The Labour Party’s movement to the Centre: an explanation using the Wright Mills approach

Matthew Zarb-Cousin

Contents Page Chapter

2 Introduction

9 C. Wright Mills’ Elite Theory

12 David Sainsbury and the 1983 general election

23 Tony Blair and the “Opinion Maker”

31 New Labour and the Corporate Elite

47 Conclusion

49 Bibliography

Synopsis Using C. Wright Mills’ theoretical approach – a strand of elite theory set out in The Power Elite – this dissertation offers an entirely original explanation as to why the Labour Party moved to the Centre. It, firstly, demonstrates how the Labour Party mitigated its ideological objectives in gaining the approval and influence of the elite, approval that helped the party win successive general elections. It begins with a critical analysis of existing explanations of the Labour Party’s ‘modernisation’, before outlining what the Wright Mills approach entails. It then illustrates how the elite in Britain influenced the outcome of the 1983 general election and altered the electoral landscape, which consequently encouraged Tony Blair to seek the approval of Rupert Murdoch. It outlines the way in which members of the corporate elite were explicitly co-opted into the party’s policy-making process, when ‘The Commission on Public Policy and British Business’ was set up by the IPPR. It also discerns the influence the elite had on the party in government after their landslide general election victory in 1997, citing most notably the connection between New Labour and the Bilderberg Group, the financial sector – in particular the investment bank Goldman Sachs International – and David Sainsbury’s influence on the party. It also analyses the connection between the Labour Party and the nuclear lobby, deriving from the use of the Wright Mills approach an analysis of how the Labour Party sought to gain the approval of the influential corporate elite, capitalising on their affiliation through favourable media coverage and party funding.

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1. Introduction

The Power Elite is a theory of the state, which argues that those at the top of

the institutional hierarchies – an identifiable and stable minority that control

key financial, communications, industrial and government institutions – hold a

concentration of power and influence (Wight Mills 1956: 19). I will seek to

explain why the Labour Party changed, and my approach will reflect that of

Wright Mills’ – which in turn provided evidence of an elite theory – in his

analysis of the concentration of power in the US that lies outside of the

democratic process: one might refer to it as ‘power without accountability’.

The focus of my research will be concerned with discerning the existence and

the influence of an elite in Britain, and I will argue that because of the

influence of a power elite, the Labour Party had to mitigate their social

democratic principles and adopt a more neo-liberal approach. I will therefore

provide an elite theory perspective as to why the Labour Party moved to the

Centre – in turn, emphasising its relevance as a theory of the state in a more

contemporary context.

Analysis of the transformation of the Labour Party under Tony Blair has, to

date, centred on the premise of an altered political landscape in the wake of

the apparent popularity of Thatcherism. I state that this popularity was only

apparent, as the Conservative Party did not attain more than 50% of the vote

between 1979 and 1992 (Ramsay 2002). Colin Hay articulated this argument,

suggesting that structural constraints were placed upon the Labour Party in

that voters were no longer supporters but consumers, and their traditional

working class base could no longer be relied upon to vote Labour (Hay 1999).

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This dissertation will dispute Hay’s implication that a change in the attitudes of

the electorate led to the transformation of the Labour Party, and to the

formation of New Labour. Whilst this dissertation finds some consensus with

Hay regarding the way in which the spectre of globalisation was used to justify

the creation of New Labour and the economic policies that ensued, it

contends Hay’s assertion that Middle England would only elect a ‘modernised’

Labour Party. Both the decline in support for the Labour Party through

successive General Elections from 1997 to 2010 post party ‘modernisation’,

and the British Social Attitudes Survey have provided a basis for this rebuttal:

51% of respondents supported more wealth redistribution in 1989, and 58%

believed the state should spend more on benefits in 1991. In 2010, after 13

years of a Labour government, 78% believed the income gap between rich

and poor was too large, and more than half supported an increase in the

minimum wage (BSAS 1989; 1991; 2010).

Ed Miliband stated in his first speech as leader to Labour Party conference in

2010, “The old way of thinking said that economic efficiency would always

come at the price of social justice.” However, a publication by the National

Equality Panel, reported by BBC News at the start of 2010, found that the

rich-poor divide was wider than 40 years ago (BBC 2010), implying that the

Labour government’s policies had not worked, and economic efficiency did

indeed come at the price of social justice.

In assessing how – using the Wright Mills theoretical framework – the Labour

Party changed, I will have the benefit of being able to analyse New Labour in

government, as their decisions and actions will provide further evidence to

support an explanation based on elite theory as an approach. It will also

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provide the opportunity to illustrate how Giddens’ Third Way does not fully

explain New Labour’s approach, as the party became “seduced by power and

money” (Reade 2010).

Giddens’ Third Way: the renewal of social democracy, also entails an

explanation as to why the Labour Party had to change to the extent that it did,

citing the decline of traditional Left and Right politics. Whilst this dissertation

will not contend Giddens’ claim with regards to the viability of statism and

traditional social democracy in a globalised, de-traditionalised and reflexive

world (Giddens 1998), it will contend – and with the benefit of retrospective

analysis of the Labour Party in government – his implication that the party

acted only out of necessity, citing various policies that are not explained by his

presumptions, an example of which is their decision to reduce corporation tax

to the lowest level in the G8 once they assumed office in 1997. Whilst the

Labour Party required modernisation, the Third Way does not explain the

nature of the modernisation undertaken by the New Labour hierarchy.

Tony Blair’s New Labour used globalisation to justify their economic policies

(Hay 1999), and this dissertation will illustrate why their approach – despite

globalisation narrowing the parameters of social democracy – was not the

only option available to them. Jon Cruddas argued in a column for the New

Statesman that Tony Blair “failed to grasp the meaning of globalisation”, and

restricted opportunities to the “metropolitan elite” – those that were open to

the world and swift to adapt. However, in the wake of the financial crisis, he

asserted, “Those sections of the population which followed Blair's call have

now discovered that the British economy cannot deliver the dream. Their hard

work and adaptability have resulted in stagnant or falling incomes, debt and

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chronic insecurity. The majority simply did not benefit from the boom in the

way the rich did” (Cruddas 2010).

This paper will contend that New Labour implemented such economic policies

because of the influence of the elite, and this argument is based on there

being, in 1995, more viable, and more social democratic, alternatives than a

continuation of Conservative economic policy, which were disregarded

(Anderson 1997). The most significant of these is contained in Will Hutton’s

The State We’re In (1995), which castigated the demand in the financial

sector for higher rates of return, claiming that it had decimated British

industry. This is echoed by Ramsay, who highlights Heath’s introduction of

Competition and Credit Control, which in turn meant that banks no longer lent

to, or invested in, British manufacturing or industry, but to domestic

consumers and the property market (Ramsay 2002: 15). He cited other

successful economies, such as Germany and Japan, which had devised

institutions to overcome this short-termism, running counter to New Labour

rhetoric concerned with the requirement for “light touch regulation” (Ramsay

1998a). I do not intend to dispute the economic rationality of the financial

sector, nor their potential to move out of Britain. However, if reliance upon a

fleeting financial sector was unsustainable, Labour could have set about

restructuring the economy, taking into consideration Will Hutton’s well-timed

suggestions. However, the party chose to disregard the advice of Will Hutton

and abandoned the call for a more active industrial policy that would have

sought to invest in alternative industries and rebuild the economy after years

of dependence on the financial sector under Margaret Thatcher (Ramsay

2002). This is a sentiment that has been echoed recently by current Labour

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Party leader Ed Miliband, who argued that the Labour Party “acted too late to

create a more balanced economy less dependent on financial services for tax

receipts” (Wintour 2011). I will contend that this inaction was not in the

national interest, but in the interest of the corporate circle, specifically those

that preside over the City of London.

I will therefore seek to provide an alternative explanation for New Labour by

demonstrating that there exists a power elite in Britain – applying the Wright

Mills’ approach to a contemporary and alternative context – and contend that

New Labour was the product of cynical appeasement of the corporate circle,

eventually leading to the party embracing its affiliation with the power elite and

abandoning its social democratic principles. I will therefore demonstrate the

influence of the elite – beginning in 1983 – and illustrate exactly how the

Labour Party gained their support. In order to gain such support, the

parameters of the Labour Party – defined by what the party seeks to achieve

politically – had to shift to the Right.

In order to apply a theory first purported by Wright Mills in The Power Elite – a

sociological assessment of the U.S. in 1956 – to a more contemporary British

context, it is important to state that this dissertation will draw on the Wright

Mills’ approach, but will not compare the power elite in the U.S. and the U.K. It

will discern who the power elite are in Britain, offer an alternative framework

that they fit into, and an explanation as to how they influenced the Labour

Party, suggesting that it was predominantly their influence that caused the

party to move to the centre ground, symbolised by their revision of Clause IV.

