SPRINGTIME FOR HITLER

New Statesman & Society, 18 February 1994

With the major parties in turmoil, the neo-Nazi BNP could win a majority on the Isle of Dogs neighbourhood council in May's local elections. Paul Anderson reports

The atrium of Tower Hamlets' spanking new town hall in Blackwall, east London, just before an evening council meeting: a dozen or so locals sit waiting for the public gallery to be opened, chatting and gazing around warily at the post-modern glass and chrome that give this £10 million monument to the ruling Liberal Democrats' eight years in power the air of a tacky provincial shopping mall.

Suddenly, the talking stops and all eyes focus on the automatic revolving doors, from which emerges a small bald middle-aged man with pebble glasses, a moustache and a respectable navy blue raincoat. He is as unremarkable a figure as it is possible to meet – and yet everyone knows who he is. Last September in Millwall, Derek Beackon became the first ever member of the neo-Nazi British National Party to win a council seat. Now he is coming to take part in his second full council meeting.

Perhaps unsurprisingly, he is not alone: he is followed through the doors by three large young men, one of them, obviously a plain-clothes skinhead, wearing a T-shirt emblazoned with the slogan "Sing up for England". The minders eye the locals suspiciously; the locals resume their conversation until an usher tells them: "You can go in now."

In the council chamber, the Liberal Democrats sit opposite Labour, with Beackon at his own table. It is the first time that Labour has attended a council meeting with Beackon present. The Lib Dems' policy of decentralisation means that most council business is dealt with by councillors in "neighbourhood councils". There are only four full council meetings a year, and Labour boycotted the last as a symbolic protest against Beackon's election.

So this is the only real chance that the two main parties have had to argue face-to-face since September – and both sides take the opportunity with relish, mindful that May's local elections are looming. Four hours of party-political invective follow, culminating in each side accusing the other of responsibility for the BNP victory. Beackon says nothing and votes only once, for a motion giving the Salvation Army the freedom of the borough. His minders look on bored.

It is without a doubt the Lib Dems who have most explaining to do when it comes to last September's debacle. As their national party's inquiry into Tower Hamlets, chaired by Lord Lester, QC, made clear just before Christmas, their propaganda in the borough, particularly in the Isle of Dogs, has systematically pandered to racism, especially on housing.

What then styled itself the Liberal Focus Team took control of the council from Labour in 1986 after more than a decade of "community politics" characterised by populist anti-Labour rhetoric and assiduous wooing of tenants' associations – a major force in a borough in which three-quarters of the population lives in council housing even after years of right-to-buy. Despite having a tiny majority, the Liberals implemented their decentralisation and council house-sales policies with missionary zeal. From the start, they courted controversy over race with their tough line on the council's legal obligation to house the homeless (mostly Bangladeshi) and their "sons and daughters scheme", giving priority in housing allocation to the offspring of people born in the borough, most of whom were white.

It was, however, only in the run-up to the 1990 council elections, which Labour expected to win, that the Lib Dems pulled out all the stops. A series of election leaflets – including, notoriously, one purporting to be "anti-racist" Labour propaganda – gave the impression that Labour gave preference to Bangladeshi immigrants while the Lib Dems worked for "local" whites. The Lib Dems increased their majority. Afterwards, the High Court ruled that seven Lib-Dem councillors were guilty of "corrupt and illegal practice" in using the fake leaflet, but they got off on appeal.

In a late-1992 by-election in Millwall ward, caused by the resignation of a Labour councillor, the Lib Dems, standing as "Island Liberal Focus Team", went further, ar-guing for "Island homes for Island people" and against "Labour's positive discrimination policies" on the Isle of Dogs. They used much the same message last September – and there are few signs of remorse today. The Lester report tore apart the local Lib Dems, several of whom resigned from the party. Paddy Ashdown responded by threatening the Tower Hamlets party with suspension if it did not accept Lester's findings by midnight last Sunday. It knuckled under, but only grudgingly.

But at least the Lib Dems had a full inquiry. By contrast, Labour's post mortem on the by-election was a secretive affair, extraordinarily careful not to put anything on paper that might suggest that something was seriously wrong with Labour in Millwall.

Labour has gone out of its way to claim that what happened was not an inquiry at all but a "debrief" followed by a few interviews, with the only question at stake the allegation, first made openly in the hard-left magazine Briefing by Christine Shawcroft (a Labour councillor in Blackwall, the other ward in the Isle of Dogs neighbourhood) that faked canvass returns had been leaked to the press by Labour to give the impression that only it had a hope of beating the BNP in September.

The initial "debrief was conducted by two London regional party officials and London region chair Jim Fitzpatrick. They interviewed a wide range of people, including candidate James Hunt, agent Steve Moly-neaux and the Millwall branch officers, then produced a three-page report, which concentrated on the minutiae of Labour's organisational weaknesses in the by-election.

According to the report, the debrief team considered the question of the leaked canvass returns "at great length" but "it was not possible to reach precise conclusions" either about who did it or about whether they were faked. The regional party therefore decided to get the Bow and Poplar consituency party to appoint a panel to look into the matter further. This panel reported to a special CLP executive meeting in December that the canvass figures were inaccurate but that it could not establish the precise chain of events leading up to the leak. Back went the buck to London region, which in turn called in national general secretary Larry Whitty. He decided to interview Molyneaux, Hunt and one other member of the Bow and Poplar party. He was about to interview Hunt last month when the former candidate resigned from the Labour Party, ripping up his party card in front of the television cameras and throwing the pieces in the Thames.

