Steve Richards: Brown warned us that markets fail

Virtually alone, Brown was never uncritically in awe of the marketplace

How quickly we leap from the apocalyptic to the parochial. Each day I read a bucket load of assessments as to where the eruptions in the financial market leave the electoral prospects of Gordon Brown and David Cameron. The crisis is far from over and yet Brown breathes again, or does he? Read those opinion polls and make your judgements.

Given that the polls are still fairly bleak for Labour at the moment I sense the reason Brown looks more at ease has nothing to do with the electoral implications of the current crisis. Brown has never underestimated the capacity of England to vote Conservative given half a chance. He will not be working suddenly on the assumption that a fourth term is in the bag. As far as such calculations come into play, all the crisis has done for Brown is to shift the focus from those alarming polls. Stephen Carter, who was briefly at the centre of the storm in Downing Street before becoming a minister in the reshuffle, used to dread informing Brown of the latest findings. These surveys with their gloomy verdicts hovered over an increasingly dark Number 10 for months. inevitably the polls have come to matter a little less in the context of such a volcanic eruption. For a Prime Minister in the midst of an economic crisis worrying too much about polls is the equivalent of a hypochondriac being obsessed about a bad cold only to discover he has pneumonia. Brown is getting a break from one set of bad news because much bigger events command his attention.

In responding to them he is better prepared than most. That is why he is looking more comfortable. Virtually alone, Brown was never uncritically in awe of the marketplace.

The best example of this is a lecture he delivered to the Social Market Foundation in 2003 in which Brown argued that the government had a duty to intervene when there were "market failures". The lecture was a typical Brownite balancing act. Part of it was in praise of markets and critical of the centre left for failing to recognise their virtues when they worked effectively. But he also identified where government could make markets function more effectively. They included interveninig in areas such as skills and training, science and research, financial markets, environmental damage and in the provision of some public services.

The speech was delivered in the middle of a blazing row with Tony Blair over the reforms in the NHS so there is more focus on this policy area than any other, but it is worth noting his considered scepticism in relation to the purity of markets in delivering health care. Daring to defy media fashion and the political consensus at the time Brown stated the flaws in a market-based health system. They included the fact that price signals do not always work, the consumer in health is not always sovereign, there is a potential abuse of monopoly power, and that it is difficult to let a hospital go bust in the same way it is proving disastrous to allow a bank to go bust – just look at Lehman Brothers in the US.

Even in this section of the lecture Brown showed commitment to reform. He was never "anti-reform", a stupid term that implied there was only one set of available changes and anyone who objected was tamely for the status quo. Brown called for more payment by results, more managerial flexibility and choice for patients. But he was not dewy-eyed about a market-based system as some of his colleagues were.

I am not suggesting that Brown was heroically ahead of the game. He was a central figure in New Labour's accommodation with the City. in 1997, the informal deal was partially understandable for political reasons – Labour had been seen as fatally anti-business – and for the financing of necessary social objectives. The markets were allowed to spiral out of control on the assumption that their profits would fund increases in public spending. Like everyone gripped by the magic of the market place, Brown should have acted earlier. But at least he was thinking deeply and at some points publicly about the limits of markets. He was also calling for greater co-ordination at an international level, knowing that if Britain acted alone he would be slaughtered politically and would make no practical headway. You will search in vain for any similar perceptive scepticism in the collected works of Tony Blair, David Cameron, George Osborne or indeed of David Miliband, who might now have been in charge if the fantasies of Labour's plotters had been realised.

Brown therefore has a small but significant degree of ideological support as he makes his daily expedient moves. Others who have paid uncritical homage to the marketplace and who regarded the state as a hostile instrument are bound to be more thrown by what has happened. They are in the equivalent position now of Neil Kinnock in the 1980s. Kinnock did not have simply to reposition his party, but to question his own deeply held beliefs – politics at its most challenging and traumatic. I also suspect that Brown appreciates the political risks better than most, an appreciation that places him at one with Peter Mandelson as they attempt to leave behind their warfare and rediscover the common ground on which they travelled before 1994. Both of them acutely recognise the danger of Labour lapsing into an indiscriminately big state, anti-business stance. Brown stated at Prime Minister's Question Time last week a theme of private strategic discussions with Mandelson and Ed Balls in recent days: "Let me say, because I think it should be clear to the people of this country, that the dividing line here is not between business and being anti-business, or between market and being anti-market. The dividing line that we have is between rewarding hard work, effort and responsibility – rewarding enterprise – and rewarding excessive risk-taking or irresponsible risk-taking."

That will be Brown's characteristically cautious, big tent dividing line as he attempts to navigate his way around a crisis of uncertain outcome. Will he be rewarded for his efforts at the next election? Blaming prime ministers with a hostile rage is a more passionate pastime in Britain these days, as John Major and Tony Blair will testify, but let us wait and see what the landscape looks like once the apocalypse has passed.

s.richards@independent.co.uk