This revision committed the party to a “dynamic economy… the enterprise of

the market and the rigour of competition” (Merkel 2008; also quoted in Bailey

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2009). Bailey highlights the mechanism the party used in order to silence

dissenting voices in the wake of their transition, which can be summarised in

an excerpt from Tony Blair’s speech to the NEC meeting in 1997, “You will

have a ready ear in the media to attack the Labour government. But I tell the

Labour Party where that leads. It leads to 20 years of Tory government”

(Bailey 2009; Blair, NEC meeting, 17-11-97). I will claim that this was rhetoric

pedalled by the party hierarchy in order to ensure that the Left of the party did

not re-emerge, alienating the elite, which helped the party win in 1997. I will

not offer speculative claims as to whether the Labour Party would have won in

1997 if it did not court the elite in the way that it did. I will, however, illustrate

how the power elite in Britain helped Labour win, and offer an explanation as

to why the party believed their support was necessary, considering their

influence on the political landscape, and their influence on the electorate.

The analysis will be constructed by drawing on Ramsay’s analysis of the

events that took place leading up to 1983, and of the changes in the Labour

Party that resulted, but will be combined with evidence that will suggest that

the elite initially prevented a Labour victory in 1983, after Margaret Thatcher

had doubled unemployment during her first term (Ramsay 2002). This will

culminate in an explanation that supports an elite theory. The potential for the

elite to alter the political landscape, I will claim, can be referenced in the

formation of the SDP in 1983, which divided the electoral support for the Left,

sometimes referred to as the ‘anti-Tory vote’ (Grice 2010).

This is not to suggest that the party, in their attempts to appeal to the elite,

were simply attracting large donations, which would therefore not go to the

Conservative Party or the Liberal Democrats. I will argue that because of an

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altered political landscape – preventing a Labour victory in 1983 – the party

had no option but to attempt to gain the support of the Right if they were going

to win. In order to gain the support of traditionally Conservative voters, they

needed to appeal to the corporate circle, more specifically the elite that

controls the Right-wing media. In order to do this, the Labour Party needed to

drastically alter its image after losing its economic credibility in 1979 (Ramsay

2002). This, I will claim, led to the party not only mitigating but also

abandoning their social democratic principles, in order to ensure that elite

interests were facilitated. Wright Mills defines The Power Elite as “a set of

groups whose members know one another, see one another socially and at

business, and so, in making decisions, take one another into account” (Wright

Mills 1956: 11). I will also highlight the connection between New Labour – who

became the governing elite – and various members of the power elite in

Britain who occupy other institutional positions.

The argument will draw on numerous sources and culminate in the articulation

of the theory that the Labour Party changed because of a realisation that

without the support of the power elite – members of which I shall identify –

then they would not have been able to achieve the highest institutional

position within the political structure, and become the party of government. It

will also contend that once in government the party became part of the elite –

as elite theory contends – and, as Wright Mills suggests, worked with the

Higher Circles and ensured their interests were put above the national interest

(Wright Mills 1956). I will adopt Wright Mills’ approach insofar as I will analyse

the British power elite and illustrate their influence over the political system,

which will, in turn, offer an explanation as to why the Labour Party moved to

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the Centre, and support an elite theory, both in its application to New Labour

and also to a wider context as a theory of the state.

2. C. Wright Mills’ Elite Theory

It is necessarily to initially outline what the Wright Mills approach entails. In his

description of The Power Elite, he asserts that, “their positions enable them to

transcend the ordinary environments of ordinary men and women” (Wright

Mills 1956). The power elite are “in command of the major hierarchies and

organizations of modern society”, specifically the big corporations, the

machinery of the state and the strategic command posts of the social

structure, in which are now centred the effective means of the power and

wealth that they possess (Wright Mills 1956). Wright Mills identifies

professional politicians as being “below the elite… in the middle levels of

power” and “mingling with them, in curious ways… are those professional

celebrities who live by being continually displayed” and serve to distract the

attention of the public (Wright Mills 1956).

Behind the power elite, and behind, “the events of history” – linking the two –

are the, ”major institutions of modern society” (Wright Mills 1956). These

institutions – of state and of corporations – constitute the means of power,

and “at their summits, there are now those command posts which offer the

sociological key to an understanding of the higher circles,” and all power is

subordinated to both of these hierarchies, and the military (Wright Mills 1956).

Within each of these three institutions, Wright Mills contends, “the process

has become enlarged, it has become administrative, and, in the power of its

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decisions, has become centralized,” and he illustrates this point empirically

with reference to how the economy has transformed, “once a great scatter of

small productive units in autonomous balance – has become dominated by…

giant corporations, administratively and politically interrelated, which together

hold the keys to economic decisions” (Wirght Mills 1956).

The economic elite resides at the pinnacle of the economic domain, and

constitutes the corporate rich, the chief executives. As all three hierarchies

coincide, these domains tend to come together to form the power elite (Wright

Mills 1956).

Wright Mills refers to early capitalism as “youthful competition,” from which

emerged – through mergers and consolidation – “the Big Five, or the Big

Three” (Wirght Mills 1956). The top corporations, according to Wright Mills,

are “not a set of splendidly isolated giants. They have been knit together by

explicit associations” leading to power being exercised by a few large firms,

which is – he contends – “different only in degree and precision of its exercise

from that of the single-firm monopoly” and if corporations compete with one

another they do so “less in terms of price than in terms of ‘product

development’, advertising, and packaging” (Wright Mills 1956), insinuating a

transcendence of the power of the market to make such decisions in what he

refers to as “corporate consolidation”, an interconnection of the corporations

which has led to the rise of “a more sophisticated executive”. The decisions of

such a group “determine the size and shape of the national economy, the

level of employment, the purchasing power of the consumer, the prices that

they are advertised, the investments that are channelled” (Wright Mills 1956).

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Wright Mills states that all official decisions made by the power elite “are

justified as in the public’s welfare, and all formal proclamations are in its

name” (Wright Mills 1956). In an analysis of what constitutes public opinion,

Wright Mills alludes to the out-dated view of democracy, which dictates that,

“discussion circles that are knit together by mobile people who carry opinions

from one to another… the public is thus organized into associations and

parties… the larger forces of social movements and political parties develop”

(Wirght Mills 1956). Theoretically, he contends, out of free discussion

emerges truth and justice, but this view of democracy is not even an

approximation of how the American system of power works (Wright Mills

1956). “The issues that now shape man’s date are neither raised nor decided

by the public at large” and the idea of a community of publics is an ideal rather

than a description of the structure of society. Wirght Mills asserts that the

classic community of publics is being transformed into a society of masses

(Wright Mills 1956), “in the society of publics it was assumed that after

determining what is true and right and just, the public would act accordingly or

see that its representatives did so. In the long run, public opinion will not only

be right, but public opinion will prevail.” This assumption is no longer true,

according to Wright Mills, as there exists a great gap between the underlying

population and those that make decisions in its name (Wright Mills 1956).

Despite The Power Elite being written before the advent of more

contemporary mass media, Wright Mills alludes to the relative unease

experienced by those at the top of institutional hierarchies when considering

the opinions of masses. He asserts, “opinion-making becomes an accepted

technique of power-holding and power-getting” (Wright Mills 1956).

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Applying this to a contemporary context, Wright Mils’ elite theory will inform

the approach insofar as the influence of “opinion makers” – those that control

the media – shall be analysed. The connection the corporate elite has to the

political hierarchy, and subsequent influence it has over the democratic

process will also be illustrated in discerning why the Labour Party moved to

the Centre.

3. David Sainsbury and the 1983 general election

Historical context

In order to explain why a transformation away from traditional social

democracy took place in the Labour Party, it is necessary to go back to the

events that took place between 1970 and 1983. It is these events that will

provide an explanation as to why Labour lost in 1983, despite Margaret

Thatcher’s administration tripling unemployment (Ramsay 2002: 8). The

general election in 1983 was an event that catalysed the party’s eventual

movement to the centre, as the election was lost as a consequence of the

influence of the power elite, and an illustration as to how will be offered

through an analysis of the events that took place.

Ramsay describes the Wilson administration that succeeded Heath’s

government in 1974 as being “an unremarkable, mainstream, social

democratic administration, mired in economic problems not of its own making”

(2002: 21). The credit boom, instigated by Heath’s implementation of

Competition and Credit Control (C&CC) in 1971, caused the economic

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problems that left the Labour government having to deal with 20% inflation.

