Brown warns of strife over new economic policy

LABOUR faces controversy, hugely difficult political choices and a battle of principles over its implementation of the party's new economic approach, Gordon Brown, the shadow Chancellor, warned yesterday.

In a London speech, he said: 'The old battle of ideology between state power and free market forces is dead. To pursue a doctrine of state power or market forces is counter-productive.

'Second, in the debate between monetarism and Keynesian demand management, we know enough to eschew the notion that inflation can simply be ignored or the idea that the level of demand is not a concern of government . . . Let us be clear - low inflation is a necessary economic objective and demand management is a necessary economic instrument.'

Mr Brown then echoed the words of the 1944 Employment Policy White Paper, which defined full employment as 'a high and stable level of employment', saying: 'Labour demand management policies have rightly sought to maintain a high and stable level of demand compatible with the economy's capacity to produce. But the real challenge now is to increase the capacity of the economy for high levels of sustainable growth.'

Turning to the delicate balance between tax and spending policies, he said: 'The tax-spending issue should not start from a prior disposition in favour of either. We do not tax for its own sake. We do not spend for its own sake. We are not against wealth. We are against poverty and the unfair waste of individual potential.

'We tax and spend for a purpose justifiable if it increases the opportunities of individual people in our community and so augments national wealth. If we can cut tax when it is prudent to do so, or cut spending programmes where there is waste, we will. But we also recognise that if we do not invest in our country and its people and raise money so that we can invest in them, then we will all collectively and individually be less prosperous.

'These are the traditional issues, immensely important of course, and involving critical judgements and controversy. They will involve hugely difficult political choices and underlying these choices will be a battle of principles. But they must not obscure the new agenda of the future.'

That was dominated by what he called the economics of individual potential. Mr Brown said: 'Any efficient economy must find means of ensuring employment, career and training opportunities for all. This goes far in advance of the traditional definition of full employment. Our long-run aim is that there should be work that maximises fulfilment for the individual and the benefit to the community. . . I believe every person should have the offer of work or high-quality retraining after being unemployed for a year, with the aim to abolish long-term unemployment. I believe every person leaving school without a job should have the opportunity to work, or the highest possible quality of education and training, with the aim to abolish youth unemployment. In the long term, it must be our aim that the concept of redundancy itself should be replaced by the sure prospect of reskilling for new work.'

Mr Brown said he wanted the party to move away from traditional capitalism, replacing the emphasis on capital with an emphasis on people - an enhancement of labour.

'Far from Labour changing its name to become modern, Labour is modern and becomes modern precisely because our emphasis on enhancing labour makes us even more relevant to the competitive conditions of the new century.'