INSIDE OUT - It is becoming settled opinion in Westminster that the wave of woes that has rocked the Government is more than just mid-term blues.

by Andrew Neil, publisher of The Business and Scotsman newspapers
Last Updated: 31 Aug 2010

It is becoming settled opinion in Westminster that the wave of woes that has rocked the Government is more than just mid-term blues.

In the dying days of Parliament's summer session, Tony Blair summoned some of Fleet Street's finest to 10 Downing Street and, in a gruelling series of one-to-one, off-the-record meetings, insisted that his Government, post-Iraq, was now fully focused on its domestic agenda in general and the improvement of public services in particular.

Few of those hearing these briefings were convinced and, as the PM recharges his batteries with a well-deserved rest in Barbados, he must wonder if things will ever be the same again.

It is becoming settled opinion in Westminster that the wave of woes that has rocked the Government in recent months is more than just mid-term blues. Blair's troubles will not disappear with the summer sun; they'll still be there when Parliament reassembles in September. The glory days of the Blair ascendancy are over and a slow-motion unravelling of his premiership beckons.

His finest hour - victory in Iraq - has not produced the predicted Baghdad bounce. Rather, the war haunts his administration at every turn. The failure to find any weapons of mass destruction has become an acute embarrassment.

The messy peace and the faltering steps to rebuild Iraq have taken the shine off victory. Critical examination of the events that led to hostilities has encouraged the view that Britain was taken to war on a false prospectus.

That, in turn, has fanned the flames of distrust. Blair and his government have been consumed by a crisis of credibility in which lack of trust threatens to do down his administration much as sleaze destroyed John Major's government.

Meanwhile, the Labour party is split from top to bottom on almost every major issue it faces.

The Iraq war divided Labour like a Grand Canyon. It has left its MPs feeling bitter and given them a taste for rebellion that undermines Blair's desire to push through radical reform of the public services. He still talks tough about his determination to shake up the public services. But an inability to carry his party, in everything from foundation hospitals to university tuition fees, makes him curb his radical intentions.

As a result, voters see taxes rise but wait impatiently for better public services. The few improvements are modest and hardly adequate recompense for the billions extra the Government is throwing at the public sector.

Blair will use the Labour party conference in late September to reinvigorate his public-service crusade (foreign affairs will get only a passing mention).

But it will be merely a repackaging of all the rhetoric we've heard before, and any mention of further increases in tax to pay for better services will be conspicuous by its absence.

Yet most economists agree that public spending cannot continue to rise without far more borrowing - which would break Chancellor Brown's fiscal rules - or extra taxes, which would break the government's bond with Middle England.

Blair and Brown had to screw up their courage to raise national insurance by 1% to help finance the current rise in public spending. Already voters are squealing that they are not prepared to pay any more. Blair and Brown sound as if they have run out of courage.

But the British economy no longer stuffs the Treasury's coffers with revenue the way it did in Labour's first term. The economy barely grew in the first half of this year, and growth is likely to be anaemic in the second half. Tax revenues are plummeting and there is a black hole in government finances. Something will have to give: either slower growth in public spending or higher taxes. The Americans call it being between a rock and a hard place.

Running like a festering sore through all these woes is the continued friction between Blair and Brown. It sours the government at every turn.

The complicated compromise to paper over their differences on the euro convinced or pleased nobody. All it achieved was an increase in the anti-euro majority. Ditto Blair's efforts to pass off the proposed new European constitution as no more than a tidying-up exercise. Europe is a passion for Blair but he is losing the arguments with the people on all fronts.

The Blair government is past its prime. It has begun its period of decline.

This is not to say it will pass quickly into history. The previous Tory government was past its sell-by date in 1990 but still managed to win the 1992 election and cling to power until 1997. The same gradual descent towards oblivion is under way for this government.

The prime minister will return from Barbados tanned, fit and revivified.

He has amazing resilience and will throw himself into the fray with renewed vigour. But he will face the same divided party, the same ailing economy and the same public services that stubbornly refuse to reform that he left behind at the summer recess. And he will have returned with no more solutions to these systemic problems than when he departed.

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