The day the music died

Tony Blair (left) and Gordon Brown. Photo / AP

Historians of the future will argue about the precise time of death of New Labour.

While it still breathed, this was an extraordinarily successful political construct, a project that delivered three successive election victories to a party that had previously been much better at losing than winning.

Its opponents became so transfixed by those successes that David Cameron tried to ape them by turning the Conservatives into New Tories.

Some will say that New Labour's heart stopped on May 5, 2005, when Prime Minister Tony Blair won a third term but lost a chunk of his majority and with it the authority to drive any more radical reform through his party.

Other political pathologists will contend that brain death occurred when Gordon Brown replaced him at Number 10 Downing St in June 2007.

Yet there's a case to be made that you could still feel a pulse then. Brown did not want to be seen as the death of New Labour when he entered Downing St. One reason he did not was because Cameron was at that time claiming to be the reincarnation of New Labour on the grounds that he was the true "heir to Blair".

A later moment of death would be October 2008 when the Great Crunch inflicted the coup de grace on all the economic assumptions that underpinned New Labour as a project.

Historians will find it easier to agree about the time and place when the coffin lid was nailed down. New Labour was finally interred by Alistair Darling in his Budget.

The most obviously symbolic respect in which the Budget marked the final full stop on the New Labour era was the new top rate of tax on higher earners. For three elections in a row, they pledged not to do that in the belief that it was politically suicidal to hike any of the rates of income tax.

It was always debatable whether it was sensible for New Labour to have so heavily defined itself by income tax rates. The pledge made huge political sense in order to reassure middle Britain before the 1997 election, but it was less obvious that it was wise from 2001 onwards.

The smart time to have asked for a bigger contribution to society from high earners was during the boom years, when there were lots of bankers, hedgies and bonuses to tax.

It is too late for Brown to go galloping after all those bolted horses. The disgraced banker Sir Fred Goodwin and his ilk are over the hills and away with their swag. The depleted ranks of the super-rich will be consulting their accountants or moving abroad to avoid the tax. In so much as it raises revenues, they will come from those who are wealthy without being quite rich enough to avoid it.

Brown was evidently hoping that Cameron would oppose the 50p rate so that the Tories could be painted as the buddies of the bankers and the pals of the privileged. As a political snare, this was too crude.

Hiking tax rates on the top earners is not a return to the politics of envy; this is the politics of sheer desperation.

Business Minister Peter Mandelson, the keeper of the New Labour flame within the Cabinet, did not try to argue against breaking their income tax pledge. He and other ministers didn't feel they could oppose it when they were simultaneously trying to persuade the Chancellor of the Exchequer to scrape together some money for initiatives to help businesses and the young unemployed. Superficially, the tax appears to be popular.

Yet the more electorally astute ministers feel queasy about the longer-term implications of breaking this pledge. Labour is back to where it was before Blair. It is again the party that jacks up income tax. One former Cabinet minister said the Budget risks "ditching more than a decade of work to make Labour the party of aspiration". He is anticipating what the Conservatives will say to those on middle incomes. "They came for the rich last time. Elect them again and Labour will squeeze you next."

That Tory argument will sound more plausible because of the shocking state of the national finances and the almost universal disbelief that the Budget has produced a credible flight path out of the mess. Many of the Treasury's own officials don't believe the Budget figures either.

The Government has been forced into this baleful position because of the collapse of the fundamental governing assumption of New Labour. That was the belief that sound management of the economy would avoid the wild swings from boom to bust of the Tory years and the financial calamities that swamped every previous Labour government.

For a decade, they seemed to have pulled it off. Continuous prosperity sustained them when the Government was unpopular for other reasons. Sustained growth spared them having to grapple with any really nasty choices about tax and spending.

The politics of the last decade have been about how to slice a growing cake.

The battles over spending are going to be brutal when the argument is about how deep to cut. The politics of the post-New Labour era will be about how to ration a shrinking cake.

Yes, a couple of New Labour's limbs are still twitching. One is spin: the smeary emails of Damian McBride are the latest manifestation of one of the least attractive attributes of New Labour. The other is sleaze.

The lowering scandal over parliamentary expenses is going to get more squalid. London should brace itself for a tidal wave of public disgust at the end of July when all MPs will be forced to reveal exactly what they have been claiming at the taxpayers' expense down to the last bath plug, pot plant and porn film.

What voters most liked about New Labour was moderate taxation and rising investment in public services. What they most loathed is the sleaze and spin.

Cameron's plans for the Tory party originally assumed that Brown was correct to claim that boom and bust had been abolished. The New Tory project was based on the belief that continuous growth would allow them to avoid hard choices about tax and spend. That is dead, too.

A Conservative government will have to implement an excruciating squeeze on spending and may struggle to avoid putting up taxes as well.

The more that the Tories assert that Labour is concealing just how dire things are, the more Cameron implies that he will have to cut even deeper than he is yet saying.

If the next government is Labour, it won't be a New Labour government.

In the rather more likely event that the next government is Conservative, it will not be New Tory.

Last week London saw no weddings and two funerals.

- OBSERVER