Labour Party (UK)

The Labour Party, originally a party of social democracy formed from several groups which first fought a general election in 1895, formally abandoned that ideology under the leadership of Tony Blair in 1994. Essentially a social democratic party, its policies became more market-oriented after the landslide election victory of 1997. Tony Blair won two more elections in 2001 and 2005, and was succeeded by Gordon Brown in 2007. After thirteen years in power, the party lost the general election of May 2010. Since September 2010 the party leader has been Ed Miliband.

Overview

The Labour party has made a stepwise transition from an initial conviction that social justice could be achieved only if the state took control of the economic system, to a belief that it could better be achieved if state control were confined to the effective provision of those services that could not otherwise be provided; and if the state were used as a means of helping the individual to "overcome limitations unfairly imposed by poverty, poor education, poor health, housing and welfare". The party's initial success in establishing parliamentary representation depended upon the support that it obtained from the trades unions, and its relation with them has since made a stepwise transition from near total dependence to near total independence. The transition of the British electoral system from restricted suffrage to universal suffrage, was a factor in the early growth of the party's parliamentary representation, and subsequent variations in its numbers have been influenced by non-idealogical factors including its leaders' personal conduct and performance, the influence of the media, the vagaries of the voting system, and a variety of unrelated episodes. The party is currently engaged in a review of its policies following its electoral defeat in March 2010.

Political philosophy

The founders of the Labour party were a small group of well-to-do thinkers who were driven by humanitarian concern to question the system that was responsible for the sufferings of the Victorian middle class. The class barriers of the time might have concealed those sufferings from them but for the fictional writings of Charles Dickens, and Thomas Hardy, and the meticulous reporting of Frederick Engels. They decided that the system must change, but were convinced that the necessary change could be brought from within the political system, rather than by the revolutionary methods favoured by Frederick Engels and Karl Marx. Like them, however, the intellectuals of the Fabian Society concluded that social justice required the public control and management of industry and business - although their policy proposals, (as reflected in the original Clause IV of the Labour party's constitution) were less prescriptive than Marx and Engel's Communist Manifesto policies.

A century later, the architects of New Labour were representing its proposed "top to bottom reorientation" of the party's policies as the adoption of a modern way of pursuing the same objectives as the party's founders, arising from a need to "separate conceptually, a commitment to our values (timeless) from their application (time-bound)". During the intervening years there had been swings of opinion towards and away from central management of industry. No move in either direction was made by minority Labour governments of the 1930s, but the economic breakdown of the depression of the 1930s had convinced even the Conservative Harold Macmillan of the need for national economic planning - a widely-held belief that was reinforced by wartime planning achievements. After the extensive programme of nationalisation by the Attlee administration, opinion began to swing in the opposite direction. The party's final attempt to intervene in industrial management was a brief, and totally unsuccessful attempt in 1964 to obtain voluntary private sector participation in a "National Plan".

Economic policies

Before the second war the Labour party subscribed to a cross-party consensus in favour of maintaining a balanced budget, and in the early post-war years it subscribed to a cross-party consensus in favour of using fiscal policy to regulate the economy. A divergence of policies arose in the 1980s when the Conservative party briefly adopted monetarism, but that was followed by a general acceptance of an international consensus in favour of fiscal stability, and the use of monetary policy to regulate the output gap

History

Origins

The founders of the Labour party included the a London-based group of socialist intellectuals calling themselves the Fabian Society, the more widely-dispersed Social Democratic Federation led by the Scottish miner, Keir Hardie, and a few trade union officials seeking parliamentary representation for their members. They formed the Labour Representation Committee and in 1900, Keir Hardie and another of their members were elected to Parliament. At that time they enjoyed hardly any support from the public or from the majority of trade union members, and their prospects of gaining a significant foothold in parliament appeared slight. That situation changed after the House of Lords Taff Vale Railway judgement that prohibited picketing and enabled employers to sue strikers for damages. That decision result in a surge of support from other trade union members that enabled the Committee to support further candidates and resulted in an increase in their parliamentary strength to 29 in 1906, 42 in 1910 and 57 in 1918. Rapid progress thereafter resulted in the election in 1924, of enough Members of Parliament to form a minority government.