And that, for Labour, was that. The London region put out a statement declaring the matter "concluded except for the selection of a full team of candidates by the local Labour Party". "Responsibility for the BNP victory in the Millwall by-election rests four-square with the Liberal Democrats," said Whitty. "There is a world of difference between 'pandering to racism', which is what the Liberal Democrats themselves say some of their members did in Tower Hamlets, and the unauthorised issuing of the canvass figures."

Others are less sanguine – particularly among the local Labour hard left. They say that the party's investigations into what went wrong in Millwall failed to address the real issue – the extent to which, after the Millwall ward Labour Party was taken over by local Labour right-wingers in the late 1980s, with the full support of Labour headquarters, it adopted the same populism-bordering-on-racism for which the national party has attacked the Lib Dems. According to the hard left, Walworth Road was prepared to tolerate the worst sort of pandering to racism, as long as it meant getting rid of the Trots.

Some of the evidence for these accusations is anecdotal. But the local ward party was undoubtedly hard-left dominated during the 1980s, with key figures belonging to both Militant and Briefing. The hard left was ousted by a combination of the national party's purge of Militant and the efforts of a group of local party members with a base in the tenants' associations, two of whom, Sandra Ireland and Kathy McTasney, became chair and secretary of the ward party.

It is also indisputable that, after the demise of the hard left, the ward party shed councillors and adopted a more populist approach. First to go was Ivan Walker, whose resignation in 1992 caused the first by-election in the ward, in which veteran community activist Ted Johns held the seat for Labour and the BNP took 20 per cent. Next, sitting councillor Dave Chapman decided not to stand again in 1994 and hard-left councillor Yve Amor was deselected at a meeting that chose James Hunt and Steve Molyneaux as Labour candidates. Chapman's resignation last year caused the by-election that Beackon won by 1,480 votes to Hunt's 1,473.

In both by-election campaigns, Labour made much of the localness of its candidates – and, although the more lurid accusations of racism against it are impossible to prove, there is no doubt that { Labour in Millwall did produce two leaflets that played to racial prejudice.

The first lambasted the Lib Dems for publishing "leaflets saying 'Island homes for Island people'" when they had instructed the Isle of Dogs neighbourhood "to give 40 per cent of its lettings to homeless families or else" – the clear implication being that Labour really would tell the homeless "outsiders" where to go. In the other, under the heading "James Hunt says: 'House the hidden homeless'", Labour declared: "The homeless in your home are your children who have to sleep on the couch, your brothers and sisters who want a place of their own, your grandchildren without space to grow up in ... James says: The Liberals tell us which homeless to house – why can't we decide our own priorities and decide for ourselves?'"

Officially, Labour denies that the leaflets and the accusations of racism were an issue in the party's investigations into Millwall: "The only people who think that are the Liberals," said a spokesman. But there is evidence that they were. When Ireland and McTasney resigned from the party last month, Ireland wrote a letter to one of the "debrief officials at the Greater London Labour Party. It suggests that the debrief was fully informed about the leaflets and that bitter argument about the Millwall party's line on housing had undermined the effectiveness of Labour's campaign last September.

"We are being victimised for our deep commitment to housing the homeless at home," she complained. "When Kathy and I seek to press for a better deal for local people, we are immediately accused, without a shred of evidence, of being 'racists and gangsters'." She hit out particularly at Yve Amor, the still-sitting but deselected Millwall councillor, and the two hard-left councillors from neighbouring Blackwall, Christine Shawcroft and Dave Lawrence. "We have told you, as we told the debrief committee, that at a meeting when Kathy and I attempted to press for a proper deal for the homeless at home, Christine Shawcroft said that neither she nor Amor nor Lawrence would house the homeless at home 'because they were predominantly white'. As a result of this Kathy and I, along with James Hunt and many others of the ward have fought them relentlessly ever since, and you know this is the reason why James Hunt wanted none of them to have anything to do with his campaign."

Last week, Ireland and Hunt announced that they would stand for election in Millwall in May's local elections as candidates of the East London People's Alliance, a mysterious outfit formed three weeks ago, which will be fighting on the "hidden homeless" theme that was such a favourite when they were with Labour. Hunt told the local East London Advertiser. "All people living in Tower Hamlets including those over 18 living with their parents are entitled to a home in the borough." The ELPA claims already to have the support of 25 Labour activists on the Isle of Dogs, and sitting Labour councillor Ted Johns has indicated that he is thinking of joining them.

Labour is sceptical about the strength of the ELPA and says that Beackon's inactivity as a councillor and the bad publicity that the BNP has had since his election will ensure that neither he nor any other BNP candidate is successful in May. "We're fighting to win in all three seats in Millwall," says John Biggs, leader of the Labour group on the council. And indeed the exit of Ireland, Hunt and their friends does seem to have had a cathartic effect on the Millwall party. Last week, it had its biggest ward meeting for ages, and last Sunday it managed to get 80 people out on the streets, despite Arctic weather, for the first of a series of monthly mass canvasses in the run-up to the elections. There is still the small matter of selecting candidates to get out of the way – but campaign organisers say. with reason, that neither the ELPA nor the Lib Dems, who came a close third last September but are now in a shambles, can hope to match Labour's organisation.

Nevertheless, many of the activists on the canvass admit that Labour has a difficult fight with the BNP on its hands. The neo-Nazis have been out on the knocker on the white council estates in groups of 30 or 40 most weekends for several months, they say, and racism among the white working class on the Island is deep-rooted. With racist former Lib Dem voters likely to vote BNP, some in the Labour camp fear that the intervention of the ELPA could siphon off just enough votes from Labour to allow the BNP to sweep all three Millwall seats.

