New Labour's ‘Paradox of Responsibility’ and the Unravelling of its Macroeconomic Policy

The Strategic Use of Macroeconomic Constraints

As the 1997 election drew closer, key party modernisers increasingly began to appeal to the abstract persona of ‘hard-working families’ to generate a populist language which carried within it the message that its macroeconomic policy was now to be deemed reasonable (Gould 2011, 340). If, in its own view, its policies could expect the support of people who exhibited values of common decency associated with the work ethic, then that was sufficient justification for sticking with them. When potential floating voters were being addressed, this populist message was contained within a broader series of statements about the pressures of an increasingly interconnected global economy. The constant reiteration of the presumed constraints of globalisation allowed the party to suggest that it accepted its circumscribed room for manoeuvre. Yet, it did so specifically by talking about the fears of potential floating voters, promising to use the constraints of new external economic realities to be as vigilant as possible in preventing inflation from exacerbating the livelihood struggles of everyone who worked for a living (Clarke 2004, 66).

However, this was not the only way in which it attempted to show that it was just as committed as the Conservatives to defending the value of middle-class wealth. In addition, New Labour also had a much more technical account of its limited scope of macroeconomic possibilities, one that had almost nothing to do with globalisation. When seeking endorsement for its policies from the guardians of considered economic opinion, it highlighted instead the appropriation for political purposes of the orthodox economics literature on credibility (Balls 1998, 118). The limit of its macroeconomic imagination was narrated to the elites of global finance, not in terms of what New Labour could and could not do because of new external economic realities, but in terms of what it would and would not allow itself to do in an attempt to forge a reputation among those elites for taking good economic decisions. The result was to align the party's 1997 manifesto pledges with exactly the same policies as it was telling potential floating voters would defend their standard of living against inflation, but the ensuing search for credibility was presented to global financial elites as the party's understanding of the right thing to do regardless of political context.

It might therefore be tempting to see New Labour's globalisation discourse as a mere sideshow, but it would be a mistake to write it off prematurely. The appeal to globalisation as a series of insuperable obstacles to traditional redistributive policies had an important effect in allowing the ‘New’ of New Labour to acquire common purchase (Watson and Hay 2003, 293). All of its spending commitments until the end of its first term in government were framed by the supposedly conditioning nature of global economic pressures (Finlayson 2003, 149). The important point in this respect is what the party could get its globalisation discourse to do for it. It was used most profitably to ensure that commitments to social assistance were subordinated to the needs of budgetary stability, so that a macroeconomic path could then be established that precluded a return to what it saw as the unelectable days of Old Labour (Crouch 1997, 354).

As Tony Blair stated just before the 1997 election, ‘Today's Labour Party, new Labour, is the political embodiment of the changed world … In a global economy, the old ways won't do’ (Blair 1996b and 1997a). He busied himself with playing down expectations of how generous his government might be, repeatedly railing against the familiar ‘panaceas’ of responding to every social problem by committing more public money to it (Blair 1996b). New Labour took it as a point of political principle that high levels of social assistance are not necessarily, in themselves, ‘a good thing’ (Mandelson and Liddle 1996, 26). Instead, it promised to be an effective keeper of the public purse, using the new environment of constrained macroeconomic choices to promote wise spending over Old Labour's presumed predilection for big spending. It moved quickly after the election to issue de facto contracts to all Whitehall departments, to be monitored centrally against Treasury-set targets for overall levels of public expenditure (Powell 2000, 52). Blair told those within the party who were concerned that Treasury control would introduce more disciplinary elements into social policy to ‘stop living in the past and move with the times’ (Blair 1996c). New Labour signalled its interpretation of what this entailed before the 1997 election by committing itself to excessively tight cash limits on public expenditure previously announced by the Conservatives.

New Labour welcomed these shackles as evidence of its obedience to what Blair called ‘new disciplines, new procedures and new thinking’ (Blair 1998). In Gordon Brown's words, ‘the answer to the uncertainty and unpredictability of ever more rapid financial flows is … the certainty and predictability of well understood procedural rules for monetary and fiscal policy’ (Brown 1999). Here we see the shift from globalisation as the discursive context for New Labour's changing macroeconomic priorities to the search for financial market credibility as their material cause. In a manner entirely consistent with the orthodox economics literature on credibility, it sought to ensure that the institutional apparatus was in place to convince others that it could no longer renege on tough counter-inflationary commitments when observing the social costs of its own actions (Watson 2007, 77–79). Throughout its first term, New Labour continually reiterated its commitment to institutional lock-ins which invalidated any serious discussion of changing macroeconomic course (Keegan 2004, 154). Blair talked about ‘a rigorous adherence to a disciplined fiscal and monetary policy’ (Blair 2000) and Brown about the need for ‘openness, accountability and transparency to keep markets and the public properly informed’ (Brown 2000). In New Labour thinking this translated into a requirement to ‘lay down rules’ for maintaining short-term budgetary stability and long-term budgetary balance (Brown 1996). Nothing else, apparently, would ‘convince the markets’ that it meant what it said (Blair 1997a) and ensure that ‘objectives and institutions are not only credible but seen to be credible’ (Brown 2000).