Despite the Treasury believing that the C&CC proposal from the Bank of

England would lead to inflation, it was adopted as government policy, and this

was “barely noticed by the media, the Labour Opposition or by Heath himself”

(Ramsay 2002: 14). Ending limits on lending, and regulating credit in the

economy through interest rates alone allowed the banks to lend as much as

they liked, and when there was too much credit in the system, put interest

rates up – a system which was effectively ‘bounced’ into legislation, and one

that guaranteed to make the elite in the City of London very wealthy, if

implemented properly (Ramsay 2002: 17). The problems with this were

twofold. Firstly, the banks did not lend to or invest in British industry, as Heath

had envisaged. Instead, they opted for lending to “domestic consumers [and]

to the property markets” (Ramsay 2002: 15). Secondly, as Heath presided

over the domestic boom, by 1973 consumer spending had risen, as had

property prises, and the scarcity of investment in industry meant the balance

of payments went into deficit, putting severe pressure on the pound (Ramsay

2002: 16). This was a consequence of Heath’s refusal to put interest rates up

“as far and as fast as the monetary experts at the Bank of England wanted”

(Ramsay 2002: 16-17), leading to high levels of inflation, a problem inherited

by Wilson’s Labour government in 1975.

Despite the economic problems facing Britain owing to the legacy of the

preceding government, the Labour Party were the subject of relentless

scrutiny, based on the premise that the British Left were a threat to business,

and even the capitalist system itself, and were accused of being

“spearheaded by the trade unions and manipulated by the British Communist

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Party [which polled 0.1% of the vote at the 1974 general election]” (Ramsay

2002: 21). To explain why the British media took such a negative stance

towards the Labour Party, it is necessary to assess who was in control of the

media, their political views – which would have had an influence on the

editorial stance of the respective newspapers – and through an analysis of the

1983 general election, illustrate the significance of their influence.

The Media Elite

Vere Harmsworth, 3rd Viscount of Rothermere was the Chairman of

Associated Newspapers from 1971 until Sir David English succeeded him in

1992. English was the editor he appointed that was responsible for turning the

Daily Mail into a tabloid, and it soared in popularity under his stewardship.

Rothermere was one of the richest men in the country and spent much of the

year in Paris, where he moved to in 1978 for tax reasons (BBC 1998; New

York Times 1998), he was also a Conservative and an ardent supporter of

Margaret Thatcher, described by Coleridge as “remorseless and effective”

(Coleridge 1993). The Daily Mail supported Margaret Thatcher in 1979, and in

1980 closed the Evening News and bought half of the shares in the new

Evening Standard company (Coleridge 1993). In 1989, Margaret Thatcher

opened the Associated Newspapers’ printing plant, suggesting her closeness

to Rothermere and the Daily Mail. Taking into consideration Rothermere’s

relocation to Paris for the purposes of tax avoidance (BBC 1998), one might

suggest that he was attracted to Thatcher’s ideological stance, which was

arguably influenced by the Institute of Economic Affairs, of which she had

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been a member for nearly twenty years. The IEA was a think-tank founded by

the poultry magnate Antony Fisher, and it proposed less government, lower

taxes and more freedom for business (Beckett 2010). One might contend that

it was the self-interest of Rothermere that drove the Daily Mail’s support of the

Conservative Party and systematic condemnation of the Labour Party in

government and the party in opposition from 1979 onwards.

Rupert Murdoch bought The Sun newspaper from IPC in 1969, assuring them

that in his hands, it would remain a “straightforward, honest newspaper” that

would continue to support Labour (Greenslade 2003). The Sun remained so in

the early Murdoch years, supporting the party at the 1970 general election,

but its support waned in the two 1974 general elections. In 1979, the paper

emphatically endorsed Margaret Thatcher, running the headline “VOTE TORY

THIS TIME”. Murdoch’s acquisition of the Times and The Sunday Times in

1981, and The Sun’s surpassing of the Daily Mirror in terms of its circulation –

which can arguably be put down to an extensive television marketing

campaign – meant that News International owned the highest circulating

tabloid, and the highest circulating broadsheet in the country. His influence

can therefore not be understated; he told William Shawcross, writer of his

biography, that he considered himself to be a libertarian, stating his belief in

“as little government as possible [and] as few rules as possible” (Shawcross

1997). It was Murdoch’s clear Right-wing agenda that was behind many

vitriolic personal attacks on Labour leaders, Michael Foot in particular. The

Sun’s editorial stance focused on his age, leading with front pages such as,

“Do You Really Want This Old Fool To Run Britain?” However, their apparent

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age discrimination did not prevent The Sun supporting Ronald Reagan for re-

election in 1984 only a year later, despite him being four years Foot’s senior.

The influence of the media in 1983

One might contend, therefore, that the media played a significant role in

influencing public opinion throughout Margaret Thatcher’s disappointing first

term. It would also be possible to contend that commitments in the Labour

Party’s 1983 Manifesto, such as their pledge to “reform taxation so that the

rich pay their full share and the tax burden on the lower paid is reduced” and

ensuring “that the richest 100,000 of the population make a fair and proper

contribution to tax revenue” would not have been in the interests of the

corporate elite, most significantly the commitment to discussions with the TUC

about the possible introduction of the minimum wage (Labour Party 1983). For

what has come to be known as Thatcherism to work – an ideology that would

have inevitably enabled the elite to expand their wealth – it needed time, as

having taken office, Thatcher doubled unemployment from three million to six

million, and, “by the end of Margaret Thatcher's first term, unemployment in

Britain was more than three million and it began to fall only in 1986. A large

section of Britain's inefficient manufacturing industry closed down” (Margaret

Thatcher Foundation 2011).

One might contend, then, that the media bought the Conservative Party some

time through their relentless support, arguably a result of Thatcher’s close ties

with Rupert Murdoch, a relationship strengthened by a similar ideological

stance. One might contend that his ownership of a newspaper that targeted

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the traditional working class assisted the Conservative Party considerably in

their success in the 1983 general election, even if this influence on the

electorate was not recognised by News International publicly, unlike in 1992.

Current literature that seeks to explain the outcome of the 1983 election

focuses on both the Labour Party being unelectable – having written,

according to dissenting Labour MP Gerald Kaufman “the longest suicide note

in history” (BBC 2003) – and the jingoism surrounding the Falklands War,

which has come to be known as The Falklands Factor, a phrase coined by

Margaret Thatcher herself in a speech to a Conservative Rally at Cheltenham

(Margaret Thatcher Foundation 2011). However, analysis of the BBC/Gallup

Election Day Poll suggests that this had very little impact on the outcome of

the general election. Of the 4141 respondents, only 24 mentioned foreign

affairs, and only 1.4% claimed that the Falklands conflict affected their vote

(Miller 1984). Analysis by the polling company Ipsos MORI drew similar

conclusions. Whilst there is an acknowledgement that “received wisdom

seems to have it that the Falklands Factor was the political making of

Margaret Thatcher”, the data shows something quite different. According to

Ipsos (2007), “Mrs. Thatcher’s ratings and the Tory poll share had begun to

climb in advance of the invasion not least because of the perceived

improvement in the economy” (emphasis added). They then go on to state

that, “[The Falklands] effect in terms of the British public’s political attitudes is

probably overstated” (Ipsos 2007).

The perception rather then the content of the Labour Party manifesto in 1983,

one might contend, was significant in contributing to their defeat, and this

perception was driven by negative media coverage. The content of the

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manifesto was “not short on left-wing hubris” (Kelly 2003) and most certainly

social democratic in its rejection of neo-liberalism, in pledging that trade union

legislation passed since 1979 to be repealed. However, it was “positively

prescient” on social policy and political reforms (Kelly 2003). The manifesto

offered Scottish devolution, the abolition of the House of Lords, a freedom of

information act and state funding for political parties, all of which were

implemented during Labour’s first term in office under Tony Blair (Kelly 2003).

On social policy, it advocated a ban on fox hunting and reforming marriage tax

allowance so that the state accepted “the wide variety in the type and size of

families”, something Gordon Brown also accepted when he abolished the

allowance in favour of the Working Families Tax Credit (Labour Party 1983;

Kelly 2003).

The contention here is not that there are little differences between old and

New Labour – as economically they differ considerably – but that the Labour

Party’s manifesto in 1983 was a credible document, and one might take into

consideration the amount of people that actually read a party’s manifesto.

This is illustrated by the comparative “demand” for manifestos in 2010, as

Waterstone’s politics buyer Andrew Lake commented, “I’ve worked in books

for nearly 20 years and have never seen such demand for manifestos.”

However, whilst the figures are not in the public domain, a spokesman for

Waterstone’s said sales of all three party manifestos was a “four figure”

quantity (Adams 2010), which is not exceptionally high.

Their electoral failure can, therefore, be put down to two factors. Firstly, the

influence of the media – something that has already been alluded to – and

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secondly the formation of the SDP, which divided the Left (Ramsay 2002;

SDP 2009).

Austrian economist F. A. Hayek contended that think-tanks were the best

medium for effecting change in society (Hayek 2001), a sentiment which

encouraged Antony Fisher to reject a career as a politician and instead

establish 150 think-tanks worldwide, including the Institute of Economic Affairs

and the Adam Smith Institute. This illustrates the influence the elite can have

on policy planning, which ultimately sets the agenda and direction for any

affiliated political party, which in his case was the Conservative Party.