If that happens, the BNP will have a three-two majority on the Isle of Dogs neighbourhood council. This would be bad enough if all it meant was the BNP's promised renaming of the neighbourhood building "Oswald Mosley House" (it is currently named after Jack Dash, the communist dockers leader). But it would also mean BNP control over housing allocation and the neighbourhood's £20 million budget. And that, as everyone who turned out last Sunday agrees, would be a disaster.

STALIN'S BRITISH BULLDOG

New Statesman & Society, 4 February 1994

Paul Anderson and Kevin Davey report on what historians of the British Communist Party are finding in the newly opened archives in the former Soviet Union

On 23 June 1941, the day after Hitler's Germany began its invasion of the Soviet Union, George Orwell wrote in his diary:

"At present the British Communists have issued some kind of manifesto calling for a 'People's Government' etc, etc. They will change their tune as soon as the hand-out from Moscow comes. If the Russians are really resisting, it is not in their interest to have a weak government in Britain, or subversive influences at work here. The Communists will no doubt be super-patriotic within ten days . . ."

Orwell was precisely right. The very next day, the executive committee of the Communist International, which controlled all the world's communist parties, and which in turn was controlled by the Communist Party of the Soviet Union, met in Moscow. It composed a message to the Communist Party of Great Britain condemning its position and demanding a change. "You should direct your fire against capitulationist anti- Soviet elements," ran the missive. "To demand in the present situation the replacement of the Churchill government with a 'People's Government' means to bring grist to the mill of pro-Hitlerite elements in England."

And so the CPGB did a somersault – just as it had in the aftermath of the 1939 Hitler-Stalin pact, when the Comintern instructed it to drop its policy of maximum unity against Nazi expansionism and instead condemn the war as "imperialist". By the end of June 1941, the party was calling for "the broadest united national front around the Churchill government", outdoing everyone else, left or right, in its backing for the war. Orwell described the new line as "All power to Churchill!"

An old story, of course – except for one thing. It was only last weekend that the content of the "hand-out from Moscow" was first made public, in a paper delivered by Monty Johnstone, for years one of the CP's chief ideologues, to a conference in Manchester, grandly titled "Opening the Books", attended by 80-odd historians of the Communist Party.

For most of its life, the British Communist Party simply denied that its political line was ever determined by the Kremlin: its changes of direction were, it claimed, locally determined. And, however implausible the claim, it was impossible to counter definitively. Access to the party's own records and those in Moscow was denied to all but official party historians, who, to the dismay of the party's best minds, published nothing that could be construed as remotely embarrassing.

Although, from the late 1970s, some party historians admitted Soviet influence on the CPGB and then documented it from the British party archives (a process encouraged by the party itself as it prepared to wind itself up in the late 1980s), it is only since glasnost and the subsequent collapse of Soviet communism that the incontrovertible evidence of the CPGB's subordination to the CPSU has begun to see the light of day.

In the past five years, researchers have dug out an extraordinary array of material from newly open archives in Moscow – and the 1941 Comintern directive is by no means the most exciting or revealing. In 1990, Lawrence and Wishart, the CP's publishing outfit, published About Turn, the transcript of the CP central committee's discussion in 1939 that led to its toeing the Moscow line of opposition to the war. Since then, other researchers have uncovered the Moscow pay-off to the CP after 1956, when it backed the Soviet suppression of the Hungarian revolution, and the role of Stalin in the drafting of the CP programme, The British Road to Socialism, which the CP had always claimed it composed itself.

More is to come – some of it, no doubt, extremely embarrassing, and not just for former members of the Communist Party. Researchers have only just started on the archives of the Comintern, and the archives of the CPSU international department, which dealt with relations with other communist parties after the end of the Comintern, are not yet open. The same goes for both Soviet foreign office and secret police files. The delicate questions of how far the CP was the hidden hand behind much of the Labour left and the extent of its work for Soviet intelligence (suspected even by former loyal party members to have been the price of the "Moscow gold") have yet to be addressed.

Unsurprisingly, there is a mood of expectation among historians of British communism about what the Moscow archives – now effectively on the market to the highest bidder – will yield. Kevin Morgan, one of the organisers of last weekend's conference and the author of a recent highly acclaimed biography of British Communist leader Harry Pollitt, is particularly excited by the verbatim transcripts of CPGB central committee and Politbureau meetings collected by the Comintern. "They provide an immediacy and vividness of detail unique among the formal records of the British labour movement," he says. "It is like an old sepia photograph suddenly become voluble and argumentative."

But even Morgan sounds a note of caution. The Moscow archives should not be fetish-ised, he says: now that it has been firmly established that the Comintern had a decisive influence in the most important CPGB decisions something that no one outside the party ever really doubted – it is not particularly important to publish papers on the details of old news. Far more interesting is the way the "orders from Moscow" were received and implemented by the party below the leadership level: "Even apparatchiks were often guided as much by an unacknowledged pragmatism as by their formal directives." And indeed, a major theme of recent communist history has been an emphasis on indigenous radicalism and local practice. The underlying notion is that the CP was not just Moscow's poodle but an honourable player in British politics and society.

It was this approach to communist history that informed most of the written contributions to last weekend's apprehensive postmortem. Few contributions were based on work in the Soviet archives, and Moscow gold was no more than a topic of speculation in the bar.

There were papers on everything from the Communist Party's role in local government in south Wales in the 1920s and 1930s to the influence of the ideas of Marxism Today in the 1980s. And although there was little on the CP's "heroic period" in the 1930s, when it was briefly the darling of most of the British left (including Kingsley Martin's New Statesman), most of the writers were searching for ways to present the CP as a respectable part of the British heritage.

