Labour can win, or it can make history

And the Devil came unto Tony and he said: "They've had it, Tone, these Tories are comprehensively and utterly gubbed. You'll be in Downing Street within a couple of years. And by the way, the haircut's great.'' And the Labour leader looked a trifl e suspiciously at this swaying, jovial intruder in his office, and he asked: "What do you want me to do?'' And the Horned One replied: "Nothing, pal. Just sit back and enjoy it.''

For if the Labour leadership makes fatal errors of strategy, they will make them this winter. Their position looks so ridiculously strong that it must be difficult for them to confront hard thoughts, to keep moving the game on.

Recently, I asked a shrewd but junior member of the Labour team how he was feeling about the party's position. "Of course, I know what I ought to say. I ought to tell you that we're not complacent, that there's still a hell of a struggle ahead. But actually, I feel deeply and gloriously complacent. I don't see how we can lose.''

Talking to other Labour people, one detects an inner nonchalance even among those who think it proper to wear the mask of decent doubt. Blair does not seem to have been infected, but too many others are relaxing, assuming that it's all over bar the counting.

This is but human. In small ways, the trappings of authority are already migrating from the government benches to Blair and his people. Biographies and television series are being prepared; advisers find themselves profiled and lionised; banks and finance houses request Labour speakers for seminars; grand companies announce that they are no longer funding the Conservative Party. True, various small-time nasties are trying a bit of media Blair-bashing. But even this lacks conviction. It is as i f the result of the next election has been quietly leaked to the Establishment.

And for what it's worth, I, too, think Labour will win. But if Labour stops taking chances over the next year, then it will be throwing away its great chance - the chance of becoming a historic reforming administration. Or, to put it shortly, of mattering.

Not everything that has happened to the Conservatives is the fault of incompetent or disloyal individuals. The systemic failure of Westminster, the rise of the bond markets, the conflicts of interest thrown up by modernising the Civil Service, the new powers of judges, the jeeringly anti-politician mood of the press, the creeping awareness through the country that ministers are not nearly as powerful as they pretend to be ... none of that is going magically to evaporate with the arrival of a Blair admin istration. Jobs won't dangle from trees. The world trade machine won't suspend its judgements about Britain.

For, as Paddy Ashdown said last night in the Hugh Gaitskell memorial lecture, "What we are looking at is not just the failure of a government, but the failure of a political system. ... Unless an incoming post-Conservative government changes not only itspolicies but also its way of doing things, then the long, slow half-century of decline in Britain will not be halted.''

His argument goes like this. In the old days, the rulers had a deal with the ruled. They offered more prosperity, jobs and so on; when they failed they were kicked out; otherwise, they were left alone. But the migration of real economic power away from the nation state means that the deal is breaking down.

"The change is fundamental and requires a change in our politics. ... If the contract, `give us the power and we'll make sure you get the goodies', is deliverable, then the people can be kept out of decisions, governments can be respected, politics can be a noble calling and paternalism will work,'' Ashdown said.

"But if the task is to make tough decisions while trying to adjust expectations, then you had better involve the governed in those decisions, or they will not understand why they have to be taken, they will not accept the outcome, and they will probably wreck the system in the process.''

This is, by now, predictable from this source: the Liberal Democrat leader has made himself the apostle of political reform, the restless critic of centralism and British parliamentary traditionalism. But it is also, I'm afraid, common sense, and controversial only in Gormenghast-on-Thames. Its truth is one Labour needs to chew on.

In practical terms, this means a more coherent, detailed and confidently expressed attitude to devolving power than Labour has so far managed. It means being serious about making a bill of rights work, and reforming Westminster. It means being pugnaciousabout Scottish democracy.

But it raises a harder question still: Labour needs to consider more formally how to deal with the Liberal Democrats themselves. There is a striking symmetry between the situation now and that in the early years of this century, when the Liberal Party was preparing for the 1906 election which swept the Conservatives away.

Then, as now, the main opposition party was in the hands of reformers, though they called themselves New Liberals, not New Labour. Then, as now, there was a smaller opposition party, the Labour Representation Committee, which was able to win by-electionsand had the capacity for damaging the larger party by putting up candidates across the country. Then, as now, the main hostility to an anti-Tory deal came from local Liberal parties in the north of England and Scotland.

Then, though, the larger Liberal Party approached Labour and did a secret deal that allowed Labour candidates a free run in some seats, with Liberal support, while Labour kept out of others. The result was an anti-Conservative landslide that has haunted Tories ever since.

Is a deal, however informal, possible between today's two opposition parties? It would be surprising if Ashdown didn't try to use 1995 to openly acknowledge the truth that the Liberal Democrats, as a party of reformers, cannot contemplate supporting another Tory government. As Labour becomes keener on reforming the political system, the remaining gap between the two parties narrows all the time - though voting reform still divides Blair and Ashdown and would be the biggest stumbling block to a deal. Yetsuch a political handshake would signal something genuinely fresh in our politics; it would send a tingle of excitement through the system.

It is a hard thing for Labour to bother about just now: I can see the faintly contemptuous smiles at the very idea spreading across a lot of Shadow Cabinet faces. Things are going so well, aren't they?

No, Horned One, they are not. They look good for Labour because the voters have become coldly angry about the political establishment and its ability to deliver. In that broader sense, things are not going well at all. And if they want to make a difference, the opposition leaders need to do more than stare at the opinion polls and hug themselves. If you want to start an earthquake, you have to be ready to jump.