However, what David Sainsbury did in 1981 was to alter entirely the political

landscape in Britain.

David Sainsbury and the formation of the SDP

David Sainsbury is the great grandson of John James Sainsbury and Mary

Ann Staples, who established the supermarket chain Sainsbury’s. David

Sainsbury attended Eton College and the University of Cambridge – like many

who occupy the upper echelons of power in Britain – and became the director

of Sainsbury’s in 1966. He inherited an 18% stake from his father, Sir Robert

Sainsbury, and his wealth in 2007 was £2.13bn (Cook 2007). It is important to

note that – unlike in the financial sector – it would be very difficult for

Sainsbury’s to move their operations elsewhere if economic policies such as

the introduction of the minimum wage and increases in taxation were

implemented, such is the nature of the supermarket industry. When Sir Robert

retired, John Davan Sainsbury – David’s brother – succeeded him as

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chairman. Sir Robert believed that John had a forceful, autocratic style of

leadership, and so it was therefore imperative to him that David remained in

Britain in order to maintain an active role in the business at boardroom level.

Sainsbury joined the Labour Party in the 1960s, but in 1983 he influenced

their general election defeat considerably. Shortly after Michael Foot defeated

Roy Hattersley in the Labour leadership contest in 1980, David Sainsbury

played an active role in the formation of the Social Democratic Party. Four

senior members of the Labour Party dubbed “the Gang of Four” – Roy

Jenkins, David Owen, Bill Rodgers and Shirley Williams – left to form the

SDP, bankrolled by Sainsbury who also served, with Dick Taverne and Roger

Liddle, on the party’s Steering Committee (SDP 2009) meaning that he played

an active role in policy formulation and in the writing of the party’s 1983

manifesto (SDP 2009).

The party then formed an alliance with the Liberals, meaning that they would

not stand a candidate from both parties in the same constituency, allowing for

a more pragmatic use of resources. The Alliance therefore attracted support

from the Centre-Left, and whilst it only managed to win eleven seats in the

general election, the influence in terms of their share of the popular vote –

which came within 1.3% of the Labour Party – denied Michael Foot success

in a number of seats.

In the Dulwich consistency, the Labour candidate, Kate Hoey, came within

1,859 votes of the Conservative Party. Dick Taverne, the SDP candidate

polled 8,376, increasing the share of the vote from 11% to 22% when

compared with the Liberal candidate in 1979. One might contend that without

  21

the presence of the SDP, Labour would have won the seat. The same can be

said for the Conservative target seat Oxford East, where their candidate

Stephen Norris defeated Andrew Smith of Labour by 1,308 votes. The Liberal

candidate – affiliated, of course, with the SDP and benefiting from the funding

of David Sainsbury – polled 10,690. In another Conservative Party target seat,

Cunninghame North, the Labour Party lost by 1,637 with the SDP candidate

polling 7,268.

The effect of the SDP was to divide support for the Left. Any anti-Tory

sentiment that might have been prevalent at the ballot box after Thatcher’s

disastrous first term was split between the SDP-Liberal Alliance and Labour,

therefore handing the Conservative Party victory. Roy Hattersley made a

similar observation, contending that the presence of the SDP caused a split in

the Centre-Left, which aided the Conservatives (SDP 2009). Hattersley

claimed that the formation of the SDP delayed the movement of the Labour

Party to a Centrist position. However, the contention here is that had the SDP

not been created and a tactical Alliance with the Liberals not been formed,

Labour might not have had to move to a Centrist position, as they did so in

order to appeal to traditionally Conservative voters, required in order to

command a majority.

Whilst one might contend Ramsay’s (2002: 8) assertion that the Conservative

Party “would have been turned out of office in 1983 had it not been for the

appearance, in time for the election, of the Social Democratic Party which

took millions of votes off Labour”, the formation of the SDP – backed by

Sainsbury – certainly played a significant role. It was this – coupled with the

influence of the media – that led to the Labour Party’s failure in 1983.

  22

Toynbee highlights the legacy of the defeat, stating that “if [the SDP] didn’t

succeed, we would still win in the end by forcing the Labour Party to turn

social democratic” (Toynbee 1995). One might contend, however, that the

Labour Party in 1983 were still social democratic, as they did not seek to

change the economic system, merely ameliorate it (Crosland 1956). In the

article – titled We lost, but the Son of SDP will win (the ‘son’ being Tony Blair,

a new MP along with Gordon Brown in 1983) – Toynbee appears to contend

that it was the popularity of the SDP which prompted the Labour Party’s

adaptation under Tony Blair, but then contradicts herself in stating that, “Blair

is too tough on law and order and liberal issues, less progressive… On policy,

some old Social Democrats say Blair isn’t tough or brave enough, retreating

rapidly on constitutional reform” (Toynbee 1995; emphasis added). What

Toynbee fails to address is the implication for the Labour Party of an altered

political landscape in the wake of the Centre-Left rivalry that had emerged

(Grice 2010). For this reason, one might contend that Blair had to appeal to a

section of the electorate that usually voted Conservative in order to win a

majority.

It can therefore be contended that it was necessary for the Labour Party to

appeal to David Sainsbury, as he has previously altered the electoral

landscape through his continued financial support of the SDP after he had

founded the party, which helped the Conservative Party to successive general

election victories (Ramsay 2002: 8). The division on the Left – caused by the

emergence of the Centre-Left SDP, later to be formally merged with the

Liberals to form the Liberal Democrats – meant that Labour Party also needed

to appeal to Conservative voters in order to win a majority, and therefore had

  23

to gain the support of the elite that controls the Right-wing media. The

importance of having media support was compounded by the altered electoral

landscape. How the Labour Party gained such support will be highlighted in

the next chapter, with specific reference to party actors’ relationships with the

power elite prior to 1997.

3. Tony Blair and the “Opinion Maker”

Everything… tax, health, education, unions, full employment, race,

immigration, everything, he’s totally sold out, and for what? What are we

for?

Neil Kinnock to Alistair Campbell, 1995

The unpopularity of the Conservative Party following Black Wednesday meant

that the leadership election in 1994, which took place after the death of party

leader John Smith, was probably going to decide who the next Prime Minister

was going to be. However, the party were aware of the influence of the media,

and mass circulation newspapers in particular, not to mention the party’s need

to appeal to the Right, given the altered electoral landscape since the SDP’s

formation. Osler (2002: 181) contends that the party saw the media as “a

decisive determinant of voting patterns” but argues that “this is a faulty

premise” as if that assumption were true then there would never have been a

Labour government before. Osler fails to take into consideration in his

analysis of why the party pursued the support of the media elite relentlessly

the altered electoral landscape after the emergence of the SDP. Osler instead

  24

claims that Labour had believed The Sun when it insisted that it alone swung

the 1992 general election, and this prompted the party hierarchy under new

party leader Tony Blair to work to galvanise their support. As Osler puts it,

“endorsement from Britain’s biggest circulation tabloid was a top priority in the

1997 campaign, for which Blair was ready to pay almost any price” (2002:

182). Osler underplays the influence of the media, failing to cite the influence

of the changed electoral landscape which required the party to appeal to the

Right, and attempts to denounce its influence in determining voting patterns

through claiming that “a majority of Sun readers have always backed Labour”

regardless of the newspaper’s affiliation (2002: 182).

When Murdoch took control of The Sun, its editorial stance shifted to the

Conservative Party before 1979, and its influence on the 1979 general

election – which took the form of unwavering support for Margaret Thatcher –

directed towards a demographic that usually voted Labour, would have likely

helped the Tories. The Sun’s editorial did not change until 1997, but it

maintained its approach of attacking the Labour government from a Right-

wing perspective, however its editorial arguably secured Labour the support of

its readership. In 2005, when its editorial backed the Labour Party, 33% voted

Conservative and 45% Labour (Ipsos MORI 2009). In 2010, when its editorial

supported David Cameron, picturing him on their front page in an Obama-

style photo with the headline “Our Only Hope”, 43% of its readers voted Tory

and just 28% Labour, therefore Osler’s claim regarding the influence of The

Sun’s editorial stance can be disputed. It is important to note that The Sun is

generally considered a newspaper of the working class, the lowest paid in

society, and had historically been a committed supporter of the Labour Party.

  25

Murdoch vowed to continue that support but reneged on his promise before

the 1979 general election.

The Labour Party’s opposition to News Corporation – animosity derived from

Thatcherite fanaticism and Murdoch’s tax avoidance (Osler 2002: 182-183) –

had been the party line until Blair had won the leadership. As Osler notes, “as

late as 1992, the Labour manifesto promised a Monopolies and Mergers

Commission inquiry into the concentration of press ownership” (2002: 183).