Paper after paper, many of them scholarly overstatements, extolled rediscovered virtues: the CP's moderation during the latter part of the war, its trade unionists' pragmatism, its responsibility for cultural innovations (including, bizarrely, the Great British Soap: Coronation Street, according to Andy Croft, owed a lot to the "socialist realist" screenplays by CP writers). There were exceptions to this semi-apologetic tone. A paper on the CP, race and colonialism revealed that the party was probably more of a white bastion than Labour's colonial bureau and was constantly upbraidedby the Comintern for failing to take the colonies seriously; in the postwar years, the party, somewhat belatedly, instructed its members to sit next to black people on the London Underground. Another paper on the Daily Worker, the newspaper that became the Morning Star, argued that it was rather less of a success than CP mythology would have us believe. But for the most part, any iconoclasm was voiced, not written.

In one session, veteran Trotskyist Ray Challinor retold his anecdotes about having been beaten up by the CP's Wal Hannington for daring to question the party's 1940s "no strikes" line, and John Saville, who broke with the CP in 1956 and was a leading light in the first New Left, railed against the "opportunism" of the CP leadership after the war. In another workshop, younger ex-members berated the party's failure to democratise even in the 1980s.

But for the most part this was familiar stuff – a settling of old scores of little interest to anyone who did not buy the Leninist fairytale in the first place. To the outside world, the opening of the archives provides an opportunity to ask, and answer, questions that threaten far more than the posthumous reputation of the CP. For the first time, that hobby horse of the right, the communist influence on the Labour Party, the trade union movement and left culture more generally, can become an object of serious documentary analysis.

That the CP was influential, well beyond its size, has long been obvious. As Walter Kendall made clear 25 years ago in his pioneering study of the birth of the CP, The Revolutionary Movement in Britain, its very formation transformed the far left in Britain, effectively killing off the homegrown radical libertarian socialism that had found expression in syndicalism and guild socialism. Others without access to the archives have shown how, in the 1920s and 1930s, the CP played a major role in establishing the idea on the British left that "socialism" was nothing more than a matter of nationalisation and planning.

But the really fascinating and disturbing questions surround the more recent past. Even as late as the 1970s and 1980s, the CP effectively controlled a large part of the trade union bureaucracy. It had sufficient influence on the Labour left to play a large part in the creation of the 1970s Alternative Economic Strategy and in 1980s Bennism.

Last weekend's conference touched on such themes, but there is still a feeling among left-wing historians of communism, particularly the majority who were members of the party, that some stones are best left unturned. Describing precisely how a few score CP-influenced caucuses managed to control trade unions with hundreds of thousands of members seems just a little too much like class treachery even now.

Although most of the communist historians are beginning to accept that, in the words of social historian Angus Calder, "Yesterday's solutions are today's problems," many are still in mourning for the old days. "A lot of people here are missing the party," said Mike Power, editor of New Times, the monthly newspaper of the CPGB's successor, Democratic Left. "They don't really know how to live without it."

NATO IS OBSOLETE

New Statesman & Society leader, 7 January 1994

It now seems clear that next week's summit of Nato heads of government in Brussels will reject not just Lithuania's much-publicised last-minute plea for membership of the alliance but, more importantly, the idea of immediately expanding the alliance eastwards to incorporate the westernmost former Warsaw Pact countries.

US President Bill Clinton has been persuaded that allowing Poland, the Czech Republic, Slovakia and Hungary into the Nato fold at once would send all the wrong signals to the military and the nationalist far right in Russia. The British and French governments have long been implacably opposed to immediate enlargement of Nato – John Major and friends because they fear further dilution of their already weak influence on Nato, and the French because they still harbour dreams of making the European Union the primary basis for a new European security order. So, despite the German government's enthusiasm for bringing its eastern neighbours under Nato's wing, it is almost certain that the summiteers' final communique will agree in principle to expanding the alliance eastwards at some time in the future – but will offer nothing more concrete to the former-communist countries of east-central Europe than the promise of greater co-operation in the so-called Partnership for Peace scheme. Crucially, there will be no mention of dates for east-central European entry into Nato.

In the context of the success of the neo-fascists led by Vladimir Zhirinovsky in the Russian general election last month, it is perhaps understandable that the west should tread carefully. Russian democracy is extraordinarily fragile, and it is not inconceivable that the far right would attempt to make political capital out of an eastwards expansion of Nato, claiming it as evidence for its claims that Russia is surrounded by enemies. Russian nationalists among the military top brass might even try another coup. Rather than encouraging Russian nationalism, it is important that the west does all it can now to ensure that democracy does prevail in Moscow.

Nevertheless, the east-central Europeans have a right to be disappointed. It is now four years since the collapse of their communist party-states, since when the westernmost former-communist countries have all managed to put functioning (if imperfect) pluralist democratic systems in place. Yet they have been systematically spurned by the west. They have been denied membership of the emerging European Union because of their relative economic underdevelopment and the immaturity of their democracies – a sharp contrast with the treatment of Spain, Greece and Portugal when they applied to join what was then the EEC. And they have been offered only the most meagre guarantees of their security. Nato's refusal of the membership that they so covet is not only a snub but, they believe, a de facto acceptance of the notion, enshrined in the Yalta agreement of 1945, that east-central Europe is a legitimate Russian sphere of influence. From the east-central European point of view, Nato's position, far from discouraging the far right in Russia, is little short of capitulation in advance of its rise to power.

All of this should provoke some serious thinking on the part of the western establishment about the way that it has approached European security since the end of the cold war. For the past four years, the line has been that Nato should remain the basis for security arrangements. No matter that it has proved utterly incapable of formulating anything approaching an adequate response to the Serbian aggression against Bosnia. No matter either that, in terms of military strategy, no one in the bloated Nato hierarchy has been able to come up with a Nato role to replace that of deterring a Soviet sweep across the north German plain. The politicians and generals have passed up no opportunity to tell us that Nato has the capacity to evolve gradually into an alliance covering the whole continent of Europe.

