Tony Blair will have to choose between the US and the Labour party
PETER OBORNE
This political year was only ever going to be about three things. First, the Comprehensive Spending Review, signalling the conversion of New Labour into a tax-and-spend government and the final repudiation of the Thatcherite economic settlement. Second, the looming war with Iraq. Third, the verdict on the euro, the largest and most irrevocable economic decision that any British government will have made since the last war.
With Westminster becalmed just now, it is helpful to keep the mind fixed on these three points. There were no noteworthy events last week: just a date. Gordon Brown, the dominant presence in the Palace of Westminster, overshadowing the Prime Minister, became Labour's longest-serving Chancellor. He surpassed the previous record held by Denis Healey, who served five years and two months between 1974 and 1979. There are now fresh targets to aim at: Nigel Lawson, Neville Chamberlain and, above all, David Lloyd George, who lasted eight years between 1908 and 1916. Of these three, Brown most resembles Lloyd George, with his oratory, tentacles deep in domestic policy, and eye fixed intently on the top job. There is more than a hint of Herbert Asquith, the barrister on the make, entranced by worldly wealth, in Tony Blair. Brown may yet do for Blair. as Lloyd George did for Asquith.
Brown was setting about making that outcome more likely all week with his Comprehensive Spending Review, now likely to be delayed till the third week in July. These negotiations dominate Whitehall. Cabinet ministers have no choice but to pay homage to Brown to get what they want. There is always the possibility of appealing to Downing Street, as Home Secretary David Blunkett and Defence Secretary Geoff Hoon may be forced to do. But other Cabinet ministers sense that this course is undignified and dangerous. Education Secretary Estelle Morris and Trade Secretary Patricia Hewitt have spotted that it pays in the end to deal with the Chancellor direct, and on his own terms. In any case, the CSR, and the huge annual upwards ratchets in government spending it guarantees till 2006, is now virtually settled.
It is a gigantic risk — as reckless in fiscal terms as Anthony Barber's dash for growth in the early 1970s was in monetary terms. The Chancellor's Mansion House speech, with its 'cautious optimism and eccentrically sanguine view of the economy, had an air of unreality. The business people listening to the Chancellor tell me that their own outlook is the worst for 15 years, that deals have all but dried up, that huge job lay-offs are certain and big bankruptcies likely. Gordon Brown's figures are plausible on the basis of 2.5 per cent annual growth, hut they imply financial crisis if the British economy slows.
Internationally, Tony Blair has a George Bush problem. The US President is absolutely set upon embarking on the invasion of Iraq, the most audacious and perilous foreign-policy undertaking since Vietnam. Most national leaders, on the eve of such an enterprise, would be scrupulous to build up as wide a coalition as possible. George Bush has set out on the opposite course of action. On practically every conceivable issue he has embarked on an isolationist course that might have been specially designed to make life as difficult as possible for a fervent friend like Britain to support him, let alone a half-hearted and treacherous ally like France. His massive package of support for farmers (a bracing moment even for the President's Republican supporters), the imposition of steel tariffs, the complete US disregard for the Kyoto Accord on greenhouse gases have all caused anger in Britain and Europe. The US refusal to accept the jurisdiction of the International Criminal Court (a particular New Labour brainchild), President Bush's call for Yasser Arafat to go, and an American pilot's careless eradication of an Afghan wedding party — all have deepened the wounds.
Tony Blair's interview by Jon Snow on Channel 4 news last Tuesday drove home, yet again, how very skilfully the Prime Minister handles this delicate territory. The US and Europe are, in essence, two unsympathetic powers with irreconcilable attitudes to social questions, economic organisation and foreign policy. And yet Tony Blair straddles the two. He does so by using all the skills which are beginning to serve him ill on the domestic stage: fudge, plausibility and, above all, the effortless propagation of contradictory opinions in different kinds of company — see, for example, the Prime Minister's various utterings on the European Rapid Reaction Force. It is helpful that Jack Straw, after a shocking start, is gradually learning the ropes as Foreign Secretary. But Tony Blair pulls it off— that is the great thing.
Whether he can sustain his juggling trick once the US moves in on Iraq remains to be seen. In the Jon Snow interview, the Prime Minister sent out a strong signal that he is ready to back the US. War will force Tony Blair to abandon the tactic of triangulation that has served him so well. It will be the break point that will force Tony Blair to choose not only between the US and Europe but also between the US and the Labour party. Cabinet resignations are likely, and it is even conceivable that the Prime Minister will be forced to rely on Tory support in order to prosecute a war.
Another momentous decision confronts the Prime Minister in the domestic arena, where events have conspired to make a referendum on the euro more likely. The sharp fall in sterling has eased business worries that British competitiveness would be shattered by entry to the single currency. Meanwhile, last week's authoritative study by Professor lain Begg, an expert in European economic integration at South Bank University, concluded that only 'political obstacles' now stand in the way of British entry. Those political obstacles remain formidable. The No Campaign retains its 30-point lead in the polls, an advantage which its adroit summer advertising campaign, led by Bob Geldof, an Irish citizen, will do nothing to diminish.
Until recently it has been fashionable to regard Gordon Brown as the major stumbling block to British entry to the single currency. But it is worth pausing to remember that five years ago Brown was rightly regarded as being more pro-European than the Prime Minister. There is something about the delicate balance between the two men which means that when one of them warms up on a subject, the other cools down. It is not quite inconceivable that the circle could turn yet again. Tony Blair's recent enthusiastic pronouncement about British entry has been made behind the safe cover of Gordon Brown's five tests. The Chancellor could yet inflict a form of torture on the Prime Minister by declaring those tests 'passed' and sadistically handing the problem over to Downing Street.
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