One might contend that Blair realised not only the influence of the media, but

took into consideration the apparent need for the Labour Party to appeal to

the Right in order to win a majority, as the Liberal Democrats – the formal

merger between the Liberals and the SDP, which took place in 1987 –

occupied the Centre-Left and were dividing the progressive vote. This might

explain why he was so willing to compromise the party’s stance on the media

conglomerate. In 1992, Labour pledged to “safeguard press freedom” but by

1997, the comparable section of their manifesto justified their new approach in

contending, “the regulatory framework for media and broadcasting should

reflect the realities of a far more open and competitive economy” (Osler 2002:

184), in other words, the Labour Party backed down. Their fierce defence of

Murdoch is perhaps most succinctly illustrated by Blair publicly humiliating

competition spokesperson Richard Caborn when he demanded that the

Tories launch a monopolies probe into BSkyB (Osler 2002: 183).

After numerous meetings with Murdoch, Blair was flown to the Hayman

Islands in order to address a News International conference. The speech

contained reconciliatory undertones, with Blair asserting, “the past should be

behind us” and assuring his audience that, “there have been changes on both

  26

sides”, and whilst he stated that policy would not be traded for editorial

support – and both Blair and Murdoch deny striking a formal deal – former

Sunday Times editor Andrew Neil recalled Blair telling him, “How we treat

Murdoch’s media interests when in power will depend on how his newspapers

treat the Labour Party in the run up to the election and after we are in

government” (Osler 2002: 1884). At the very least, an understanding was

reached between the two.

Neil Kinnock warned against such a compromise in a conversation with

Alistair Campbell. The 1992 general election defeat for Labour illustrated the

increased power of the media – their influence perpetuated by the altered

political landscape which divided support for the Left – as Neil Kinnock noted

in the wake of their loss, “the Conservative supporting press has enabled the

Conservative Party to win yet again” (Heath et al. 1994). Despite this, Kinnock

could not understand why Tony Blair would “sell out” and attempt to forge an

alliance with Rupert Murdoch, stating that the party would have to be open to

compromise. His reaction to Blair’s journey to the Hayman Islands came

during a conversation with Alistair Campbell, in which he firstly mocked the

content of Blair’s speech. The tirade is worth noting in full:

“Oh Margaret Thatcher, not too bad you know, not such a bad person, quite

radical, and of course you had to admire her determination and her leadership

– that’s what the fucking leader says … I’ll fucking tell him – too radical my

arse. That woman fucking killed people… He’s sold out before he’s even got

there” (Campbell 2008). It is necessary to determine the reason as to why

Tony Blair valued the support of the Murdoch-owned media to such an extent,

despite a relatively reformed Labour Party being ahead in the polls and on

  27

course to win the next general election at the time he assumed the leadership.

One might contend that the same could have been said for Kinnock in 1992,

who then went on to lose after The Sun ran the headline, “If Kinnock Wins

Today Will The Last Person To Leave Britain Please Turn Out The Lights”. It

is possible to argue therefore, that Blair did not want to put his chances of

becoming Prime Minister in jeopardy through creating powerful enemies –

such was the nature of the political landscape. Media influence was even

more important in the context of a general election, as the Liberal Democrat

presence on the Centre-Left meant that the Labour Party would arguably

need to appeal to the Right in order to win a majority. Briefly analysing where

Labour’s support came from substantiates this. In 1997, the Liberal

Democrats gained 28 seats and their share of the vote remained the same,

whereas the Conservative Party under John Major suffered an 11.2% decline

in their share of the vote. Labour won the election in 1997 through gaining the

support of what were Conservative voters, the party had successfully

appealed to the Right. If Blair had not pursued the support of the media elite

and still won a majority – and one can only speculate as to whether this would

or would not have been the case – Labour in government could have then

implemented the 1992 policy of instigating a Monopolies and Mergers

Commission inquiry into Murdoch’s News Corporation. He instead attempted

to modify the editorial stance of the newspapers owned by the conglomerate

so that they were in his party’s favour, and he did so successfully.

As well as dropping the party’s commitment to launch an inquiry into News

Corporation, Blair actively worked to further the interests of Murdoch whilst in

government. Aside from moving the party to the Centre in terms of continuing

  28

the economic policies of the outgoing Conservative government, New Labour

facilitated Murdoch’s more specific special interests.

When News Corporation moved to take over Manchester United in 1998,

Secretary of State for Culture Chris Smith opposed the deal, and Secretary of

State for Trade and Industry Peter Mandelson referred it to the Competition

Commission, which ruled against Murdoch (Osler 2002: 185). The Sun then

launched a brutal smear campaign, highlighting their sexuality, and calling

them the ‘gay mafia’ running Britain. Incidentally, a year after the ruling in

2000, the Communications White Paper was published which included

proposals to relax the restrictions on cross-media ownership. The restrictions

had dictated, according to Osler (2002: 186) that “owners of national

newspapers with a market share greater than 20 per cent … cannot own more

than a 20 per cent stake in national or regional television and radio stations.”

Murdoch had been a victim of this, and one might contend that this was a way

in which the Labour government attempted reconciliation.

Osler notes, “for an Australian-born naturalised American citizen, Murdoch is

strangely perturbed by the prospect of Britain joining the euro” (2002: 186). It

would not be sufficient to explain Murdoch’s vehement opposition to further

EU integration because of an ideological objection to it, and analysis of EU

legislation regarding media plurality might provide a more coherent

explanation. In 1994, the EU Parliament voted in favour of the Fayout/Shinzel

Report, which urged the Commission to address the expansion of media

conglomerates across European borders and cross-media through the

introduction of a new Directive on media ownership (Doyle 2002: 158). EU

legislation prevents Murdoch purchasing terrestrial television channels in

  29

Europe because of his American citizenship (Osler 2002: 186), and The Sun

newspaper has always been against further EU integration, maintaining a

Eurosceptic editorial line.

According to Osler, a breakfast meeting between Murdoch and Blair in 1998

was arranged in order to come to a compromise on the party’s stance

regarding the EU, although no agreement was reached (Osler 2002: 186).

Subsequently, The Sun ran a front-page headline with a photograph of Tony

Blair under the headline “Is This The Most Dangerous Man In Britain?”

accompanied by an anti-euro commentary. Despite this, the Murdoch owned

newspapers were behind New Labour in 2001, with the Times calling for a

Labour vote for the first time ever, and The Sun maintaining their support.

Incidentally, the Communication Bill was published in May 2002, a year after

the general election dubbed “the quiet landslide”: the Labour Party all but

maintaining its position from 1997, losing just six seats. According to Milmo

(2002): “Under the 263 clause Communications Bill, a newspaper proprietor

who owns more than 20% of the national market will be allowed to buy

Channel 5 or a radio license”, however it still imposed restrictions on the

purchase of ITV. The relationship between New Labour and Murdoch

remained cordial during this time and his daughter, Elisabeth Murdoch, is a

close friend of Peter Mandelson. Murdoch visited Number 10 regularly for

discussions (Osler 2002: 187). Their relationship was so close, that during the

Labour leadership contest, the New Statesman suggested that an inquiry into

the tycoon’s past relationship with Downing Street might have handed David

Miliband victory (Crampton 2010). Matthew Norman writing for the

Independent argued a similar case, contending, “While attacking the Tories

  30

over Andy Coulson is justified, he might say, a little light phone-hacking

seems trifling next to allowing Rupert dominion over British policy on Europe”

(Norman 2010). More significantly – but not, however, concerned with

explaining the Labour Party’s movement to the Centre – is the alleged

influence Murdoch might have had over Blair’s decision to go to war with Iraq,

illustrated by the reports from the Press Association – after Liberal Democrat

peer Lord Avery submitted a Freedom of Information request – which noted,

“Tony Blair spoke to the media mogul Rupert Murdoch three times in the 10

days before the outbreak of the Iraq war - once on the eve of the US-led

invasion” (Guardian 2007).

Based on the Labour Party’s willingness to negotiate with Murdoch, one might

contend that Blair knew that he needed his influence if he was to command a

majority in 1997, but by engaging with the elite, the party had taken on a new

identity, placing elite interests above the national interest. Murdoch’s view on

economic policy is not dissimilar to that of the City (Shawcross 1997), and the

next chapter will illustrate how it was New Labour’s relationship with the elite

in the City of London that shaped Brown’s handling of the economy as

Chancellor of the Exchequer.

4. New Labour and the Corporate Elite

The City of London

It is only through critically analysing arguments that seek to explain why New

Labour gave corporations in City of London such prominence that will allow

  31

the space for an articulation of an alternative explanation based on the Wright

Mills approach.