In the past few weeks, however, it has become clear that such thinking is just as wishful as the left said it would turn out to be. The truth is that Nato is obsolete in the post-cold-war world. It cannot form the basis for European security unless it loses nearly all its defining characteristics.

Put simply, if Nato is to become a continent-wide security system, it has to expand east: otherwise, it will continue to exclude more than half the countries in Europe. Yet any expansion east, unless it includes Russia, will inevitably be seen as a threat by Moscow – and for good reason. Nato was set up by the US and Britain, and then run by the US, as an anti-Soviet military alliance. Its entire organisation and military strategy even now are predicated on the continued existence of an enemy (or potential enemy) threatening Europe to the east. And this is precisely why Nato is not prepared to take the leap and invite Russia on board: it cannot believe with certainty that that Moscow will never again turn against the west.

The problem, in short, is that Nato by its very nature preserves the international relations assumptions of the cold war into the post-cold-war period. It deserves to be consigned to the dustbin of history along with the tanks, strike aircraft and nuclear missiles that are now universally recognised to be surplus to requirements. In its place, something quite different is needed – a collective security arrangement encompassing all of Europe as well as Russia and the US, guaranteeing all international borders and committed above all to the defence of democracy and human rights. The Conference on Security and Cooperation in Europe, for all its failings over former Yugoslavia, remains the best existing organisational basis for such a scheme – but there is no reason for not starting absolutely from scratch. The one thing that is certain is that relying on Nato is a recipe at best for encouraging Russian paranoia.

A STEP IN THE RIGHT DIRECTION

New Statesman & Society, leader, 10 December 1993

This week's European summit will see the first exchanges of fire in what promises to be a gruelling battle over the economic and social role of the European Union.

The protagonists are already well entren­ched. On one side are the forces of light – the followers of European Commission president Jacques Delors, whose imaginative white paper on competitiveness, growth and unem­ployment will be discussed in Brussels. De­lors believes that Europe, with 20 million out of work already, is facing ever-increasing unemployment unless there is concerted Eu­rope-wide intervention to create jobs. The white paper, Tackling the Challenges and Moving into the 21st Century, proposes a package of measures for infrastructural investment (in communications  –  both infor­mation technology and transport  – and energy), research and development, and the skills of the workforce. On information tech­nology, Delors suggests EU spending of Ecu20 billion (£15 billion) a year for the rest of the 1990s; on transport and energy, his target is Ecu250 billion (£190 billion) of in­vestment by the end of the century.

Instead of cutting wages and pruning unem­ployment benefits to "price people into jobs", Delors argues for a "European social pact" whereby unions agree that gains from in­creased productivity should be ploughed back into investment. Workers should be given the opportunity of retraining through­out their lives. Meanwhile, new types of enterprise should be created between public and private sectors to develop a new "social economy", producing socially useful non­commercial goods and services (such as inner-city renovation, home helps for the elderly, child-care for working mothers and so on) and creating some three million jobs. 

Ranged against Delors and the intervention­ists are the usual suspects: the British govern­ment and Unice, the European employers' confederation. They believe that the key to

European economic recovery is labour mar­ket deregulation and reduced employment costs. Unice's report, Making Britain More Competitive, published on Tuesday, calls for cuts in employers' social security contribu­tions for young and low-paid workers and relaxation of rules on maximum working hours, minimum wages and making workers redundant. The ideological affinity with the Tory policies that have done such damage in the past 14 years in Britain is striking.

The stark difference between the two ap­proaches to EU economic and social policies makes it almost inconceivable that this week's summit will reach any consensus  –  and, in the short term at least, the predomin­ance of right-wing governments among EU members means that the best that Delors can hope for is a request to put his proposals in more detail. Although he has the backing of the Belgian EU Presidency, the EU's big guns  – Germany, France, Italy and Britain  –  are either worried about the costs of his pro­posals or (in the case of Britain) vehemently opposed on dogmatic grounds.

In the longer run, however, the prospects for something like the Delors plan being put into practice are rather better. To begin with, his proposals are not in fact far removed from what the mainstream European Christian Democratic right would like to do: the reason that German Chancellor Helmut Kohl is cur­rently unenthusiastic about them has less to do with ideology than with the burden of debt with which reunification has saddled his country. An improvement in Germany's economy, expected some  time in the next  18 months, could work wonders for Christian Democrat dithering over the Delors plan, al­though its author might well have retired by then.

Just as important, the political balance in the EU is by no means set in stone. Both Italy and Germany face general elections in the coming year that seem likely, as things currently stand, to result in left-leaning coalitions coming to power.

Last weekend's Italian local elections show that the former-communist Party of the Democratic Left (PDS) is now the only coher­ent national political force: many political commentators reckon that it is set to be the core of the government that takes office after elections likely in the spring. In Ger­many, although the Social Democrats (SPD) are not performing as well as they would like, the popularity of Chancellor Kohl's Christian Democratic Union has plummeted, particu­larly in the east of the country, and there's a possibility of an SPD-CDU "Grand Coalition" taking power next autumn. With both PDS and SPD in government, the laissez-faire la­bour market deregulation approach so beloved of the British Tories would have far less purchase.

Of course, this cannot be taken for granted: expectations of shifts to the left in Europe have all too often been dashed in recent years, and a Franco-British laissez-faire bloc could seriously damage the prospects of the Delors plan even with left-leaning governments in Germany and Italy. Neither should anyone underestimate the widespread fear in the Eu­ropean establishment that, faced with grow­ing competition from the newly industrialising countries of the far east, Eu­rope has no option but to cut wages and employment costs by any means necessary.

