A year that has defined the Labour government and ourselves

LOOKING BACK over the year, Peter Mandelson's period in office shed as much light on the nature of this government as did his sudden leaving of it. In just 150 days in the Cabinet, he symbolised the emergence of New Labour from the dark into the light. When a whisperer-in-ears becomes Secretary of State for Trade and Industry, he has to make real decisions. Mr Mandelson defined himself, and the Government of which he was briefly a member, as pragmatic, pro-European and with his liberal heart in the right place.

He faced, for example, an important test of the Government's commitment to a competitive free market when he had to make a highly technical decision about the future of the Post Office. He fudged it. He was not interested in producing the best economic solution, but in balancing the political forces: so we were treated to a rhetorical mixture of public service and the free market. New Labour is not, then, really dedicated to competition - but neither, of course, were the Conservatives, transferring monopolies lock, stock and pork-barrel to the private sector.

The Independent feels strongly about competition, not simply because this newspaper was launched to give readers choice or because we have felt the rough edges of Rupert Murdoch's monopolistic tendencies. We believe that one of the reasons for Britain's relative economic under- performance is its unenterprising culture and the feebleness of governments in dealing with the anti-competitive instincts of large corporations. The machinery of trust-busting is far, far too slow in this country.

However, we do not want to give the impression - which can easily arise from the instant commentary of day-to-day journalism - that this Government is a miserable failure. Tony Blair has done much of which we approve, starting in Northern Ireland, and across a broad front in beginning to reverse the social division of the Thatcher years. The minimum wage, set at a level that will not destroy jobs, the raising of child benefit, the attention to finding work for the unemployed and lone parents, and the focus on the causes of social exclusion are all welcome.

Above all, in its stewardship of the wider economy, the Government has not yet made any obvious mistakes, which must be counted as an achievement of some magnitude - and a historic one for the Labour Party. It was right to make the Bank of England independent, although there is a problem with the asymmetry of the Bank's inflation target, which gives the monetary policy committee an incentive to keep interest rates too high. And, in practice, although we have quarrelled with the speed of its response to evidence of the economy slowing down, the committee seems sensitive to the dangers. The Government's real error has been a political one - that of promising to "end the cycle of boom and bust", which is bound to feed a sense of betrayal when the business cycle reasserts itself. Above and beyond this lies the question of how soon the British cycle will converge with continental Europe's, and how soon Britain will join the euro.

Europe

ONE OF the most important of the Government's positive achievements is to mark a turning point in the history of our erratic relations with our neighbours. Mr Blair, to his great credit, has begun a long zig towards Europe after the unsteady zag that was taken in the opposite direction during the late Major years.

Mr Mandelson was important, not just as an exemplar of New Labour's hollow morality, but as a pro-European who said some suggestive things which ought to be included in any instant anthology of quotations. In January, he said: "Europe can be a superpower without being a superstate." Well, can it? Agree with it or not - and, broadly, we do agree - it was a provocative statement that asked the fundamental questions about the purpose of the European Union which ought to be asked at this point, six days away from the formal launch of the euro. We want the EU to be neither a superstate nor a superpower in the Cold-War sense, but we want it to have influence in the world, to be a force for democracy, and the rule of law independently of the United States. For that reason, Mr Blair's plans for greater defence co-operation are as welcome as his closeness to the US over Iraq is suspect. An EU defence force would not be a "European army" any more than Nato forces are a "North Atlantic army"; in that respect, the Eurosceptic spectre of the federal superstate cannot be invoked.

For most of this century, a currency has been as potent a symbol of nationhood as an army, but the world is changing. From next Friday, we will experience an intensification of the forces that render the idea of national monetary sovereignty either illusory or counter-productive. We will be a middle- sized economy on the edge of a huge single-currency zone that is bigger than the US. We are already following interest rate changes across the euro zone within days. We have to come to terms with a new idea of national sovereignty. If the constitution of the European Central Bank worries us - and it should, because it is secretive and undemocratic - we are only going to be able to change it from the inside. It is true that, in a large, unified market, there will be a constant gravitational pull towards political union - but that should be a good thing, provided that it always proceeds at the speed of the most reluctant member of the convoy.

It is the very endlessness of pro-European rhetoric - the "ever-closer union" of the treaties - that is a problem, because any sceptic horror can be placed convincingly somewhere down the track. That is why the urgent business of the EU is to entrench the notion of consent, so that citizens have a real say in what matters to them and the language of "imposition from Brussels" is expunged. Radical notions, such as directly-elected EU commissioners, are needed, especially as the Union grows. But we have to embrace the future in a more confident frame of mind. The economic changes of the information age will transform - are already transforming - the significance of the nation state. Britain should be leading the charge, if for no other reason than that, alone among Europeans, we do not have to park our language in a museum of national heritage in order to speak to the future.

