For good or ill, the Third Way is here to stay. Unlike those other disposable enthusiasms, from stakeholding to the Giving Age, Tony Blair is committed to the Third Way. He believes it is the best peg for the New Labour project.
Given that the Labour administration believes (rightly) that a message has to be repeated ad nauseam before it trickles down to the typical voter, prepare to get mightily sick of the phrase.
Blair says that the Third Way "stands for modernised social democracy." Whether "modernising" means "ditching" depends on whom in Blair's circle you talk to. For the moment we should take it at face value. Blair also says that the values on which social democracy is founded, such as responsibility and opportunity, can sometimes conflict.
But there is an even more profound conflict in the making: between democracy and equality. The government could soon be faced with the choice between a fairer, more equal society and a more democratic one. Blair may be a social democrat, but which half is more important?
Posed in abstract terms, this choice seems absurd. But in reality all values are relative and subject to change. What if the choice is between lots of democracy with little equality, or moderate amounts of both?
A clear example of the tension between democracy and equality is devolution. The Northern Ireland assembly already exists. Soon Scotland, Wales and the big cities will have more power over their own destinies. The English regions are set to follow.
Devolving power will make the high levels of redistribution between regions and nations in Britain more transparent. Already civic leaders from the north of England are trading blows with London over the way the national cake is sliced. What Kirsty Milne at the New Statesman has called the "Distribution Wars" are about to begin.
And a good thing too, say the democrats. For too long, Whitehall has made decisions behind closed doors and with no accountability. It is time to fling open the doors and allow democratic light to pour in. Jonathan Freedland is the most eloquent exponent of this view. In Bring Home the Revolution (Fourth Estate) he slates the secrecy and central control of the British state compared to its US counterpart: "Rather than let communities themselves work out how much they want to spend, men from the ministry walk into every town in the country, like pin-striped tailors armed with tape measure and slide rule. They measure the 'need to spend' of every council, feed the numbers into a computer which then generates the exquisitely Soviet-style Standard Spending Assessment, or SSA. The money from the Whitehall kitty is distributed accordingly."
All of which is true. As a result, money shifts from prosperous areas to poorer ones. It may be undemocratic-but it is egalitarian. Freedland praises the US system, where 90 per cent of the resources for a state school is raised locally. In Britain, the ratio is reversed.
But there is a problem. Affluent areas can raise money for good schools and motivated teachers. Poor areas struggle to keep their schools open. (And while the schools of the richest areas are often half-empty, because many parents send their children to private schools, the crumbling inner city schools are bursting at the seams.)
Democratic? Yes. Devolving power from the centre? Certainly. A good thing? No-at least not in terms of equality. Freedland does not deny this trade-off. He simply believes that it is a price worth paying for a more vigorous democracy: "Maybe Britons will simply have to choose between diversity and equality."
One of the cornerstones of modern political analysis is that people do not like paying taxes. Voters will not elect a party which says it will raise personal taxation. Hence Labour's pledge not to raise income tax or national insurance rates during this parliament, a promise set to be repeated next time around.
If this is true at a national level, will it not also be true at a regional one? Once devolution makes the invisible redistributive hand plain for all to see, there is likely to be a backlash.
Two years ago, the Institute of Fiscal Studies (IFS) published a paper on financing regional government. It found that per capita GDP in London and the southeast was much higher than the national average; in Northern Ireland and Wales, much lower. As a result, money flows across the country from taxpayers in Surrey to benefit claimants in Belfast and Swansea. The IFS then worked out what would happen to income tax rates if inter-regional redistribution ended. In London and the southeast, the standard rate of tax would fall to 19 pence in the pound and the top rate to 30 pence in the pound. For Wales and Scotland to maintain their current level of spending, the basic tax rates would have to rise to 41 per cent and 38 per cent, the top rates to 66 per cent and 61 per cent.
The IFS is the home of truth and transparency in tax matters, but these numbers frightened even the IFS. It concluded: "It is quite possible that when the scale of these flows is made explicit, they will not attract the same public consent as the implicit transfers currently have. This would imply that decentralisation could substantially worsen the position of areas that currently benefit from fiscal transfers." What Londoner will be able to resist those tax rates, especially with a mayor on their side?
And resistance to these transfers will come at the worst possible time. The government's social exclusion unit has recently highlighted how poverty and unemployment have become more concentrated in certain pockets of the country. The need to divert resources to these areas has never been more pressing. Political devolution may make such redistribution more difficult. Which, then, is more important?