But at least there are grounds for cautious optimism. The Delors plan is far from perfect. It falls well short of the sort of counter-cycli­cal Keynesian expansionism that Europe so badly needs, and it does nothing to address the democratic deficit in EU macro-economic policy-making: it is designed to be im­plemented by the unelected Commission after approval in secretive intergovernmental bodies. Nevertheless, it is a crucial first step towards the pan-European pro-growth macro-economic policy that is our only hope of tackling unemployment. As such it deserves all the support the left can give it.

CLARKE'S CONJURING TRICK

New Statesman & Society, 5 December 1993

Is Kenneth Clarke really so clever? Paul Anderson examines the tax-and-cut budget and assesses its likely impact on Britain's economic prospects

It is easy to see why Kenneth Clarke's Tory colleagues and the markets hailed him as a magician after he delivered Britain's first unified budget on Tuesday.

Somehow or other, Clarke managed to pro­duce a package of measures to attack the public sector borrowing requirement, raising taxes and cutting public spending – and yet he did it apparently without either hitting the most sensitive parts of the welfare state or increasing the most noticeable taxes.

On tax, Clarke confirmed the imposition of VAT on fuel, announced by Norman Lament in March, and cut the tax relief on mortgage interest payments even more than Lamont planned (which will bring in an extra £1 bil­lion a year by 1996-97). He put up duties on petrol and cigarettes (worth a total of £2.4 billion a year by 1996-97), promised to raise another £2 billion over three years by clamping down on loopholes (just as shadow chancellor Gordon Brown had been suggest­ing) and introduced new taxes on air travel and on insurance policies (worth another £1 billion a year from 1995-96). And he brought in changes in income tax that will yield just under £2 billion in 1996-97.

But the Chancellor softened the blow of VAT on fuel by announcing a compensation package for pensioners and others on benefits – an inadequate one, perhaps, as the poverty lobby and environmentalists were quick to point out, but enough to take at least some of the sting out of criticism of Lament's original plan.

In similar vein, the reduction in tax relief on mortgage interest (very much in line with Labour thinking, as it happens) will cause little pain at a time when interest rates are as low as they are today; while the increased petrol and tobacco taxes (also very much part of Labour's approach to taxation) can be jus­tified on green and health grounds respec­tively. Clarke's new taxes on air travel and insurance are very cleverly levied on items of once-a-year consumer expenditure (who can remember what last year's holiday cost?).

More important, the income tax hike was done not by increasing rates but by freezing allowances and thresholds, allowing inflation to increase the revenue, a trick learned from Lamont. And, most important of all, Clarke did not extend the base of VAT as almost everyone had expected. Much as the opposi­tion parties fulminate about Clarke's swin­geing tax increases, there is widespread recognition among their members that it could have been an awful lot worse – and that many of Clarke's proposals are very similar to the ones that they would have had to put forward if they were in government.

The story is much the same with the bud­get's spending cuts. The cuts are there all right: in real terms, the "control total" of non-cyclical government spending is set to fall by more than 1 per cent from 1993-94 to 1994-95, with next year's levels reached again only in 1996-97.

Public-sector pay is to be frozen, and there will be major cuts in social security entitle­ments as, first, sickness and invalidity benefits are merged into a new incapacity benefit, and then income support and unem­ployment benefit become job seekers' allow­ance. Defence spending will be cut by more than 10 per cent in real terms by 1996-97, taking it to below 3 per cent of gross domestic product for the first time since 1945; there will be a further move away from student grants to loans; transport spending will be slashed.

But once again the pain is not quite what was expected. The biggest cut is in the con­tingency reserve – down £4 billion on pre­vious projections in the next financial year and only a little less in 1994-95 and 1995-96. In real terms, local authority and health spending are shown unchanged – and educa­tion gets a 5 per cent increase, while the social security budget increases by 2 per cent. Pen­sions, unemployment benefit, income sup­port and child benefit will continue to be inflation-proofed. Clarke even found the cash to introduce a childcare allowance for low-paid working single mothers and to bring in a high-interest savings bond for pensioners.

The upshot is that most of the public spend­ing element of the budget will almost cer­tainly prove difficult for the opposition to attack with conviction. Apart from what ap­pear to be draconian changes in invalidity and unemployment benefits – on which much detail is still missing – there is little for Clarke's opponents to get their teeth into. No one outside the military and the Tory right really believes that defence spending should not be slashed, and Clarke has easy populist arguments for public-sector efficiency to answer the unions' howls of protest on pub­lic-sector pay. On student loans, his point during the budget speech that bus-drivers should not be made to subsidise the education of future lawyers is a taste of things to come. Already, the main refrain of opposition pol­iticians on the spending plans is that more should have been ploughed into education and training and infrastructural projects –  hardly the stuff to set the voters' pulses racing.

Enough, though, of the political cunning of the budget: will it actually work? Clarke said that its purpose was to put public finances in order once and for all, and the key projection in the Red Book that outlines the effects of the budget is the one showing public-sector borrowing steadily falling to zero by 1997-98 (conveniently enough allowing Britain to meet the convergence criteria on public bor­rowing laid down in the sections of the Maas­tricht treaty on European monetary union).

The credibility of this PSBR projection de­pends on what happens to growth: tax revenue will be inadequate to cut into PSBR if growth is low, while social security spend­ing will be difficult to keep under control. The assumption behind Clarke's figures is that the British economy achieves a sustained growth rateof3.5 per cent from 1995 until the end of the century. But such growth rates are, to say the least, highly unlikely, not least because Europe, Britain's largest export market, is deep in recession and unlikely to revive for a couple of years. With more realistic assump­tions of growth at 2.5 per cent, as the Red Book itself admits, the possibilities of reduc­ing the PSBR to zero fade away.

