Labour's Dilemma

New Labour’s complete humiliation in the European poll, gaining a mere 15.3% of the vote on an appallingly low turnout, changes everything at Westminster.

It is not only that UKIP, a petit bourgeois nationalist party that wants withdrawal from Europe, beat the ruling party into third place, but that the far right BNP, a pariah until today, won two seats in the European Parliament. Wales was lost by Labour for the first time since 1918.

What Is At Stake

The details and meaning of the election are well rehearsed in the mainstream media and do not need repeating here but what the markets and allied leaders are concerned about is whether Gordon Brown can survive to maintain a steady hand on an economy that is seeing the first signs of recovery.

Once again, there is a conflict of interest between the national population which has had enough of this Government and an international community that needs continuity to see through co-ordinated economic policies and the implementation of the Lisbon Treaty.

This is the essence of the crisis – that Brown genuinely sees it as his duty to continue in office to oversee the conditions for economic recovery and to start the process of practical reform of national politics.

The international community, where it is not indifferent, wants certainty. His removal would plunge the Labour Party into a summer of infighting and distract the Government at a key time - yet failure to remove him now just prolongs the agony and so the uncertainty.

The chances of a smooth handover seem slim. Most senior figures are showing considerable restraint but a few have managed to create a picture for the public of cats fighting in a sack. The backbenchers, staring political death in the face, are at least beginning to quieten down a bit.

The Left (insofar as it is represented by Cruddas outside the Government) offers personal support but policy criticism, playing a long game. The Blairites, most recently the troublesome Lord Falconer, are continuing to behave appallingly.

While the European results were awaited, the weekend saw frenetic activity in the media as New Labour continued to collapse under the weight of its internal contradictions. Petulance was also not confined to the Blairites. There is nothing to be feared so much as Ed Balls spurned.

It was soon apparent that, instead of uniting silently around the Prime Minister, Balls had managed to let his resentments against Mandelson, for effectively blocking him behind the scenes as Chancellor (we presume), come out into the open.

The Collapse of the ‘Spin’ System

The problem here is that the ‘spin’ system created by Blair to manipulate the media through collusion has more than broken down. The players in this vicious game are tiny in numbers and stature but the damage that they wreak is enormous.

This finely tuned tool of message centralisation has collapsed into factional units which now feed the media with material that seem to indicate a civil war amongst the big beasts while the rest of the party looks on aghast.

For example, we do not take over-seriously the leak of an old Mandelson-Draper memorandum. This apparently engages in character assassination of Brown disguised as analysis.

The analysis is probably true (the Prime Minister seems to be a deeply neurotic and defensive personality) but it preceded Mandelson’s pragmatic re-alliance with his old foe. In fact, as always, Mandelson’s analysis seems to be both objective and constructive - and distressingly accurate.

This is an irritant and little more but the inability of the main players to suppress their emotions, as Labour falls to 23% (local) and then 15% (euro) of the vote, merely indicates just how much damage has been done to the internal constraints and disciplines of the Party by Blair’s management style.

Personality has replaced policy as the motive for expressing strong feelings in politics. Ministers now resign on pique rather than on prescription charges.

The Mood Is Grim

The Prime Minister also has serious problems with the activist base, with perhaps 50% allegedly (according to polling) wanting him to move on before an election and 20% wanting him to quit now. What is more remarkable is that only 30% are still confused or want him to carry on!

The mood is grim. It comes down to a brutal calculation. Every week Brown spends in office drags Labour down further. It increases the risk that the centre-left will be out of power for a generation.

A lot of damage could be done to the organised trades union movement, the public sector and to regional elites by a vengeful Tory Party in that time. New Labour may even become a rump party, behind either UKIP or the Liberal Democrats, depending on the resolution of the European Question.

The counter-calculation is that the quick election of Alan Johnson, while he may not be able to win the next election, could rebuild an electoral coalition for new times. This might well save the Labour Party as the primary expression of the British centre-left.

The problem for the international community and for the markets is that saving the party and the centre-left may prove to be a nerve wracking experience over the months ahead as an uncertain global recovery is managed in the context of a weakened and divided Europe.

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Where the Local Election Results Take Us ...

As we wait for the results of the European Elections today, the chaos at the top of the Labour Party has caused media attention to drift from detailed analysis of the vote in the local elections.

This Election was cataclysmic for New Labour, with the loss of 327 seats. It was not great for the Liberal Democrats either who lost 50. With the Tories gaining 285 and many of the ‘others’ (92 gains) being of the right, this was the shift to the centre-right that we expected.

Actual power, that is the administrative dominance of county councils, has certainly shifted to the Conservatives, with seven gains from all parties. Yet a calculation of equivalent vote at the national elections was much less impressive for the Tories than this implies.

Labour certainly now appears to have been in a possibly terminal and steady decline from the 2005 election victory, coming third to the Liberal Democrats who, in turn, despite their losses, have seen a slight recovery in actual vote. Yet the Tory vote has also sharply declined. So where is this all going?

The British system has its own peculiarities. What we are seeing is a potential time-bomb for all the main parties. It appears that some voters have shifted to a variety of neo-nationalist, green and (very marginally) neo-socialist parties but that the vast bulk have simply decided not to vote.

Is this inertia or resentment? Some of these voters may well return at a national election, but this is no longer certain as the expenses scandal and resentments over immigration and the economy create anger and cynicism below the surface.

The British political system allows silent resentment to be ignored as unimportant, so that a party that is despised by the majority might yet form a Government with a mandate of sorts. But this still gives it a problem of legitimacy.

This has been Brown’s problem since he failed to call an election after taking power from Blair. It could become a Conservative problem under a flaccid Cameron leadership that seems to be adopting John Smith’s ‘one more heave’ strategy for power as an alternative to any decisive reform of its own failings.

Current projections (not a reliable guide given what actually happened in 1997) give the Tories an overall parliamentary majority of 34 if an election were held now. This would place Cameron under permanent pressure from whatever awkward squad appeared on his backbenches.

Labour’s main opposition role would, under these projections, not be much threatened by the slightly higher number of Liberal Democrats and ‘others’ in Parliament. Its very survival in adversity would enable Brown to be removed with honour and provide a base for revival under an untainted leader.

In this analysis, Labour, unlikely to win an election now, could still recover afterwards on Conservative failures. Unfortunately, the scenario does not take account of wider disenchantment in English society nor of the future effects of tax rises and spending cuts.

Tax rises and cuts will reflect back on New Labour’s past stewardship of the economy but there is a real danger for a Conservative Government that it could face a war on two fronts - an aggressive and revived official opposition without any real legitimacy in the country’s eyes for itself …

The Blair coalition has not merely been shattered (as the Sunday Times suggests). Its middle class elements are loose and angry and have not yet accepted that the Conservatives are any better. Blair’s success has, in any case, been exaggerated.

The Blair coalition had long since been whittled away by foreign policy issues and perceived Government incompetence well before the economic crisis added fuel to the fire. A new coalition is now necessary on the centre-left and only Alan Johnson currently appears in a position to do this.

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