Politicians of the centre and left have toyed with the idea of "hypothecation"-making the link between what people pay and what they get more transparent. The Liberal Democrats see an NHS tax, or an education tax, as a way of rebuilding trust in taxation.
This is dangerous idealism. Even in "good news" areas such as education and health, once people realise how much they are paying for a service which they may not even be using, pressure will grow for the right to opt out of both the tax and the service. And in other areas, it is better if people don't know how their money is spent. It is no coincidence that no politician has yet called for a re-labelling of income tax as a "welfare tax."
The logic of this argument is paternalistic, even undemocratic. It has echoes of "Whitehall knows best." Well, maybe it sometimes does. Voters themselves are sensible enough to know that unpopular decisions have to be made for the good of the nation. One of the most striking findings of the Prospect poll last month was the large number of people who thought that governments should sometimes ignore popular opinion.
In any case, the argument that democracy can always trump other values does not seem to apply to other areas-arguably those which better serve the interests of the rich. The government has transferred power over setting interest rates from democratically-elected politicians to unelected central bankers. The reason is explicitly anti-democratic: to get monetary policy decisions out of the political arena. (The similar status of the US Federal Reserve is a small blind spot in Freedland's eulogy of the US system.)
There is good evidence that, over the long term, independence for monetary policy-makers results in lower inflation and lower interest rates. But if democracy can be traded for the sake of macroeconomic stability, surely it can be traded for redistribution.
The rhetoric of the Labour government is ultra-democratic, even populist. In his Fabian Society pamphlet on the Third Way, Blair notes the "demand for more democratic self-governance," a demand which will be met by "devolving power and making government more open and responsive." But an analysis of what the government has done reveals a more complex picture. Many senior members of the administration think that it is not clever to be too candid.
Gordon Brown's last budget was the most redistributive for decades. It was a budget for the poor, funded by taxes on the better off. Poor working families got billions, while those with occupational pensions or performance-related salary schemes lost out. Tax loopholes for the wealthy were closed. All behind-the-lines stuff, rather than an Old Labour frontal assault. (The very complexity of some changes, such as the reform of ACT, provided a useful smokescreen.) But the tone of the budget speech was dour and pro-business. The markets were pleased.
There is a price to be paid for this approach. Raising income tax would be a better way to raise money than the raid on pension funds. And the re-branding of Family Credit as the Working Families Tax Credit-in order that spending on it can be described as a "tax cut for working families" rather than a "benefit hike for the poor"-is an administrative nightmare. It could still go terribly wrong.
But if sleight of hand is required to get money from the better off to the poor, then so be it. Gordon Brown's political skill is to recognise this. There are other examples, too. Jack Straw talks tough, but acts liberal in crucial areas. The defence review was presented as being about the creation of new, muscular task forces, rather than a cut in military spending in order to free resources for more desirable things such as health and education.
One of the mistaken views held about New Labour is that it follows focus groups and opinion polls, adopting positions because they are popular. In fact, focus groups are used to help the government package changes in palatable ways, even if the reform is not in tune with majority views. Focus groups provide the intelligence required to fool the people at least some of the time.
Tax resistance is still part of the political landscape. Being coy-or undemocratic, if you like-about what is going on is thus a reasonable course of action for a left-of-centre government.
The question for the future is whether tax resistance will subside. There are broadly two schools of thought. The first group maintains that Labour had a tax problem because it had a spending problem. People were unhappy to cough up more tax to Labour, because they thought the money would be wasted on lazy bureaucrats and the undeserving poor. In order to get elected, Labour had to promise not to raise taxes.
But if government-funded schemes can be shown to work effectively, fairly and in ways which promote civic life, then a call for higher taxes might cease to be political suicide. The public mood on tax is not fixed, only highly sceptical. Gordon Brown probably falls into this camp, along with John Prescott, David Blunkett and the majority of the PLP.
The second camp takes a more pessimistic view. Tax resistance is not a temporary phenomenon linked to concerns about the quality of spending. There has been a step-change in the politics of tax and there is no going back. No party promising to raise taxes will get elected. Tony Blair seems to be in this camp. "My own gut feeling is that there is a long-term trend away from higher personal tax rates," he said recently. If this view prevails, redistribution will continue to be an under-the-counter business, if it carries on at all.
Blair wants to devolve power and open up government. He also wants a fairer society. These goals are in conflict. If his views about tax are right-and they probably are-then he will soon have some important decisions to make. Let us hope, for the sake of the poor, that he is not too democratic.