Since Heath introduced Competition and Credit Control and removed

restrictions on lending, Margaret Thatcher had continued the high interest and

deregulation that had decimated manufacturing in the 1980s (Ramsay 2002:

130). There is little doubt that the financial sector contributes towards a

significant proportion of Britain’s GDP, although it is difficult to state the figure

exactly, at any point in time (Ramsay 2002). There are a number of competing

and highly varied claims as to exactly the proportion of GDP the City

contributes towards Britain’s economy. In 1996, Alistair Darling, the then

Shadow Economic Secretary with a special responsibility for City affairs,

produced a figure of 18% GDP and rising. However, in 1998 a survey by

British Invisibles concluded that the financial services sector accounted for 7%

of the British economy (Ramsay 2002: 129). Whilst a disproportionately large

financial sector provides jobs, it incurs costs in terms of infrastructure

spending in the City of London – the London Docklands Development

Corporation had received £1.8 billion from 1981 until 2002 (Ramsay 2002:

131) – and in terms of its impact on the wider economy.

One might contend also that the financial sector is an obstacle to social

progression. Its ability to offer the most highly qualified graduates

disproportionately higher economic incentives has led to a deficit of

engineering and physical science graduates, with students perhaps pursuing

degrees that would arguably increase their chances of working in the City of

London. Those that do graduate in the subject areas mentioned do not

necessarily opt to work in their field of study. Lord Sainsbury reported in 2006

  32

in response to the depute director of the CBI, John Cridland, that the number

of graduates in engineering and technology had indeed fallen by 10%, and in

the physical sciences by 11% (Andalo 2006). It is for this reason that the

defence of the financial sector, which cites the creation of jobs – around

330,000 work in the City – carries very little weight, as more and more of our

most talented graduates reject a career in a meaningful, more sustainable,

industry such as genetics – which would benefit society – in favour of an

inflated salary. Taking the example of genetics one step further, the science

budget would have to increase significantly in order to compete for talented

graduates, and other industries face the same problems. To summarise the

argument here, its mere existence suppresses growth in other areas of the

economy.

Therefore, together with the more subjective impact on the wider economy,

the financial sector has – as Ramsay rightly points out – had a negative

impact on manufacturing, a consequence of both high interest rates in the

1980s (Ramsay 1998a) and the movement away from traditional lending in

favour of more speculative practice, which ultimately led to the financial crisis

in 2008.

The unsustainability of an economy centred on the City of London was

something that Will Hutton alluded to in The State We’re In (1995), which

provided a credible antithesis to the supposed Thatcherite consensus that

there was no alternative but to embrace deregulation and free-market non-

intervention. Hutton’s argument was centred on the notion that Britain’s

economy had declined relative to other countries because of a long-term

economic dominance in the City of London, perpetuated by successive

  33

Conservative governments allowing a free rein to market forces (Anderson

1997; Hutton 1995). Hutton advocated a reassertion of the state’s role in

managing and regulating the economy, in reform of the financial system to

encourage long-term investment – shifting the focus away from short term

dividends, and a social partnership model of industrial relations based on the

German ‘social markets’ model, with – as Anderson succinctly puts it – “a

moderately expansionist Keynesian macroeconomics underpinning it”

(Anderson 1997: 38). ‘Stakeholder capitalism’ differed from Blair’s vision of a

‘stakeholder society’. Hutton contended that firms should have obligations that

are codified in law, not simply to shareholders but to suppliers, the financial

sector, consumers and their staff – as well as social and community

responsibility, and environmental consciousness (Anderson 1997: 38).

Criticism of Hutton stemmed from the apparent failure of the German model to

produce substantial growth, and Gordon Brown put this down to inflexible

labour markets (Anderson 1997).

However, it is possible to articulate a critique on Gordon Brown’s approach to

the economy in comparison to the relative success of Germany post-financial

crisis. Will Hutton noted shortly after the crisis hit that, “Gordon Brown

lectured Germany for not following the British example, not embracing

financial deregulation and the American business model. The hubris and

concessions to daffy free-market fundamentalism that justified all this is

mocked in Germany, and you can hardly blame them for some

schadenfreude” (Hutton 2008). As Hutton advocated for Britain in 1995,

Germany sought to base their economy around industry – with firms such as

ThyssenKrupp, Siemens and BMW – rather than the financial sector, which

  34

ultimately left Britain vulnerable when Northern Rock and HBOS collapsed

(Hutton 2008). The financial sector required an £800 billion bail-out and

caused a recession, mitigated only by the revert to Keynesianism by the then

Chancellor Alistair Darling, who kept up public spending and injected a fiscal

stimulus into the economy to prevent the onset of a depression (Macnab

2010). One might argue that New Labour’s economic policy was

unsustainable in the long-term, and the contention that there was no

alternative other than to pursue Thatcherite economic policies is coherently

contended here. The core of neo-liberalism – that the private sector was to be

viewed positively, and the public sector negatively – was a central theme once

Blair and Brown took office, promising no income tax increases, not to raise

public spending, no government intervention in the economy and therefore no

plans to re-nationalise assets that were privatised under the previous

administration (Ramsay 2002: 87).

The Bilderberg connection

The Labour Party began its courting of the elite in the City of London during

what became known as the “prawn cocktail offensive”, and in 1995 Blair and

Brown “did all they could to distance themselves from Hutton’s ideas”

(Anderson 2007: 39). It began with John Smith and Gordon Brown attending a

meeting of the Bilderberg group in 1991 – omitted from his 1998 biography by

Paul Routledge – and subsequently, articles in praise of New Labour’s

economic policies began to emerge in the financial pages of mainstream

newspapers (Ramsay 1998a: 106).

  35

The Bilderberg meetings take place annually and comprise of 140 guests who

attend only if they are in receipt of an invitation. Those who participate are

usually people of influence in the fields of politics, banking, business and the

media, although the conferences are closed to the public and no press

releases are issued (Bunting 2001). The 1991 meeting took place in Baden-

Baden, Germany and Rupert Murdoch was in attendance with Andrew Knight,

who was both the executive chairman and editor of News International and

director of News Corporation (Bilderberg 2011).

The Commission on Public Policy and British Business

The Labour Party’s infatuation with the corporate elite – particularly the

financial sector – is illustrated through an analysis of those that participated in

the Commission on Public Policy and British Business. The commission was

set up in 1995 by think-tank IPPR, an organisation that was founded by then

leader of the Labour Party John Smith in 1992 (Anderson 1997: 39), and

according to Anderson, “the very involvement of the IPPR was a signal that its

findings would be taken seriously by Blair” (Anderson 1997: 40). The

commission sought to “investigate the competitive position of the British

economy and the role that public policy should play in it” (Anderson 1997: 39).

The spokesperson for the commission was Clive Hollick, who funded IPPR

and was a Labour Party donor (IPPR 2011). Hollick had been a director of

Hambros Bank before becoming the chief executive of the JH Vavasseur

Group, a merchant bank that had been caught up in the 1973 secondary

banking crisis (McDonagh 2000). Hollick rebuilt the bank into a successful

  36

media company, renaming the group Mills & Allen International. MAI moved

into television in 1993 when Meridian Broadcasting, it’s subsidiary, won the

ITV franchise for South East England, and the following year it purchased

Anglia Television. By 1995 it was a major shareholder in Channel 5

(McDonagh 2000).

In March 2006, MAI merged with United Newspapers – publishers of the Daily

Express and Daily Star. Hollick then became the chief executive, and within

18 months, the Daily Express underwent a radical shift in its editorial stance.

Having supported the Conservative Party since its formation, the Express

became a supporter of Tony Blair’s New Labour (McDonagh 2000). After the

1997 general election, Hollick became a special advisor to Margaret Beckett

and Peter Mandelson, who were Ministers at the Department of Trade and

Industry (Westminster Parliamentary Record 2011).

Other than Hollick, the commission – chaired by the principal of the London

Business School, George Bain – was “heavily weighted towards business”

(Anderson 2007: 39). The only member of the commission from the workers

side of industry was John Monks, the general secretary of the TUC (Anderson

2007: 39). The commission included Bob Bauman, the chairman of British

Aerospace, now BAE Systems; Sir Christopher Harding who was the

chairman of Legal and General; and George Simpson, the managing director

of General Electric Company, who had also been on the board of British

Aerospace since 1990 (Financial Times 1990). David Sainsbury was also on

the commission, having switched allegiance to the Labour Party, pledging £1

million of financial support the very same year the commission was formed

(Bentley 2008). Bauman and Simpson were connected through British

  37

Aerospace, and in 1999 Simpson’s General Electric Company sold its

defence arm – Marconi Electronic Systems - to them for £7.7bn (Jane’s Navy

International 2009), illustrating the close corporate ties between those that

took part.

