What Blair told Blunkett, and why

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Eric Garcia

Washington Bureau Chief

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Anyone who doubts that the fracas over David Blunkett and the idea of VAT on public school fees did real damage to Labour should consider one of the unpublicised results that flowed from it. Gordon Brown was due to launch a New Year offensive on economicfairness, highlighting the party's commitment to a national minimum wage and the need to stop the state subsidising underpaying employers through the social security system; stepping up pressure on Kenneth Clarke to commit himself not to seek to reimpose VAT on fuel at 17.5 per cent; and building on its onslaught against top executive salaries.

In the event he felt forced to delay it because of the disarray in which the Shadow Cabinet appeared to find itself. To compound the problem Martin O'Neill, the energy spokesman, seemed to tilt the party towards a new-found welcome for nuclear power. Allthis coincided with a new campaign to secure support for a new Clause IV of the party constitution - a campaign interpreted by many as evidence that the leadership was beginning to be apprehensive that a victory could not be guaranteed.

For many in the Labour Party there is an attractive case for imposing VAT on public school fees. It would raise revenue, though if applied solely to private schools probably not more than between £100m and £200m. And it would no doubt encourage greater use of the state system by articulate and ambitious parents whose demands for higher standards would become more audible. But it is also easy to see why Mr Blair wanted to rule it out. First, it threatened to cast a shadow over Labour's determin

a tion to succeed where the party failed in the run-up to the 1992 election and to present itself as the party of the aspirational and upwardly mobile as well as of the dispossessed. Second, there were genuine practical problems about its implementation.

A nd if Labour was both to raise some real money - around £600m - and avoid the charge that it was simply, for narrow ideological reasons, hell bent on damaging independent schools, then it might have to impose the tax on adult education and university fee s as well, with potentially disastrous consequences.

But over all this loomed a more immediate, and perhaps more important, reason of practical politics. The fight against the imposition of 17.5 per cent VAT on fuel had been a conspicuous success for Labour's Treasury team under Mr Brown - culminating in the most signal parliamentary success for Labour in 15 years of opposition. The raising of the tax was hugely unpopular, but Mr Brown had managed to turn the issue of VAT into one of the dividing lines of a new party politics in which many of the old ones- for example between private and public ownership - had disappeared or been blurred. By identifying as a prime target the switch from direct to indirect taxation since 1979, Mr Brown had made headway in persuading voters that the Tories were not quite the low-tax party they had presented themselves as. But if Labour was prepared to cherry-pick new indirect taxes when it suited them, that could undermine its argument. If VAT on school fees was OK, the Tories might argue, what else might Labour have in its locker?

Mr Blunkett can make a respectable case that he was doing nothing outrageous in merely suggesting that the possibility of VAT on fees was being examined. He never, so his colleagues say, submitted the idea for internal discussion within the party, or mentioned it to Mr Brown. But even Mr Blair himself had failed to rule out the idea during the leadership campaign. What seems to have heightened the tensions among the Labour front bench was the manner in which he detached himself in the second of his two BBC interviews on Sunday. Instead, his critics argue, of simply saying that he made a mistake, he not only made explicit the intervention of the party leader - who had indeed telephoned him on Sunday morning - but also suggested that Mr Brown had been behind his recantation as well. As it happened, Mr Brown did not speak to Mr Blunkett. To the outside world this means little; but to readers of publications like Tribune, not to mention Mr Blunkett's potential supporters in future NEC elections, it is a signal that radical Mr Blunkett has been leant on by cautious Mr Brown.

The darkest interpretation of Mr Blunkett's behaviour is that, having had to defend the Labour leader's decision to send his son to a grant maintained school, the party's education spokesman was seeking to re-establish his credentials on the left. And the shock waves caused by Mr Blair's choice of the Oratory school among a party activists should not be overlooked. To a historian of Labour when it was in power, this may seem faintly ridiculous. Harold Wilson did not regard the fact that Roy Jenkins had sent to his son to a public school as disqualifying him from the job of Education Secretary. And the Oratory, it is sometimes forgotten in the present debate, is a state comprehensive school. Mr Blair may gauge correctly that among the larger electorate his decision will be applauded more frequently than it will be condemned. But senior colleagues of Mr Blair acknowledge in private that it has posed a problem - it came just when Mr Blair most needed the activists on his side to secure the backing of every section of the party for a new Clause IV. And it is making the task of achieving that more of an uphill struggle than it seemed when Mr Blair first announced his sensational intention to get rid of the old one. Now, the ripples of anger are spreading worryingly, unpredictably, through draughty Labour committee rooms up and down the country.

None of that alters the fact that by stirring the education pot as he did during the New Year news vacuum, Mr Blunkett has made life a little more difficult not only for his leader but also for his party. There is, as Shadow Cabinet members have since been falling over themselves to explain, a clear mechanism for formulating policy. There are policy commissions which submit proposals to the worthy, if unwieldy, national policy forums. This year three papers - on crime, health, and the economy - will wend their way back from those forums to the joint Policy Committee which will draw up the final documents for the party conference.

Against that background it is always possible to float publicly a policy proposal, as Mr Blair himself did on the closed shop before the last election. But it needs to be done as part of a careful strategy - something Mr Blunkett would probably admit it was not on Sunday. Belatedly perhaps, certainly not terminally, but unmistakably, New Labour is suffering some real birth pains.