At least, after years of dithering, of accepting large steps towards European integration on the basis that they were technical free-market measures and then bitterly regretting them afterwards, we now have a Prime Minister who - it became clear during this year - is prepared to act on the understanding that Britain's future lies in Europe.

Our democracy

IF THE renewal of democracy in the EU has yet to begin, Mr Blair made useful progress this year in reforming Britain's own dated constitution. His coup in forcing the Tory hereditary peers to roll over was a triumph of instinctive politics, knowing where to apply pressure and keep it applied. It was an important step, but a limited one - it is a strange reform of the hereditary principle that leaves an unmodernised monarchy. What is more, Roy Jenkins' report on electoral reform, less than two months after publication, seems to be gathering the very dust its author vowed would not be allowed to settle.

Our criticism of Paddy Ashdown has been that he has failed to promote liberal values aggressively, which is the only argument for plural politics worth having. Instead of playing footsie with Mr Blair in the hope of delivering an electoral system to the Liberal Democrats' advantage, he should have been voting against the illiberal Terrorism and Conspiracy Act passed in a dangerous parliamentary spasm after the Omagh bombing.

Mr Blair is devolving power to Scotland, Wales, Northern Ireland and London, and yet he is an unconvincing pluralist. But when we accuse him of being a control freak, it is only an expression of our sympathetic concern for his self-interest. It does him no good to be trying to fix internal party elections or, worse, to impose a system of elections for the European parliament which will tend to strengthen party machines. And what possible purpose was served by preventing Labour MPs registering their protest against the bombing of Iraq?

Rule of international law

IF THE bombing of Iraq was the right thing to do, as we reluctantly accept it was, then it would not weaken Mr Blair's authority to allow Tony Benn - who conspicuously failed to offer any alternative means of restraining Saddam Hussein's murderous intentions - to vote against it. The US/British attack on Iraq has been an imperfect instrument of justice, but 1998 has never the less been a hopeful year in the development of international law against tyrants and war criminals.

The Nuremberg doctrine - that some crimes are so terrible that countries have the right to intrude on the sovereignty of others in order to bring perpetrators to justice - has been advanced significantly. The ad hoc courts set up at The Hague to try Bosnian war criminals could now be universalised in the form of the International Criminal Court, set up this year despite US opposition. If President Clinton had backed the court, his moral authority in Iraq would have been the greater.

The passivity and bluster of European leaders over Kosovo, the Serbian province still being "cleansed" of ethnic Albanians, has been one step back. But one step forward was taken by a heroic Spanish magistrate when he applied for General Pinochet's extradition. Like Woody Allen's Zelig, Mr Mandelson was there, too, opining that General Pinochet was a "brutal dictator" and that the idea of diplomatic immunity for him was "gut-wrenching". He was tactically unwise to show his feelings - but they were not the wrong feelings to have. More seriously, Lord Hoffmann was truly daft to overlook his connections with Amnesty International - but Amnesty's arguments were right, and it is to be hoped that they will prevail when the five new Law Lords come to deliver their verdicts next month. Anything which strengthens supra-national jurisdiction over crimes against humanity is right, even if its main effective sanction is only to exile retired dictators from Harrods.

Quality of life

THIS WAS also the year in which the Government first published an index of the "quality of life" in this country. Anything that focuses on measures of national well-being, other than that of Gross Domestic Product, must be a good thing. But the Government has hardly begun to take those real "tough choices needed to secure our environment in trust for tomorrow", as Labour ringingly declared before the election.

Never the less, our impression of the past year is that the quality of life for most people in Britain might have, on balance, improved a little. To be sure, our lives are blighted unnecessarily by Chris Evans and the National Lottery. But, as a people, we are a little healthier, and the Government shows some sign of taking better schooling seriously - although it is far too prescriptive for the youngest children. We take a livelier than ever interest in the arts and the Internet: far from killing the book, has given it a new lease of life.

Nor has a better quality of life for the majority blinded us to our responsibilities to others. One of the best surprises of the year was the extraordinarily generous response from our readers to the appeal for the victims of the flooding caused by Hurricane Mitch in Honduras and Nicaragua. We have also been concerned about deprivation at home: we reported Sir Donald Acheson's findings of the persistent links between economic inequality and ill-health, and our Christmas appeal focused on the needs of one group in poverty in particular, namely the less fortunate among the old. As we promised in our first edition: "Our campaigning will emerge from our reporting rather than the other way round."

We hope to look back on 1998 as the year in which The Independent, having secured its financial future, regained the confidence of its founding spirit. This newspaper was created, above all, to serve its readers with "journalism of the highest standard", and we promised: "We will both praise and criticise without reference to the party line." We hope that that was as true over the past year as it was when the paper launched in 1986.

We also said something else to our readers in that first issue: "Your relationship with us will finally determine what sort of newspaper we are." Although we believe our values are still essentially the same, The Independent looks and feels very different from Issue No 1, largely in response to what you want us to be. We depend on an active, opinionated and independent readership to survive, and look forward to your support, brickbats and involvement in the year to come.