💼
THE ERA OF NEW LABOUR: 1997-
2007
DOMESTIC POLICIES
IDEOLOGY:
💡 The ‘Third Way’ is in favor of growth, entrepreneurship, enterprise and wealth
creation but it is also in favor of greater social justice and the involvement of the
state
LABOUR’S 1997 ELECTION PLEDGE CARD
THE ERA OF NEW LABOUR: 1997-2007 1
, 🗒️ Pledges:
cut class sizes to 30 or under for 5, 6, and 7 year-olds by using money from the
assisted places scheme
fast-track punishment for persistent young offenders by halving the time from
arrest to sentencing
cut NHS waiting lists by treating an extra 100,000 patients as a first step by
releasing £100 million saved from NHS red tape.
get 250,000 under-25 year-olds off benefit and into work by using money from
windfall levy on the privatised utilities
no rise in income tax rates, cut VAT on heating to 5% and keeping inflation and
interest rates as low as possible
the pledge card was clear, easy to understand and designed to attract a range of
potential voters.
✅ The key objectives for Labour’s first term were all achieved by 2001
CONSTITUTIONAL CHANGE
🏴 The Labour Party Manifesto in 1997 promised new referendums on devolution.
Devolution referendums were held in Sep 1997. The Scottish people voted in favour
of devolving power to a Scottish parliament and also in favour of this parliament
having the power to raise taxes.
This led to the establishment of a new Scottish assembly in Edinburgh based on a
system of proportional representation. Similarly, the referendum in Wales agreed to
the setting up of a Welsh Assembly in Cardiff, although with more limited powers.
🗳️ London: Introducing the office of an elected mayor of London proved to be a
successful change. However, in the first election in 2000, Blair blocked Ken
Livingstone from being the Labour candidate, fearing that Livingstone would harm
the image of ‘New Labour’.
Livingstone subsequently ran as an independent candidate and won the election,
and Blair was forced to accept him back into the party.
THE ERA OF NEW LABOUR: 1997-2007 2
, 👑 House of Lords Act 1999: The House of Lords Act reduced hereditary peers to 92.
However, this was seen as unsatisfactory by almost everyone.
REFORMS TO PARLIAMENT
📮 Pre-election discussions had been held with the Liberal Democrats about possible
reforms to the electoral system. A commission led by Roy Jenkins was set up to
examine alternative voting systems. It recommended that the first-past-the-post
system be replaced with a more proportional system, but no such changes were
made.
CITIZENS’ RIGHTS
🖥️ A Freedom of Information Act was passed in 2000. This gave people the right to
request information from public bodies. By 2006, over 100,000 requests had been
made annually. Blair later described this as a mistake as he had not realised that its
existence would prevent politicians from making difficult decisions because they
feared their actions would become public knowledge.
📜 The European Convention on Human Rights (ECHR) was incorporated into British
law through the Human Rights Act 1998. However, judges' interpretations
sometimes create unexpected difficulties for the government.
RURAL ISSUES
THE ERA OF NEW LABOUR: 1997-2007 3
, 🚜 New Labour was accused of failing to understand rural issues: in 2000, rising fuel
prices led to blockades by farmers and lorry drivers; there was dismay over the cull
of 10 million animals during the foot and mouth outbreak in 2001; and anger over the
ban on hunting with dogs, which was assed in 2004.
The Countryside Alliance organised a march against the hunting ban, which
attracted half a million protestors in 2002.
ECONOMIC POLICY:
👔 Brown’s initial priorities:
keep inflation low
keep government spending under control
breaking the image of ‘tax-and-spend’ party
BANK OF ENGLAND
🏦 Under Brown’s Chancellorship, the Bank of England gained independence and was
responsible for setting the interest rates. At the same time, he also changed the
inflation measure from the Retail Price Index to the Consumer Price Index and
transferred responsibility for banking supervision to the FSA (Financial Services
Authority) - thus divorcing it from political interference.
Some have argued that the divisions of responsibilities exacerbated the 2007 global
banking crisis.
TAXATION/BORROWING
💷 In the 1997 election and subsequently, Brown pledged to not increase the basic or
higher rates of income taxes.
During his chancellorship, he reduced the basic rate from 23% to 20%, this helped
to reassure the electorate as well as businessmen and financiers.
THE ERA OF NEW LABOUR: 1997-2007 4
, 🏧 In order to avoid raising taxes, Labour, continued to use private sources of funding
for improvements to public services. There was criticism of funding projects
through the Private Finance Initiative (PFI) - buildings were completed quickly but
debts were stored up for the future.