The commission’s report was launched in January 1997, titled Promoting

Prosperity: A Business Agenda For Britain. It endorsed a significant amount of

New Labour policies (Anderson 1997: 40), such as a low minimum wage,

tougher competition policy, tax incentives for long-term investment and strict

adherence to a tight fiscal and monetary regime (Anderson 1997: 40). The

report made clear that significant changes were not required in the way the

system worked, and it “gave wholehearted endorsement to the Tory market

liberalizations of the 1980s” (Anderson 1997: 40), despite Hutton’s assertion

that this was the root of failure in what he called “British capitalism” (Hutton

2005).

At the launch, Blair gave the report his full support, offering a “new deal for the

future… we leave intact the main changes of the 1980s in industrial relations

and enterprise” (Anderson 1997: 40). Blair insisted that New Labour’s

affiliation with the corporate elite was about creating a constructive

partnership with business rather than collecting endorsements and support

(Anderson 1997: 40). However, a partnership would have entailed the Labour

Party and corporations working together, perhaps negotiating and settling on

a series of compromises, rather than giving some of the wealthiest people in

the country the power to dictate policy. As Anderson asserts (2007: 40), “the

participants in the IPPR commission were by no means the only enthusiasts

for New Labour in the business world.”

  38

As Andy Burnham - the former Labour government Health Secretary - stated

in an interview with The Mirror during the Labour Party leadership contest in

2010, “When we won power in 1997 we were right to be pro-business but we

ended up being seduced by power and money. I'm proud of Labour's record

but I think this obsession with wealth goes back to before I became an MP in

2001. I was merely a low-ranking official at Millbank during the early days and

I didn't like what I saw. We went over the line. There was too much

arrogance, too much infatuation with courting elites. We should have backed

the rights of people in the workplace but instead we listened to the voice of

business too much. It meant that when the recession came, people thought

we were on the side of the bankers. It gave people the belief that we didn't

know who we were any more” (Reade 2010). Such insight highlights the

importance of analysing the subsequent influence of the corporate elite on

members of the Labour government, in order to depict exactly how the Labour

Party remained tied into elite circles after 1997.

Gordon Brown and Goldman Sachs

Gavyn Davies joined Goldman Sachs International in April 1986 and was a

partner between 1988 and 2001, where he was paid £2 million per year (BBC

2011). In August 2000, he made £15 million selling 219,000 shares in

Goldman Sachs, and his total shareholding in the year 2000 was worth £85

million (Davies 2000). Former head of BBC News Richard Sambrook

estimates his personal wealth to be in the region of £150m (Snoddy 2006),

  39

and his connection with New Labour occurred through Gordon Brown’s office

manager Sue Nye, who is his long-term partner (Ramsay 1998b).

In an essay for Variant Magazine, Ramsey alludes to the conflict of interest

between the financial sector and manufacturing with regards to economic

policy, more specifically the value of sterling. “Immediately after the Labour

election victory in 1997 [Gavyn Davies] dismissed concern about the damage

the rising pound was doing to British exporters” (Ramsay 1998b). Ramsey

describes his claim that the City is not directly affected by the exchange rate

as, “an extraordinary lie or self delusion” (Ramsay 1998b). The higher the

exchange rate, the more the financial sector benefits both from the cause of

such – specifically, increased interest rates – and the effect, in terms of higher

purchasing power. The City wants higher interest rates and freedom from

regulation, whereas the manufacturing sector would benefit from low interest

rates, state controls on the use of credit and more economic planning

(Ramsay 1998b), all of which are irreconcilable with the demands of the

financial sector. The value of sterling rose as interest rates increased

perpetually from 1997 through to 2001, after Chancellor Gordon Brown

granted the Bank of England independence (Ramsay 1998b), a move that

inevitably led to an exhibition of self-interest. In the decade leading up to the

financial crisis of 2007, “the pound was even more expensive than in the early

1980s, when the over-valuation of the exchange rate helped wipe out a sixth

of manufacturing capacity” (Elliott 2010).

Having handed the “most powerful single economic tool” to the City of

London, Gordon Brown then stated his concern that the 20% appreciation of

the value of sterling would damage industry, as it made exports more

  40

expensive (Ramsay 2008b). One might derive from the latter that New

Labour’s economic policies favoured the corporate elite in the financial sector,

rather than smaller-scale manufacturing enterprise.

Murdoch’s connection with the financial sector

Wright Mills illustrated the way in which the elite work together, are

interconnected – both socially and in business – and therefore take each

other into account when they make decisions (Wright Mills 1956: 11). Once

the Labour Party had discerned the importance of having those that control

the media, the opinion makers, on their side, their decision to weight

economic policies in favour of the City of London might be explained by an

analysis of how Rupert Murdoch is connected with the financial sector.

Lord Jacob Rothschild was appointed to the board of British Sky Broadcasting

in 2003 as Senior Independent Non-Executive Director and Deputy Chairman

of Murdoch’s organisation (Shah 2003). Rothschild has a corporate interest in

the financial sector, having co-founded Global Asset Management and J

Rothschild Assurance, now part of the St James’s Palace Group. Having

graduated from Oxford University, he joined the family bank N. M. Rothschild

& Sons before leaving in 1980 to pursue his own interests in the financial

sector (Shah 2003). Aside from a direct connection Rupert Murdoch has with

the financial sector in his association with the Rothschild family, a more

indirect connection is evident through his daughter. Murdoch’s daughter,

Elisabeth, married the grandson of Sigmund Freud, Matthew in 2001 (BBC

2001). Matthew Freud is the multimillionaire owner of PR company Freud

  41

Communications (Harris 2008) and, aside from being Rupert Murdoch’s son-

in-law, British Sky Broadcasting is one of Freud’s clients (Sanghera 2001). In

1997, Freud Communications is listed as a Labour Party sponsor, donating a

sum in excess of £5,000 (Aisbitt 1998). Freud had previously sold Freud

Communications in 1994, when it was known as Matthew Freud Associates,

and he continued to run the company until 2001, when he bought it back with

money from the directors, Barclays and Neil Blackley – a Merrill Lynch media

analyst – illustrating Freud’s connection to the financial sector (Sanghera

2001). It is also worth noting his clients, which include Pepsi, KFC, Asda and

Nike (Harris 2008).

Peter Mandelson, Minister without Portfolio from 1997 until 1998 when he

became Trade and Industry Secretary, acquired responsibility for the

Millennium Dome. Despite opposition from most of the Cabinet, Blair decided

that the project would go ahead (Carrell 2000). The Millennium Dome was

granted £400m of lottery money, and British Sky Broadcasting were among

an array of corporate sponsors (Carrell 2000). Prior to Mandelson’s

appointment as Secretary of State for the Department of Trade and Industry,

Freud allegedly set about galvanising support for him in the press, placing the

story Peter’s Friends in The Sun – incidentally a newspaper owned by Rupert

Murdoch’s News Corporation – which stated that Mandelson was a friend of

various celebrities, including Tom Cruise, whom he had never met (Guardian

2000). Mandelson subsequently appointed Freud to work on one of the

Millennium Dome’s senior committees (Harris 2008), and he had a significant

impact on the arena’s content (Guardian 2000). Despite his understanding of

politics being described by a Labour insider as “not that deep” and immature

  42

(Harris 2008), he had significant influence over Tony Blair (Sanghera 2001).

The Financial Times quotes him as saying: “Have I ever given the Prime

Minister advice? There’s no clever way of answering that. No. No. I have

expressed my opinions in political circles about, you know… I’m on various

steering groups, some of which report to the Prime Minister” (Sanghera 2001).

Freud organised the party that celebrated Labour’s general election victory in

2001, and played a role in recruiting one of his clients, Spice Girl Geri

Halliwell, to Labour’s party political broadcast in 2001, and persuading Chris

Evans to campaign with Tony Blair in 2005 (Harris 2008). According to John

Harris (2008), “it is the Freud’s talent for hosting high-powered get-togethers

that underpins their bond with Blair.” One well-placed source that had

observed Blair commented, “he just loves hanging out with celebs” (Harris

2008). In 2005, Blair’s former special advisor Kate Garvey became Freud

Communications’ head of public and social affairs (Harris 2008), and Blair’s

former health secretary Alan Milburn is paid £25,000 a year to sit on the

nutritional advisory board of one of Freud’s clients, Pepsi (Harris 2008).

It is possible to illustrate Elisabeth Murdoch and Matthew Freud’s connection

with the financial sector through their friendship with Jacob Rothschild. Shortly

after Elisabeth Murdoch’s 40th birthday party in 2008, Rothschild hosted a

dinner at his family’s villa in Corfu, where Peter Mandelson was also a guest

(Harris 2008). Rothschild’s interests extend beyond the financial sector. In

2005, the newspaper Sunday Business reported, “N.M. Rothschild, the

London merchant bank, is leading an initiative to finance, build and manage

Britain’s next generation of nuclear power stations” (Orange 2005).