The Ramsay Macdonald era (1924 & 1929-31)

The first Labour Government lasted less than a year. After passing laws on housing, education, unemployment and social insurance, it was defeated on a vote concerning the conduct of its Attorney General. After being out of office for five years, it was re-elected in 1929, retaining its former Prime Minister, Ramsay MacDonald. The country was immediately struck by the effect of the Great Depression and the effect of the previous government's return of the pound to the Gold Standard at an overvalued rate. The result (which is described more fully in the article on the Great Depression in Britain) was an increase in unemployment to over 16 per cent and a speculative attack on the pound. The Government's reaction was an attempt to reduce the depression-induced budget deficit, the cabinet split over a proposal to cut unemployment benefit, and the Government resigned. To the surprise of his colleagues, the following day Ramsay Macdonald announced he would lead a National Government as a Coalition with the Conservative party .

The Attlee era (1945-51)

The first post-war Labour government was faced with an unprecedented economic situation. In the words of the official historians of the war: "In a war allegedly governed by the concept of the pooling of resources among allies, the British had taken upon themselves a sacrifice so disproportionate as to jeopardise their economic survival as a nation". The country had lost a quarter of its national wealth and most of its export markets, and had accumulated a record public debt amounting to more than twice its national income. With the sudden cancellation of American Lend-Lease economic support, it was becoming difficult to pay for food imports, and John Maynard Keynes was sent to Washington to negotiate a fresh loan. A condition of that loan , was that the pound was to be made convertible with the dollar. The need to maintain a fixed rate of exchange between the pound and the dollar imposed a balance of payments constraint upon the management of economy which could only be escaped by devaluation. Attempts were made to maintain full employment within that constraint, but a currency crisis forced the government to devalue the pound in 1949. In order to avoid a further crisis, imports were restrained by continuing the rationing of food and clothing. The Government suffered a marked loss of popular support and was narrowly defeated in the election of 1951.

During the intervening six years the Attlee government brought about major and lasting domestic changes by introducing a comprehensive social security system, creating the National Health Service, and raising the school leaving age to 15. It also made more transitory changes to the country's industrial structure by nationalising the coal mines, the railways, gas and electricity, and iron and steel. In addition, it introduced lasting changes to the country's foreign relations by becoming part of NATO; giving independence to India, Pakistan, Ceylon and Burma; and withdrawing from Palestine .

Wilderness years (1951-64)

After the party's decisive defeat in the general election of May 1955, Clement Attlee resigned and his former Chancellor of the Exchequer, 44-year-old Hugh Gaitskell was elected as party leader in his place. According to Roy Hattersley, who was one of its members at the time, "the Labour Party of 1955 was a loose coalition of men and women who ranged in opinion from orthodox Marxists to footloose liberals". They and their successors spent 13 years in public contention about the party's policies. The principal topics of contention were whether abandon or retain Britain's nuclear weapons, and whether to implement or abandon the party's commitment to wholesale nationalisation. Although the outcome moved in the direction of the second option in both cases, a substantial body of its - mainly left-wing - members continued to campaign for the first.

The new party leader, Hugh Gaitskell, supported by former economics academic, Anthony Crosland campaigned for the abandonment of the proposal in the 1955 election maifesto to "start new public enterprises" where necesary. In an influential book "The Future of Socialism", Anthony Crosland argued that further nationalisation was unnecessary since the socialist goals of greater equality and improved living standards could be achieved through growth under a mixed economy. Hugh Gaitskell failed in an attempt to remove the Clause IV commitment to nationalisation from the party's constitution but a 1959 collection of essays on the future of the Labour party, only one contributor argued for further nationalisation, and two argued the case against. The 1959 election maifesto promised to re-nationalise the steel industry (that had been privatised by the previous Conservative goverment but announced that the party had no other plans for nationalisation, and the 1964 election manifesto proposed only to expand existing nationalised industries.