"What the Chancellor needed in this budget was to convince the markets that he had a credible path towards the reduction of the PSBR to zero," says Meghnad Desai, profes­sor of economics at the London School of Economics and a former member of the La­bour front bench Treasury team in the House of Lords. "He has done it quite cleverly. He has disguised the tax increases needed to get the PSBR down, he has made optimistic pro­jections on growth, and he has looted the reserves to balance the books. Clarke has hidden the problems that will come to the fore, he hopes, only after the next election. Watch out for a rush to the polls in 1995 or early 1996!"

Nevertheless, to judge from the reaction of the markets, the scam seems to have worked in the short term at least. The consensus is now that the way is open for the further reductions in interest rates necessary for recovery.

Whether they will be enough on their own is, however, a moot point among left econo­mists. On one hand, there is the traditional Keynesian argument that the problem with the budget is that its mix of spending cuts and tax increases will dampen the overall level of demand in the economy to such an extent that the recovery will inevitably be stillborn.

According to Bryan Gould, writing in New Statesman and Society last week, the PSBR is simply the product of the recession and no particular cause for concern. In similar vein, Jonathan Michie, a fellow of Robinson Col­lege, Cambridge, and the author of several books arguing for a revival of a version of the Alternative Economic Strategy that formed the basis for Labour policy in the 1970s and early 1980s, says: "Cutting expenditure and increasing taxes is the opposite of what is needed to bring the country out of recession. The major worry now is what happens if it does all go wrong. If it does, the running down of the contingency reserves means that the cuts will be even more savage than those already announced."

On the other hand, there is widespread sup­port for the idea that the central focus of the government's economic policy efforts should be a programme for European recovery  –  which was not mentioned by Clarke in his speech. Stuart Holland, one of the architects of the AES in the 1970s who has recently been advising Jacques Delors on his European re­covery programme, argues that Clarke simply missed the point.

"No national recovery is feasible if Europe stays in recession," he says. "In today's inter­nationalised economy, macro-economic pol­icy has to be internationalised. For us, that means that macro-policy has to be European. The only way out is to increase the macro-economic instruments of the European Union, such as the European Investment Fund. The political space is opening up in Europe for European macro-economic policy instruments."

The government's hope is that exports to the US and to booming economies in the developing world – China, Indonesia, the Phillipines,  Mexico – will more than com­pensate for the sluggishness of the European economy until such time as lower German interest rates have laid the basis for European recovery without recourse to an expensive full-blown European recovery programme. It is a big gamble – but it might, just might, come off.

A BUDGET FOR RECOVERY

New Statesman & Society, leader 26 November 1993

Kenneth Clarke's first budget as Chancellor of the Exchequer, to be unveiled next Tuesday, has been the subject of more speculation than any other budget in the past decade. This is partly a matter of the novelty of having a budget in November combined with the autumn state­ment on public spending – but it is also the product of a widespread public feeling that the economy is in a mess, and that what Clarke does next week will determine whether the mess is cleared up or whether it gets worse.

Britain has been in recession for nearly four years now, and signs of recovery are still faint. For all Britain's recent successes in non-EC export markets, there is still a strong possibility that the deepening European re­cession will scupper hopes of a sustained upturn – just ask those Nissan workers now being offered voluntary redundancy because no one in Europe is buying cars.

In any case, if unemployment has peaked, it has only just done so – and it still blights millions of lives. Even those in work suffer its consequences: fear of unemployment is still holding back consumer confidence, and the cost of keeping around three million people on the dole is horrendous. Taking into account benefits and lost tax revenue, each unemployed worker costs the Treasury nearly £9,000 a year, which means that the cost, for example, of keeping the 500,000 unemployed building workers out of work is around £4.5 billion a year.

Meanwhile, everywhere you look there is work to be done: crumbling council blocks, sewers and schools to repair, ancient tube trains and buses to replace, railways and houses to build. The waste of unemployment is obscene and absurd. Britain desperately needs a budget that lays the foundations for a sustained economic recovery.

What is not required is what Clarke seems to be preparing – an assault on public bor­rowing on two fronts, with cuts in state spending and increases in taxation aimed at shaving some £3 billion off the public sector borrow­ing requirement (which is currently running at £50 billion). The fragile nature of the re­covery makes it imperative that the Chancel­lor does nothing to reduce the overall level of demand in the economy: state spending should be kept at current levels or even in­creased, with the overall burden of taxation increased only to fund an expansion of state spending on investment.

In similar vein, any tax or spending changes should on no account be regressive: even leaving aside the persuasive moral and social arguments for a more equal society, pro­gressive redistributive measures have econ­omic benefits. They have a modest reflationary impact because poor people tend to spend money rather than salt it away; and they help the trade balance by putting a block on the tendency of rich people to buy im­ported luxuries, rather than home-produced goods.

Yet all the talk is of Clarke increasing Na­tional Insurance contributions (an income tax that hits the worst-off hardest) and direct taxes on non-luxury items, while reducing benefit entitlements – all of which will harm prospects for recovery.

Some of the measures, both long-term and short-term, that should be taken next week have been elaborated by Gordon Brown and other Labour spokespersons in the past year: tax breaks for industrial investment and for training, a training levy, taxes on speculative share and money market transactions, release of receipts from council house sales to allow new council house building, lease-buying of trains, a windfall tax on privatised utility profits, a stricter regime to prevent tax evas­ion, a redefinition of public borrowing to distinguish borrowing for investment from borrowing for the current account, and so on.