  43

Jacob Rothschild and the nuclear power lobby

In order to demonstrate how the British power elite influenced the Labour

Party’s stance on nuclear power, it is necessary to go back to 1983. It is also

worth noting Ramsay’s observation in his essay Uncle Sam’s New Labour,

where he stated that in 1986, Tony Blair was a member of the Campaign for

Nuclear Disarmament (Ramsay 1998b).

In 1983, the Labour Party manifesto included the policy of nuclear

disarmament, which would have entailed the closure of nuclear power stations

(Labour Party 1983), and the removal of Britain’s nuclear weapons.

Incidentally, BAE Systems Submarine Solutions, a wholly owned subsidiary of

BAE Systems, operates one of the few shipyards in the world capable of

building nuclear submarines (Naval Technology 2011). Both Bob Bauman, the

chairman of BAE Systems, and George Simpson who had been on the board

of the same company, and sold the General Electric Company’s defence arm

to BAE, were members of the IPPR’s Commission on Public Policy and British

Business (Anderson 1997: 39), highlighted earlier.

Rothschild’s involvement in nuclear power was centred on his ambition to

“dominate the next phase of nuclear power development” (Orange 2005).

British Nuclear Fuels plc is an international company owned by the

government, involved in all stages of the nuclear process: designing reactors,

manufacturing fuel, decommissioning reactors and dealing with radioactive

waste (British Nuclear Fuels 2006). In 2005, Rothschild assembled a plan for

British Nuclear Fuels plc suggesting the means for funding nuclear power

through the private sector (Orange 2005). In April 2006, Rothschild was

  44

appointed by British Nuclear Fuels plc to handle the £1bn sale of the

organisation’s nuclear clean-up arm, British Nuclear Group (Pfeifer 2006).

David Sainsbury – whose role in the Labour Party’s election defeat in 1983

has already been illustrated – had, by 2003, donated over £11 million to the

Labour Party (Brennan & Hastings 1998). In October 2005, having been made

a Labour peer, he declared his support for nuclear energy in the House of

Lords, saying, “Lady O’Cathain offered me the opportunity of… agreeing that

nuclear is a renewable energy source – it clearly is so” (Mortished 2005). One

month later, Vincent de Rivaz – Chief Executive of EDF energy, which has at

least two contracts with British Nuclear Fuels plc (British Nuclear Group 2011)

– called for the relaxation of planning and licensing laws, arguing that if this

were to happen, new nuclear power stations could be built within ten years

(Parliament 2005). De Rivaz’s more explicit connection with the New Labour

government was through Gordon Brown’s younger brother Andrew, who is

EDF Energy’s Head of Press. Andrew Brown previously worked for Weber

Shandwick, where Philip Dewhurst – now Director of Corporate Affairs at

British Nuclear Fuels – was the UK Chief Executive (Private Eye 2006).

Weber Shandwick also provided consultancy services for British Nuclear

Fuels plc in 2005 (Register of members and clients 2005).

In 2009, EDF energy acquired British Energy, which owns and operates two

thirds of the UK’s nuclear power stations (EDF 2007: 74; Leake 2005).

Incidentally, de Rivaz shared corporate ties with David Sainsbury until 2010,

as Sainsbury’s supermarket offered ‘Sainsbury’s Energy’ in a partnership with

EDF (Williams 2011). The former Labour government Housing Minister,

Yvette Cooper, also has links to the nuclear industry through her father, Tony

  45

Cooper, who is the former chairman of the Nuclear Industry Association and is

currently the director of the Nuclear Decommissioning Authority (Wheeler

2010a). One might conclude that New Labour’s ties with the nuclear lobby

heavily influenced policy formulation with regards to energy prioritisation.

Mark Seddon, a member of Labour’s National Executive Committee, referred

to Sainsbury in an interview with the BBC, in which he said, “in any other

country I think a government minister donating such vast amounts of money

and effectively buying a political party would be seen for what it is, a form of

corruption of the political process” (Brennan & Hastings 1998).

David Sainsbury and Progress

Labour Party think-tank Progress declared their support for nuclear power in

an article titled, “End of the Honeymoon?” in 2010, in which it quotes Nadhim

Zahawi, “We missed the trick in the 1980s not adopting nuclear like the

French, and now they lead the world where we should have a competitive

advantage” (Marcelin-Horne 2010).

David Sainsbury’s influence over the Labour Party encompasses the Blairite

think-tank, Progress. Sainsbury has provided the organisation with substantial

funding, most recently in 2008 when he donated £250,000 (Progress 2011).

Derek Draper, Peter Mandelson’s former aide, founded progress shortly after

Tony Blair became the leader of the Labour Party.

In September 2009, Murdoch refused to endorse Gordon Brown and switched

the editorial stance of his newspapers, supporting the Conservative Party led

  46

by David Cameron instead (The Sun 2009). The outcome of the general

election was a hung parliament, which eventually brought the Conservative

Party and the Liberal Democrats together in a formal Coalition (Barnett 2010).

Following the resignation of Gordon Brown as Prime Minister, the ensuing

Labour leadership contest witnessed both David Miliband – the former

Foreign Secretary – and his brother Ed – the former Secretary of State for

Climate Change – compete against each other (Burns 2010). Ed was often

seen as being to the Left of his brother, illustrated by support from the UK’s

largest union, Unite (Elmhirst 2010) and endorsements from former Labour

Party leader Lord Kinnock (Wheeler 2010b).

Progress endorsed David Miliband (Ferguson 2010), offering him the platform

as keynote speaker at their Annual Conference in May 2010 (Progress 2010).

David Miliband was the only candidate that supported the so-called ‘Darling

plan’ to halve the deficit over four years (Parker et al. 2010) which would have

seen cuts of 20% to all non-protected departments (Eaton 2010), whereas

other candidates – including the eventual winner, Ed Miliband – said that the

Brown and Darling pledge was only a “starting point” (Parker et al. 2010).

Prior to the general election in 2010, former Chancellor Alistair Darling

announced tougher measures to tackle the deficit (Elliott 2010), the impact of

which would have been to push up the value of sterling, potentially hindering a

rebalancing of the economy in favour of manufacturing and exports (Elliott

2010).

Incidentally, David Miliband received £185,265 more in donations to his

leadership campaign than the second highest candidate, Ed Balls, who

  47

accumulated £28,419 (Mulholland 2010). With David Miliband’s position on

the economy in mind, it is worth breaking down the donations. Silvergate

Investments Ltd donated £50,000 to his campaign (Bowcott et al. 2010), and

David Claydon of UBS – the investment bank based in the City of London –

also donated £50,000. David Sainsbury donated £31,188 including the use of

office space (Mulholland 2010), and Progress staff and volunteers made up a

ninety-strong team of ‘DM4Leader’ activists (Mulholland 2010).

During the campaign, Matthew Norman suggested that David Miliband was,

“too attached to his mentor, Mr Tony Blair” (Norman 2010) and that

announcing an intention to launch an inquiry into New Labour’s relationship

with Rupert Murdoch might win him the contest (Norman 2010). No such

announcement was made.

5. Conclusion

I intended to illustrate the significant influence of the elite through an analysis

of the 1983 general election, when both the media and the corporate elite –

specifically Rupert Murdoch and David Sainsbury – contributed significantly to

Labour’s defeat. It was such influence, one might contend, that prompted the

Labour Party to seek the approval – and ultimately the influence – of those

that occupy the higher circles of power.

Whilst party donations are vital, I wanted to discern the level of political power

the elite had in Britain other than through robust financial means. This

  48

manifested itself in an analysis of the Murdoch family, their connections and

their influence, all of which the Labour Party evidently held in high regard.

The influence of the corporate elite, illustrated by the Commission on Public

Policy and British Business was explicit, and although there is scope for

corporations to work with the government to ensure that economic conditions

are pragmatic, the Labour Party gave the chief executives of the largest

corporations an unprecedented amount of influence over decisions regarding

policy, whilst refusing to acknowledge Will Hutton’s advice on the economic

restructuring Britain needed. Neglecting comprehensive regulation of the

financial sector ultimately left the country open to the financial crisis, such is

the level of Britain’s Gross Domestic Product that is derived from the City of

London.

Ed Miliband, leader of the Labour Party, recently apologised for the former

government’s failure to act, “of course, I am sorry for what happened in terms

of regulation. The question is what you do now. And that’s why I say you have

got to sort out regulation. It wasn’t just the failure of regulation that was the

problem, it was the banking system, the financial system, wasn’t doing

enough to support those future industries” (Green 2011). Evidently there was

an alternative.

Whether the Labour Party reverts back to a more social democratic approach,

given the anticipated decimation of Liberal Democratic support, remains to be

seen. Less reliance upon support from Conservative voters – and therefore

the elite that controls the media – suggests that this is plausible.

  49

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