Thanks mainly to Hugh Gaitskell's opposition to the powerful unilateral disarmament movement within the Labour party, the 1964 election maifesto proposed instead to negotiate a joint NATO deterrent.

Before that election, Hugh Gaitskell died suddenly of a little-known disease and Harold Wilson was elected as his successor.

The Wilson/Callaghan era (1964-70 & 1974-79)

(the sequence of events during this era is set out in the 1964-1997 timeline)

After an unsuccessful attempt to conclude "planning agreements" with the hundred largest companies, the Wilson government's attention was diverted from industrial policy to the problems of economic management. An international consensus had been established, according to which fiscal policy should be used to regulate output, monetary policy to manage the exchange rate, and incomes policy to regulate pay and prices. The objective was to maintain full employment within the balance of payments constraint imposed by the ruling system of fixed exchange rates. That consensus was accepted by the both Labour and Conservative parties. There were disagreements about judgments of magnitudes and timing, but none about the principles involved. Unemployment remained below 4 per cent throughout the 1964-70 period but rising domestic prices, and a resulting fall in international competitiveness, led to a succession of balance of payments crises between 1964 and 1968 and a devaluation of the pound in 1967.

When the Labour Party resumed office in 1974, the Bretton Woods regime of fixed exchange rates had been abandoned and the 1973 oil price crisis had started an international recession. A "pay explosion" that had started under the previous administration had already raised the inflation rate to 16 per cent and by 1975, its continuation together with import price increases, raised it further to over 24 per cent. The government was faced with two categories of deficit crisis. Under the influence of the recession, tax revenues fell and benefit spending increased, raising the budget deficit to its highest post-war level. Secondly, a further fall in competitivenss together with a contraction in overseas markets raised the deficit in the balance of payments to a similarly unprecedented level.

The crisis year of 1976 was also the year when the international economic policy consensus adopted the monetarist prescriptions put forward by Milton Friedman. The UK's budget deficits and the associated increases in its money supply were causing concern in the foreign exchange markets that prompted a persistent decline in the value of the pound. The Chancellor of the Exchequer responded with a money supply target, tax increases and cuts in spending, but international doubts about the stability of the economy led to a further fall in the value of the pound that forced him to seek asistance from the International Monetary Fund. The loan was granted on conditions that had already been met and confidence was restored.

The central issue that had faced the Labour and Conservative governments between 1964 and 1979 concerned pay bargaining and its implications for inflation and international competitiveness. Expectations of inflation had prompted the trades unions to press for wage increases, even when the demand for labour was falling, and the governments of that period were unwilling to allow unemployment to rise as a consequence. Instead of that solution, they adopted a succession of "incomes policies" that set limits on pay increases. An attempt to enforce such a limit had been the cause of the downfall of the Heath government in 1974, and in 1978 a similar attempt led to widespread industrial disruption that probably contributed to the fall of the Callaghan government in 1979.

New Labour (1997-2011)

Tony Blair was elected as the Leader of the Labour Party in July 1994 after the sudden death of his predecessor, John Smith. In 1995, he persuaded the party to amend its constitution; the annual Conference voted to replace the controversial Clause IV (see box), which had been drafted by Sidney Webb and had been party policy since 1918. The redrafting marked a radical break with traditional policies, and marked the emergence of what Blair called "New Labour". The commitment to nationalisation, even though it was widely regarded as rhetoric without practical intent, was widely seen as a major factor in the electoral unpopularity of the Labour Party. The Conservative Party had won four successive general elections (in 1979, 1983 and 1987 under Margaret Thatcher and in 1992 under John Major), and Labour was seen by some as unelectable as long as it retained close links with the Trade Union movement and espoused the rhetoric of pre-war socialism.