The Third Way may be good for Latham The Age - December 22, 2003 The ALP could learn a few lessons from the actions of Tony Blair's New Labour, writes David Hayward. Since winning the ALP leadership, Mark Latham has said a lot about opportunity and social progress based on merit, about responsibilities as a balance to rights, about hard work and the social recognition that comes from this, and about the importance of enterprise as well as fairness in a modern society. These are all key phrases that attach to the philosophy known as the Third Way, of which Latham is Australia's best-known proponent, having published several texts on the topic. But what is the Third Way and what can Australian Labor learn from it? The Third Way is the name given to the political program followed by Tony Blair and Bill Clinton. Interestingly, as a political philosophy it has not been very successful. Of the world leaders who most fervently advocated it in the late 1990s only Blair remains in office, while Gerhard Schroeder the German leader who once dabbled with his own version (the "New Centre"), has effectively renounced it. By giving it an academic underpinning as a response to modern trends, British sociologist Tony Giddens gave the Third Way some credibility for a while, but even in academia interest has petered out. The reason is not difficult to locate. It is that the Third Way never added up to a coherent philosophy. The principal characteristic of Blair's "New Labour" Government has been pragmatism: a willingness to use different methods of governance to achieve its aims. Some of these have been successful, others less so, but they have not all drawn on a single philosophical framework. Indeed, the familiar trope of "Blairism" has been the insistence that the polarities of old-style politics no longer apply. Governments can promote enterprise and fairness, they need not choose between them; people should have both rights and responsibilities; government should be tough on crime and on the social causes of crime. The Third Way is best thought of, in fact, not as a philosophy from which one might be able to read off what a government is espousing it will do next, but a post-hoc description of what such governments have done. Put simply, the Third Way is whatever the New Labour Government is doing at any one time. But in this light the experience of the Blair Government is highly instructive. First, New Labour has not been committed to neo-liberal-style balanced budgets. It has followed a classically Keynesian line, building up surpluses in economic boom times but then borrowing heavily when the economy is weaker. Under Blair's rules, borrowing for current expenditure must be paid back over the economic cycle, but borrowing for investment in infrastructure, schools and hospitals is not so limited and has been significantly increased. Second, New Labour has explicitly and openly increased taxes to pay for better public services - by as much as 2 per cent of national income. In 2002, most notably, Blair's Government raised social security contributions, a form of income tax, and earmarked the revenue specifically for the National Health Service, winning public approval in the process for boldness and the values that underpinned it. Whereas Labor governments in Australian states have been very cautious about increasing public spending, even implementing cuts, the Blair Government has injected huge additional sums into public services, including annual rises of 5-6 per cent for the health and education services for each of the past four years. These spending increases have been accompanied by vigorous programs to try to improve public service performance (not all of which have succeeded). Third, core British public services remain free at the point of use. The Blair Government has refused to countenance any patient payments for health care or expected parental contributions to state schools. It is true that Blair is now trying to introduce a new HECS-style system of university tuition fees - over which, incidentally, he now faces a potentially disastrous parliamentary revolt - but user payments have always been a feature of British higher education; it is the mechanism that the Government is proposing to change. Fourth, the Blair Government has been the most redistributive Labour administration since the Second World War. Major efforts have been made to reduce the poverty left by previous Tory administrations. Policies include the introduction of a minimum wage as well as in-work tax credits to support those in low-paid jobs, the raising (in some cases almost doubling) of social security benefit levels for families with children and for pensioners, the implementation of active welfare-to-work schemes that have reduced youth unemployment to almost zero, and the investment of large sums in community and urban renewal programs. Fifth, among other environmental policies, Blair has introduced an energy tax on business and a major investment program in energy efficiency and renewable energy. All this suggests that the impression of Blair as a neo-liberal is wide of the mark. His is a moderate social democratic government - operating in post- neo-liberal times, to be sure, but with a core commitment to left-of-centre principles. Blair's Government is pragmatic, but effective, not to mention enormously successful in political terms at least. Many in Britain would argue that in today's unequal and globalising world its moderateness has proved insufficient to change British society in any fundamental way. But it has, at least, halted the drift to greater inequality and loss of public goods, and it has been considerably more radical, certainly, than most of the Australian Labor state governments that now enjoy power across the country. Australia and Britain are different. No one would suggest that the ALP should model itself on the Blair Government, or that the Third Way offers a coherent political strategy. But it might repay Mark Latham and his colleagues to ignore the labels that are touted around, and instead have a close look at Blair's domestic policies. They might see how far some Australian orthodoxies about what ALP governments can and should do might be challenged, to Labor's electoral benefit. David Hayward is the director of the Institute for Social Research at Swinburne University.