Steve Richards: Brown remains trapped by his past

After the carnage in Iraq and collapse in the markets, Labour struggles for definition

When a government is in decline the causes are often varied and shapeless. Unusually the fall of New Labour has an epic neatness, a tragic symmetry.

In the Nineties and beyond its co-founders Gordon Brown and Tony Blair made a series of sweeping compromises with the prevailing mood of the times. They not only chose to adapt, but made the very act of flexibility their distinctive virtue. In order to win power and keep it they screamed from the roof tops that, in domestic affairs, they were pro-market and, in foreign affairs, unambiguously pro-American. In different ways their ruthless defensive expediency, so beguiling in the mid Nineties, has become their undoing.

What is more two images from recent days convey a sense that perhaps both of them realise that the calculated pragmatism of the past has left them in the wrong place now.

The first vivid image is of an exhausted Gordon Brown railing against the bankers as he seeks to rescue them for a second time. Now he faces a dilemma candidly outlined by the City minister Lord Myners in an interview at the weekend. Lord Myners admitted that, although the principles of the latest package are in place, the crucial decisions about its balance are still to be worked out.

"If we get it wrong and we charge too much the banks will say we are not interested and continue to carry the risk and continue to be in the mire ... if we don't charge enough they will flood us with assets and we will end up putting public funds at risk." In other words Brown walks as high a wire with his latest scheme as with the previous one.

Nonetheless his high-wire act is the only sensible route to take. His political problem is the past, or his own past. As Chancellor he paid homage to the bankers and the financial markets. Although almost congenitally conditioned to be wary of free markets he made his servile accommodation because the booming sector provided cash for public spending and the association between Labour Chancellor and City was politically potent, as counter intuitive as David Cameron's claim to be a progressive.

Always fearful of being regarded as Old Labour, Brown did not consider for a moment the need to intervene unilaterally in Britain. He wanted always to be seen as New Labour as much as his neighbour in No 10, and not least because some of his neighbour's friends were briefing that he was "anti-reform" and backward looking. For Brown the admiration of Alan Greenspan, when he was chairman of the Federal Reserve and disciple of the light regulatory touch, was the ultimate counter-intuitive accolade. Shortly before becoming Prime Minister, with the Tories seeking to portray him as a leftie, Brown published a selection of his speeches. The section on the economy was introduced by a doting Greenspan.

I bet a thousand Royal Bank of Scotland shares that Brown would not choose him now. Instead the Prime Minister wonders whether there was space in the past for him to have acted against the recklessness of the financial markets or at least to have expressed more scepticism about what was happening, past words or actions on which to cling.

The second image of recent days was that of Tony Blair receiving his medal from the outgoing President Bush. Take another look at the photo from the ceremony. Blair looks uneasy and far from thrilled. Perhaps he was showing conscious restraint, not wishing to appear remotely triumphalist. But I suspect the event brought home to Blair the degree to which, whatever the substance of the issue, he misread the politics of Iraq.

Surely someone with an eye for political fashion would have preferred to have been at a drinks gathering with the incoming President Obama rather than dancing again with a President whose low ratings broke records. Did not a part of him wonder whether he was going down in history with the wrong President?

But Blair forged his relationship in the different context of 2001. He had won another defensive landslide based on a cautiously judged pitch to Middle England. He viewed the coming four years even more defensively, telling visitors to No 10 that he was determined to show that a Labour prime minister could work closely with a republican president. He would not allow any space for the Tories to claim that they were closer to Bush than he was.

Blair knew that a war in Iraq had risks but that the politics was clear cut. As a New Labour prime minister he would be President Bush's strongest ally, give no room to the even more pro-war Conservatives and retain his alliance with some of the most powerful newspapers.

What followed meant that Labour's majority in 2005 was smaller than it might have been and the party's vote in England was less than the Conservatives, not as a result of a rise in Tory support but because of switches to the Liberal Democrats in protest over Iraq. Labour has never fully recovered from the war and now it faces the trauma of a collapsing economy brought about by a banking crisis it did nothing to prevent. The tantalising question is whether and when the defensive duo could have acted differently. Most of the newspapers attacking Brown now for his economic record were not calling for tougher regulation during his tenure at the Treasury. You will also search in vain for speeches from senior Tories raising questions about the freedom of the financial markets.

Similarly, in ways that are underestimated, Blair faced a series of nightmarish political decisions in advance of the war. His opposition would not have stopped Bush from going ahead and would have alienated the powerful Atlanticist wing in the New Labour coalition. He was relaxed about accusations that he was Bush's poodle as his overwhelming concern was to counter unequivocally any perception that he might be anti-American.

Perhaps braver, more epic leaders, unsullied by Labour's electoral defeats in the 1980s and 1990s might have challenged the orthodoxies of the time and risked taking hits from their political opponents. Instead Labour struggles for definition after the chaotic carnage in Iraq and the collapse of the financial markets. In trying so hard not to be Old Labour, the founders of New Labour followed paths that led them towards nightmarish traps.

s.richards@independent.co.uk