But other measures that are equally applic­able in the current economic climate seem to have been discreetly abandoned by Labour since the shadow budget just before last year's general election. In particular, it dropped plans for a top income tax rate of 50 per cent on those on £40,000 a year and abolition of the ceiling on National Insurance contributions. Both should be re­vived, although both need to be a lot better sold to the electorate than they were last time.

And then there is a whole raft of proposals that never get a look-in these days in Labour's top echelons. The most obvious is abolition of mortgage interest tax relief – essentially a regressive subsidy to affluent home-owners, which is retained by the government only for the most cynical of political reasons. The savings from abolishing MIRAS should be ploughed straight into building houses for those on low incomes.

There are others, too, from wealth taxes, through energy taxes that do not hit the poorest as VAT on domestic fuel will, to disbanding the British Army of the Rhine and using the savings on a massive employment programme. In all these cases, the reason for Labour's lack of enthusiasm has little to do with economics and a lot to do with fear of what the Tory press will say.

Of course, there are limits to what a single medium-sized nation-state can do to conquer unemployment and recession: the experience of France in the early eighties shows that there is little mileage today in the sort of one-nation Keynesianism that used to form the basis of all left-of-centre alternative econ­omic strategies. That is why a programme for recovery in Britain would have to be matched with proposals for a European recovery pro­gramme, initially based on the intergovern­mental framework suggested by Jacques Delors (unceremoniously blocked by the British last week), but ultimately carried out by federal European institutions.

Nevertheless, it remains in the power of the medium-sized nation-state to make a substan­tial difference – and it is a scandal that Clark will deliver a package that does nothing (or worse) for recovery.

CLINTON'S POOR START

New Statesman & Society, leader, 5 November 1993

Bill Clinton was elected a year ago promising to be a president who con­centrated his efforts not on foreign affairs but on changing America for the better. There were some sound political reasons for this: George Bush was widely perceived by voters as having spent too much energy on faraway countries and having ne­glected the domestic front, particularly the economy. But Clinton's ordering of priorities was also a reflection of his own inadequacies: put brutally, he did not, and does not, know very much about the world beyond his own backyard.

So far, his administration's foreign policy has been marked by quite extraordinary in­consistency. On Somalia, where he inherited Bush's ill-advised military intervention, he has veered between backing escalation of US involvement and seeming to want to pull out as soon as possible. On Bosnia, the adminis­tration started off promising military inter­vention and cajoling the reluctant British and French to back its approach – only to end up effectively spurning any role. A similar con­fection of bluster and inaction seems to be the name of the game with Haiti.

The problem is not, however, simply with the spectacular international crises that make it on to the television screens. Clinton has proved just as inept on Cuba, hinting that he might reconsider the blockade and then an­nouncing that it would stay. He has faced both ways on China, attacking its appalling human- rights record and then upgrading US contacts with Beijing. Perhaps more import­ant in the long run, no coherent policy has emerged on relations with Europe or the Pacific Rim countries, on world trade or on nuclear weapons. America has had little or nothing to do with the Israel-PLO peace pro­cess and appears confused about what it wants in the Middle East. Just about the only decisive and effective action by Clinton in the foreign arena was his rapid endorsement of Boris Yeltsin's seizure of power in Russia – and that could all too easily turn out to have been a giant mistake.

The mess is not entirely Clinton's fault: he has been badly advised, particularly by his Secretary of State, Warren Christopher, a veteran of the Carter administration who has plenty of experience, but entirely lacks the vision required to steer the sole superpower in the post-cold war era. Nevertheless, the buck stops with Bill – and he needs to start thinking a lot more clearly about the goals of American foreign policy if his administration is not to go down in the history books as a disaster. What the world needs is a US that is neither isolationist in the traditional sense nor the world's policeman – not a US that one minute seems to want to retreat into its shell and at the next intervenes unilaterally and incompetently in some crisis or another.

At home, the picture for Clinton is differ­ent – but not so different. All the indicators suggest that the American economy is at last making a strong recovery from recession. But it is doubtful whether this has anything to do with "Clintonomics", that familiar mix of austerity budgets, continental free trade and "supply-side'" intervention.

Certainly, the idea of making training the central focus of economic policy, so much admired by the Labour Party here in Britain, looks increasingly threadbare. According to the current issue of the Nation, the New York left weekly, a Labor Department report last month assessing a $200 million-a-year scheme for retraining manufacturing workers who had lost their jobs to foreign competition "concluded that only 19 per cent of the 'retrained' workers found jobs that demanded their new skills and paid at least 80 per cent of their former wages; 20 per cent remained jobless; most of the rest sank into low-wage slots that they occupied for just eight months."

And if retraining doesn't work, isn't the North American Free Trade Agreement simply a mechanism for exporting employment to Mexico? It is no surprise that the administration is currently engaged in the mother of all battles with Congress over NAFTA, with Clinton's political credibility on the line if he loses.

Apart from the economy, Clinton's main domestic policy plank was a promise to re­form America's creaking health and welfare regimes, starting with health. Here too, how­ever, the signs are less than promising. The health package launched by Hillary Clinton in September is unlikely to provide the com­prehensive, accessible service that the country so badly needs, and there are no indications that the welfare reforms now being considered by the administration will do anything other than penalise the poor for the economy's failure to generate jobs.

Clinton's honeymoon with the electorate has been deservedly brief: the defeats suf­fered by the Democrats in New York and elsewhere this week are a taste of worse to come in the mid-term Congressional elec­tions this time next year unless the adminis­tration pulls its socks up – and fast. This side of the Atlantic, those Labour politicians who celebrated Clinton's victory last year with champagne at a swanky London hotel have been remarkably silent about their erstwhile hero. One hopes that the silence does not mean that Britain's Clintonmaniacs are not having second thoughts.