At last, the party of social justice has woken up
The New Labour era is over - welcome to social democracy. Following in Obama's footsteps, it is suddenly safe to tax the rich and spend to protect jobs. Keynes and Roosevelt are the world's spirit guides through this crisis, because in a crisis social democracy is what works. Yesterday that faith allowed Labour to shed its disguise and follow its nature in a £20bn shower of spending. Yesterday saw the Conservatives strip off their sheep's clothing too, as George Osborne tore into the "unexploded tax bombshell" with gusto, merrily defending the aspirations of the wealthy. Now we can see both parties naked as nature intended, and at last comfortable in their own skins.Symbolism is everything in the volatile irrationality of these times. When markets zigzag between exuberance and despair, confidence is the only currency. The language, the mirage, the smoke and mirrors, it all matters as much as the substance. No one alive has ever lived through such a crisis or faced the danger of a slump so deep, so if enough people say that the right thing was done yesterday, then it was. The stock market rewarded Alistair Darling with the biggest ever one-day rise - so for now, it worked. For years New Labour has forgotten about the power of symbolism. As wealth at the top soared, Tony Blair and Gordon Brown had no word of reproof for gross greed and excess. Relaxed about the filthy rich, they "celebrated" vast salaries that spilled over to contaminate the public sector too. On Labour's watch the top 10% consumed nearly a third of national earnings and 54% of personal wealth. This comes too late to check the bonus culture that wrecked the economy, but better late than never. The words are spoken: "Those who have done best in the last decade will pay more" - an average of £3,168 more for earners over £140,000 in 2011. And the sky has not fallen in after all. On the contrary, some sense of the rightness of things begins to be restored. Of course the mega-rich should pay a fairer share of tax. Of course low earners deserve a fairer share of rewards - the cleaners, caterers and carers who earn too little to keep their families above the poverty line - though they didn't get it this time.   //<![CDATA[  //]]>  In poll after poll, from British Social Attitudes to the Guardian ICM, three-quarters of voters say that the income gap is too wide. The Sun tries a feeble jab at Gordon Brown for "turning his back on wealth creators" - but it lacks conviction. Odd how it has taken near calamity to shake Labour from its craven fear of the hyper-rich. The Tories and their press, who inhabit a world where "everyone" earns over £100,000, forget at their peril what "ordinary" really is: only 2% of taxpayers earn more than £100,000 a year. Only 1.3% earn more than £150,000. High earners are always in denial about how exceptional they are, while Labour over the years has colluded by failing to tell the true story about the distribution of wealth and earnings. Here is a reminder of the shape of national incomes now: only 10% of people earn more than £40,000, to reach the top tax bracket. Half the working population earns under £23,000. A couple need £11,000 to rise above the poverty threshold - and over a fifth of people fall below, with a third of children born poor. So now let's hear Labour remind itself and all other opinion formers how little most people have shared in the boom. Labour doesn't need the votes of the top 2% so long as the other 98% see fairness done - but Labour does need to get the facts across, as most people are woefully ignorant of where they stand on the earnings scale. The richest 2% will protest because they think their earnings are ordinary, refusing to believe most people earn so little. Sadly, even the poor think they are nearer the middle than they are. But don't imagine Britain has become Sweden overnight, for this was less redistributive than the symbolism suggests. Alistair Darling had promised "help to every household" - and that's what his VAT cut did. But was it wise and necessary - or even populist? This money would be better spent on the poorest children and pensioners, instead of scattered thin and wide. Out there in the high street - where economists rarely venture - shop windows offer discounts of 20% and 30%, so what chance of a mad rush for 2.5% off VAT? Will people notice? £12.5bn is a huge sum to squander without provable results when it is just not true that every household needs help. Even if unemployment reaches 3 million, that still leaves 90% in secure jobs. Most people will suffer not at all in this recession: on the contrary they will do well as prices fall and the real value of their earnings rises. Though the VAT cut may ease the climate of fear when fear itself is the risk. Some of that great VAT cut should have paid instead the £3bn in child tax credits that would have seen Labour hit its child poverty target, raising half of all poor children over the line. Oddly, Darling promised to set that pledge in law instead of giving the money to fulfil it. The Institute for Fiscal Studies says there will now be no extra children lifted above the poverty line in 2010-11 and the target will be missed. What a missed political chance to challenge the Tories on their compassion. Sadly, the VAT cut will help the poorest least: apart from in their energy bills, they spend least on non-food items while the big spenders get most benefit. The IFS says the VAT cut will only spur the buying of the "most expensive, infrequent items" like white goods and furniture.Good news is capital spending of £3bn dragged forward to create jobs. Good news too is extra spending on helping people find work. Help for small businesses that employ 60% of the workforce is just what was needed. Here is a plethora of good measures, but a huge gamble. Will this send the economy upwards by halfway through next year? Darling risked his reputation in that prediction. Will he be able to prove Labour's action made the difference and all this spending saved the day? But whatever the details and the fine print, history will judge yesterday was the turning point when Labour unfurled its old battle banner for social justice and the Conservatives chose to ride full tilt against it. There is danger for both in abandoning their centre-ground hug of death - but now there is real choice for voters. (The Guardian, London)