Clarke’s speech to a private meeting of the Tory Bow Group on Tuesday was “obtained” by The Times newspaper. It revealed that the shadow Business Secretary warned the Tory leadership not to be too specific about spending cuts before the general election.

Ring a bell? Six weeks before the 2005 election, the same newspaper obtained a tape recording of a much more explosive speech to a private meeting by Howard Flight, a Tory Treasury spokesman, who suggested his party had a secret agenda of unpopular spending cuts. He was dumped as an MP. The Flight recorder was John Woodcock, a rising Labour star, now a Downing Street communications strategist and Labour’s candidate in Barrow-in-Furness.

So you can hardly blame the Tories for claiming that Labour was up to its old tricks at Mr Clarke’s speech. Labour denies it, of course, but seems remarkably well-informed. “A reminder of Times past,” quipped a Tory official. But the Tories are taking it seriously: they have issued instructions to organisers of such events to vet guest-lists very carefully.

Anyone would think there is another election in the offing. This was, after all, the week when Gordon Brown appeared to relaunch the class war, accusing David Cameron at Prime Minister’s Questions of dreaming up his inheritance tax policy “on the playing fields of Eton”. It was a big moment.

The first time Mr Brown mentioned Mr Cameron’s Eton education – four years ago – it bombed, even though his audience was Labour’s annual conference. On Wednesday, Labour MPs loved it. Labour got its fingers badly burnt when it ran a “Tory toffs” campaign in last year’s Crewe and Nantwich by-election. Yet now it plays the same hand.

The crucial difference is that Labour is playing the ball, not the man, by linking the class attack to policy, not personality. That is why Mr Brown mentioned Eton in the same sentence as inheritance tax.

The Tory plan to raise the threshold for death duties to £1m (£2m for a couple) was a brilliant hit when George Osborne announced it at the 2007 Tory conference. So brilliant it helped stop Mr Brown calling an election he would probably have won. So brilliant that Labour pressed the panic button and copied it.

But now there is a recession. Public spending cuts loom large. Policies to help the few not the many don’t look clever. Bankers are public enemy No 1. Tory fat cats are in the headlines. Zac Goldsmith, a shining green symbol of Mr Cameron’s New Tories, is revealed as a non-domicile for tax purposes and becomes a symbol of Labour’s “same old Tories”. Questions about the tax status of the deputy Tory chairman, Lord Ashcroft, go unanswered by him. Claims for moats, manure and duck houses in the MPs’ expenses affair reminds us of “same old Tories” too. Labour might just have discovered its antidote to Mr Cameron’s powerful “time for change” message.

So there are real dangers for the Tories in the Labour attack. The Tories should drop their planned inheritance tax cut. I doubt they will. Mr Cameron believes it is still popular now for the same reasons it was in 2007, not because of who would benefit but because the “death tax” is hated by people who have aspirations to paying it, and think it is unfair to stop the better-off handing down their assets to their children.

Most voters probably agree with Mr Cameron that it doesn’t matter where you come from, but where you want to take the country. Senior Tories tell me they are happy to fight this battle. They are confident the people will see through Labour’s attack as naked, ya-boo, old politics. The Tories are drawing up their counter-attack: Mr Brown’s class war means the “end of New Labour” and “a lurch to the left”.

On policy, the Tories accuse Labour of failing to live up to its rhetoric on bankers’ bonuses. They have a point. The eyeball-to-eyeball confrontation between the Government and Royal Bank of Scotland is surely the moment of truth. It’s yet another dilemma for Alistair Darling as he finalises next Wednesday’s pre-Budget report (PBR). The re-emergence of class as a political issue gives his statement a new backcloth. The PBR will tell us whether Mr Brown’s “Eton” jibe is part of a much wider strategy.

Will Mr Darling be tempted into bashing the bankers with deeds as well as words? Will he halt Labour’s inheritance tax cuts to widen the divide with the Tories? Will tackling the deficit in the public finances mean a further tax hike for the rich? All this might be popular in the country, and give the Tories a headache. The Chancellor’s problem is that he must satisfy the financial as well as the political markets, which requires a credible plan to cut the deficit. It will not be easy to do both.