💸 Instead, the Labour Party made financial adjustments, which were not technically
classified as taxation, but were so in practice:
Raising NI contributions
Removing marriage tax allowances for couples aged under 65
Removing tax relief on mortgage payments
Reducing the level of tax-free savings that could be made each year under
schemes such as TESSAs.
🏧 The increased government expenditure on the public sector, could not be entirely
met from taxation revenues. Brown resorted to borrowing from foreign banks, which
did not make headline news as New Labour came to power during a period of
relative stability and growth in the international economy. This arguably worsened
Britain’s economic state by 2007.
💳 Government borrowing encouraged a consumer credit boom, and house buying and
retail sales increased markedly during this time.
‘GOLDEN BROWN’
🪙 Between 1999 and 2002, as the price of gold fell on the international markets, the
British government sold off 13 million ounces of gold, nearly half of it’s reserves.
In contrast, China, which bought up nearly 7 million ounces benefitted from the
subsequent recovery of gold prices by 2005, whereas Britain lost some £3 billion.
PENSIONS
THE ERA OF NEW LABOUR: 1997-2007 5
, 🏦 In order to build up reserves for future expenditure, Brown began to tax pension
savings. This was done through taxing the dividends companies paid to their
investors, which reduced the value of pensions.
By 2007 the amount lost was over £8 billion. This led to a reduction in savings, with
the savings ratio decreasing from 9.7% to 3.7%.
📉 Additionally, as share prices are dependent on dividend values, the cutting of
dividend payments meant that total UK share values were some £120 billion lower
than they would have been without government intervention.
SUPPLY-SIDE POLICIES
💸 ‘Prudence with a purpose’: After the 2001 election, the economic policy became
less cautious and increasingly radical with a massive injective of money into public
services (new schools, hospitals, and pay rises). Critics argued that public spending
and government borrowing were too high.
🤑 By 2007, inflation was under control, house prices increased, record levels of
employment, improving living standards, and consumerism.
However, due to increased government spending, inflation reached 4.8% by 2007.
EMPLOYMENT:
🧑🏻💼 During Blair’s time in office, the number of people employed rose to 29.1 million, a
2.5 million increase from 1997.
🏗️ However, the growth in jobs did not benefit the unskilled and the young - In 2007,
there were 5.4 million people of working age, many of whom between 16 and 30,
who were living on unemployment benefits.
THE ERA OF NEW LABOUR: 1997-2007 6
THE ERA OF NEW LABOUR: 1997-
2007
DOMESTIC POLICIES
IDEOLOGY:
💡 The ‘Third Way’ is in favor of growth, entrepreneurship, enterprise and wealth
creation but it is also in favor of greater social justice and the involvement of the
state
LABOUR’S 1997 ELECTION PLEDGE CARD
THE ERA OF NEW LABOUR: 1997-2007 1
, 🗒️ Pledges:
cut class sizes to 30 or under for 5, 6, and 7 year-olds by using money from the
assisted places scheme
fast-track punishment for persistent young offenders by halving the time from
arrest to sentencing
cut NHS waiting lists by treating an extra 100,000 patients as a first step by
releasing £100 million saved from NHS red tape.
get 250,000 under-25 year-olds off benefit and into work by using money from
windfall levy on the privatised utilities
no rise in income tax rates, cut VAT on heating to 5% and keeping inflation and
interest rates as low as possible
the pledge card was clear, easy to understand and designed to attract a range of
potential voters.
✅ The key objectives for Labour’s first term were all achieved by 2001
CONSTITUTIONAL CHANGE
🏴 The Labour Party Manifesto in 1997 promised new referendums on devolution.
Devolution referendums were held in Sep 1997. The Scottish people voted in favour
of devolving power to a Scottish parliament and also in favour of this parliament
having the power to raise taxes.
This led to the establishment of a new Scottish assembly in Edinburgh based on a
system of proportional representation. Similarly, the referendum in Wales agreed to
the setting up of a Welsh Assembly in Cardiff, although with more limited powers.
🗳️ London: Introducing the office of an elected mayor of London proved to be a
successful change. However, in the first election in 2000, Blair blocked Ken
Livingstone from being the Labour candidate, fearing that Livingstone would harm
the image of ‘New Labour’.
Livingstone subsequently ran as an independent candidate and won the election,
and Blair was forced to accept him back into the party.
THE ERA OF NEW LABOUR: 1997-2007 2
, 👑 House of Lords Act 1999: The House of Lords Act reduced hereditary peers to 92.
However, this was seen as unsatisfactory by almost everyone.
REFORMS TO PARLIAMENT
📮 Pre-election discussions had been held with the Liberal Democrats about possible
reforms to the electoral system. A commission led by Roy Jenkins was set up to
examine alternative voting systems. It recommended that the first-past-the-post
system be replaced with a more proportional system, but no such changes were
made.
