August has been a very bad month for Tony Blair. A mood of surly, pettish despair has overtaken the Labour party. Ministers, protected by official cars and red boxes, are scarcely aware of this. But it is out there, palpable and menacing. New Labour has reached a dead end, and nobody knows what to say or do.
The government’s foreign policy is not far from collapse, though this too is not yet apparent to ministers. The Defence Secretary John Reid wrote an article in the Times last week which attacked the press for its failure to celebrate the many successes of the Iraqi invasion. Dr Reid’s article was not that distant in tone from Vice-President Cheney’s remarkable recent announcement that the insurgency is on its last legs. It is very difficult for governments to admit even small errors; perhaps impossible to come to terms with graver miscalculations.
On the domestic front there is greater cause for concern than at any stage since New Labour took power. Unemployment is rising remorselessly, personal debt has hit record levels, government revenues are slowing. The Chancellor of the Exchequer has been obliged to fiddle his ‘golden rule’, guaranteeing that the government will balance the national finances across the economic cycle, and has thus destroyed his credibility.
It is certain that taxes must rise soon. Till now Gordon Brown’s tax increases have been creamed off the top of a buoyant economy. The next round will hurt because circumstances are already hard. The stage is now set for a vicious Budget next spring. The Chancellor most likely wants to get the pain out of the way at once — while Tony Blair is still Prime Minister.
But there is something more intangible at work — the sense of drift, bordering on despair, within the Labour movement.
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