Alan Watkins: History is catching up with you, Mr Brown

Pay restraint and the semi-nationalisation of Northern Rock? New Labour is haunted by the demons of its least favourite decade

Most unfairly, Nigel Lawson possessed a certain fly-by-night quality as Chancellor. He was associated with some of the worst excesses of the Thatcher revolution – just as the present Prime Minister may come to be linked, if he is not already, with the more disagreeable aspects of the Blair years.

But Lord Lawson regarded himself as one of the leading apostles of fiscal conservatism. He looked back with admiration to the days of W E Gladstone. One of his beliefs was that building societies were building societies, and banks were banks. They were engaged in superficially similar, but in reality, different lines of business, and never the twain should meet. That was Lord Lawson's point of view.

It did not make the slightest bit of difference. Couples kept coming together like blushing brides and ardent grooms at a Moonies wedding. Predatory investors maintained a perpetual lookout for the next windfall. Through no merit of my own I was presented with what was, to me, a large sum of money through being both an investor in and a borrower from the old Abbey National building society. Among the many solutions that have been canvassed for the problem of Northern Rock is that it should be turned back into a building society, which it was in the first place.

There are few takers for the idea that this institution should be mutualised. It is, or was, out of kilter with the spirit of the age. Even nationalisation is slightly more popular. It may, however, be better liked than the main parties are prepared to admit. This week Mr Gordon Brown may prefer semi-nationalisation as the least unattractive idea on display.

Mr Brown's year of trial began in October 2007 and is still going on. Its first few months corresponded to the temporary assumption of the leadership of the Liberal Democrats by Dr Vince Cable. All of a sudden, MPs began to listen to what he was saying. He managed some quite good jokes at Mr Brown's expense. The Labour members laughed behind their hands, while the Conservatives were more open about it.

And Dr Cable knew what he was talking about: in this case Northern Rock, and the desirability – the necessity – of nationalising it. On Newsnight the other evening, Mr Jeremy Paxman prefaced his questions to Dr Cable by saying that the respondent did indeed know what he was talking about. This must be a unique tribute in the annals of the programme concerned or, for that matter, of Mr Paxman.

Dr Cable was acting as a surrogate for the backbenchers and to some extent for the inhabitants of the front benches as well. He was assuming responsibility for questions which the representatives of the big parties preferred not to ask for themselves. The Conservatives are clearly embarrassed. Mr David Cameron prefers to speak in abusive generalities about incompetence.

It was Mr Brown who gave us a new phrase, "an incompetence". This related to the circumstances in which Mr Peter Hain was late in declaring donations to his deputy leadership campaign. It was intended as a word of comfort in Mr Hain's ear and as a sign of confidence in his minister – or, at any rate, I hope so.

But to return to the Conservatives and Northern Rock: Mr George Osborne, the hero of inheritance tax, who really did change the political weather with his speech at the Tory conference, is nowhere to be seen. A second-rank spokesman is put up instead, not so much to defend the indefensible, as to refrain from attempting a defence or, an attack of any kind.

But the Labour Party is more embarrassed by far. The party is terrified of walking back into the 1970s. Or of appearing to do so. Even comparatively sane economic commentators, not attached to this party or to any of them, emerged from their studies to pronounce a curse on nationalisation. The very word is like a knell.

The phrase "public ownership" is little better. "Public-private partnership" is an improvement. It marks a change, not cosmetic entirely, but substantive as well. For while the public took the risk, the private element took the profits. There was an illustration of this in the now aborted scheme for the improvement of London Underground. Mr Brown, as Chancellor, insisted on this arrangement as a matter of New Labour dogma. Talk about Socialist dogma! New Labour dogmatists are much fiercer and more intense in their preoccupations.

Mr Brown, assisted by Mr Alistair Darling, tried much the same wheeze with Northern Rock. Sir Richard Branson and other potential saviours were initiallly having none of it. Instead, the taxpayer and the entrepreneur are likely go half-and-half.

The 1970s have had a bad press. They had a bad press even when they were going on. It is not for me to sit in judgement on decades. It is merely that all kinds of subjects are revisiting Mr Brown. The 1960s had a better press, but many of the political preoccupations are the same. The entire political class was obsessed by the position of sterling as a reserve currency and, most of all, by the balance of payments. When did you last hear a speech on the balance of payments?

In the next decade, the system of fixed exchange rates collapsed, the price of oil trebled (or, in some accounts, quadrupled) and we had to go to the International Monetary Fund for a loan. The accompanying theme was the need for an incomes policy. This was tied to the "defeat of inflation", though sporadic attempts were made to justify it on grounds of equality or social justice.

Incomes policies came and went under Harold Wilson, Edward Heath and James Callaghan, sometimes enforced by law, and other times by different means. The only prime minister who did not have an incomes policy was Heath in his first years, though that did not prevent him from introducing the most stringent laws later on. Wilson tried a "solemn and binding" agreement, which proved ineffective. Callaghan brought about the unrest of 1978-1979 by trying to enforce a limit of 5 per cent, which was considered to be unduly strict.

Mr Brown would describe such a concession today as one of profligacy. He would not have allowed a union leader to get away for a moment with such a demand. Now, as then – indeed, for most of the previous period – the justification for wage limitation was to "defeat inflation".

In former periods, however, there was a certain rough-and-ready equality between the private and the public sectors. No minister that I have recently heard advances the view that they simply do not have the money because the Government does not have the cash. An incomes policy, turbulence on the foreign exchanges, nationalisation, or part-nationalisation (however reluctant, whether justified or not): all belong to that darkest of dark ages, the day before yesterday.

Mr Brown does not want to return to the era before Mr Blair. He wants to be seen, rather, as one of the architects and inheritors of the Blair age. The year 2008 may yet cast a shadow over an earlier period of national life.