CITIZENS’ RIGHTS
🖥️ A Freedom of Information Act was passed in 2000. This gave people the right to
request information from public bodies. By 2006, over 100,000 requests had been
made annually. Blair later described this as a mistake as he had not realised that its
existence would prevent politicians from making difficult decisions because they
feared their actions would become public knowledge.
📜 The European Convention on Human Rights (ECHR) was incorporated into British
law through the Human Rights Act 1998. However, judges' interpretations
sometimes create unexpected difficulties for the government.
RURAL ISSUES
THE ERA OF NEW LABOUR: 1997-2007 3
, 🚜 New Labour was accused of failing to understand rural issues: in 2000, rising fuel
prices led to blockades by farmers and lorry drivers; there was dismay over the cull
of 10 million animals during the foot and mouth outbreak in 2001; and anger over the
ban on hunting with dogs, which was assed in 2004.
The Countryside Alliance organised a march against the hunting ban, which
attracted half a million protestors in 2002.
ECONOMIC POLICY:
👔 Brown’s initial priorities:
keep inflation low
keep government spending under control
breaking the image of ‘tax-and-spend’ party
BANK OF ENGLAND
🏦 Under Brown’s Chancellorship, the Bank of England gained independence and was
responsible for setting the interest rates. At the same time, he also changed the
inflation measure from the Retail Price Index to the Consumer Price Index and
transferred responsibility for banking supervision to the FSA (Financial Services
Authority) - thus divorcing it from political interference.
Some have argued that the divisions of responsibilities exacerbated the 2007 global
banking crisis.
TAXATION/BORROWING
💷 In the 1997 election and subsequently, Brown pledged to not increase the basic or
higher rates of income taxes.
During his chancellorship, he reduced the basic rate from 23% to 20%, this helped
to reassure the electorate as well as businessmen and financiers.
THE ERA OF NEW LABOUR: 1997-2007 4
, 🏧 In order to avoid raising taxes, Labour, continued to use private sources of funding
for improvements to public services. There was criticism of funding projects
through the Private Finance Initiative (PFI) - buildings were completed quickly but
debts were stored up for the future.
💸 Instead, the Labour Party made financial adjustments, which were not technically
classified as taxation, but were so in practice:
Raising NI contributions
Removing marriage tax allowances for couples aged under 65
Removing tax relief on mortgage payments
Reducing the level of tax-free savings that could be made each year under
schemes such as TESSAs.
🏧 The increased government expenditure on the public sector, could not be entirely
met from taxation revenues. Brown resorted to borrowing from foreign banks, which
did not make headline news as New Labour came to power during a period of
relative stability and growth in the international economy. This arguably worsened
Britain’s economic state by 2007.
💳 Government borrowing encouraged a consumer credit boom, and house buying and
retail sales increased markedly during this time.
‘GOLDEN BROWN’
🪙 Between 1999 and 2002, as the price of gold fell on the international markets, the
British government sold off 13 million ounces of gold, nearly half of it’s reserves.
In contrast, China, which bought up nearly 7 million ounces benefitted from the
subsequent recovery of gold prices by 2005, whereas Britain lost some £3 billion.
PENSIONS
THE ERA OF NEW LABOUR: 1997-2007 5
, 🏦 In order to build up reserves for future expenditure, Brown began to tax pension
savings. This was done through taxing the dividends companies paid to their
investors, which reduced the value of pensions.
By 2007 the amount lost was over £8 billion. This led to a reduction in savings, with
the savings ratio decreasing from 9.7% to 3.7%.
📉 Additionally, as share prices are dependent on dividend values, the cutting of
dividend payments meant that total UK share values were some £120 billion lower
than they would have been without government intervention.
SUPPLY-SIDE POLICIES
💸 ‘Prudence with a purpose’: After the 2001 election, the economic policy became
less cautious and increasingly radical with a massive injective of money into public
services (new schools, hospitals, and pay rises). Critics argued that public spending
and government borrowing were too high.
🤑 By 2007, inflation was under control, house prices increased, record levels of
employment, improving living standards, and consumerism.
However, due to increased government spending, inflation reached 4.8% by 2007.
EMPLOYMENT:
🧑🏻💼 During Blair’s time in office, the number of people employed rose to 29.1 million, a
2.5 million increase from 1997.
🏗️ However, the growth in jobs did not benefit the unskilled and the young - In 2007,
there were 5.4 million people of working age, many of whom between 16 and 30,
who were living on unemployment benefits.
THE ERA OF NEW LABOUR: 1997-2007 6