Macroeconomic Constraints and Welfare-to-Work Policies

According to Bob Jessop, New Labour was happy to retain the centralising state project of Thatcherism as a means of bringing Treasury influence to bear across Whitehall, and those changes to the internal mechanisms of government did little to alter the terms of the neo-liberal accumulation project it inherited. The one real difference in purpose, he argues, was in New Labour's challenge to Thatcherism's ‘distinctive “two nations” authoritarian populist hegemonic project’ (Jessop 2003, 4). In its place, the first Blair government attempted to tackle instances of poverty that had been created by the stratification policies of its Conservative predecessors (Fairclough 2000, 51). The ‘one nation’ elements of its approach are evident in the efforts it made to enhance access to social inclusion for members of the most disadvantaged sections of society, but without reversing the gains to economic well-being that the middle classes had made under Thatcherism. New Labour rejected the use of traditional strategies of income redistribution that increase the middle-class tax burden, arguing somewhat curtly that ‘equality of outcome … is neither desirable nor feasible’ (Brown, cited in Levitas 2005, 135). Instead, it limited itself to the aspiration of redistributing individual opportunities by providing people with the personal wherewithal to improve their own lots (Driver and Martell 1999, 246).

What New Labour had in mind in this respect was an increasingly ‘preventive welfare state’ (Powell 2000, 43). Its critique of Old Labour was that it had been overly defensive, seeking to preserve the essence of the post-war settlement against all attempts to renew its underlying institutional logics (Hay 1999, 13). It asked to be judged instead on how far it was able to move welfare functions beyond their traditional focus on repairing things that had gone wrong, so that it might be possible to stop those things happening in the first place. From the outset, a key New Labour theme was that ‘welfare is not only about acting after events have occurred’ (DSS 1998, 20). In this way, it tried to alter the personal resources of members of disadvantaged groups as a means of counteracting disadvantage at source (Stewart and Hills 2005, 9). It was happy to act on individuals’ behalf to identify the problems they were likely to experience, before then establishing programmes that equipped them with the skills to lessen that likelihood.

Foremost among the embedded behaviour that the first Blair government attempted to tackle was worklessness, which it viewed as a habit that became more difficult to break the longer the individual went without having a job (Fletcher 2008, 99). The poor experienced poverty, according to New Labour, primarily because they had lost contact both with the labour market and with the culture of job-readiness that comes from incorporation into the labour force (Lavalette and Mooney 1999, 9). Paid work, proclaimed Harriet Harman, the Blair government's first secretary of state for social security, is ‘the best form of welfare for people of working age’ (Harman 1997a), such that ‘the most potent social policy is a successful economic policy’ which allows for the full utilisation of individual resources (Miliband 1994, 89). In Blair's words, the ‘greatest challenge’ for New Labour was ‘to refashion our institutions to bring the new workless class back into society and into useful work’ (Blair 1997b). When the New Deal began to be introduced, Brown stated peremptorily: ‘Work now pays—now go to work’ (Brown, cited in The Observer, 5 September 1999).

The New Deal was not about the creation of new jobs so much as about the creation of job-preparedness to increase the competition for existing vacancies. The Department of Social Security's 1998 White Paper argued that ‘Our ambition is nothing less than a change of culture among benefit claimants’ (DSS 1998, 24). Prominent modernisers within the first Blair government consequently began explicitly to moralise paid work by listing the personal attributes that the economically active possessed. Brown insisted that ‘work is central … to individual achievement’ in so far as it provides additional sources of ‘self-esteem’ (Brown 1997a and 1997b); Harman that it ensures ‘autonomy’ (Harman 1997b); and Blair that ‘the key test of most benefits is whether they are helping people to be independent’ in the labour market (Prime Minister's Office 1998, 50). Paid work was therefore repeatedly presented as the salvation for those on benefits, justifying if necessary making them work for the benefits in order to produce a ‘something-for-something’ culture rather than leaving them ‘doing nothing’ (Blair 1996a). Ruth Levitas (2005, 157) has captured the essence of the policy perfectly in her characterisation of it as ‘performative inclusion’. The poor were told that they were responsible for their own social exclusion, and that this could only be reversed if they activated those aspects of their character that were lost amid the ‘something-for-nothing’ culture of passively receiving benefits.

Despite the strength of feeling that underpinned such interventions, though, the suspicion remains among many commentators that the choice of welfare-to-work policy was merely the means to a rather different end. Every time the first Blair government made qualifying criteria for benefit payments more exacting it defended its decision by saying that existing commitments were too costly to be rolled over indefinitely (Driver and Martell 1999, 249). Every time it came under pressure to explain its increasingly authoritarian position on welfare dependency it pointed to the inflationary effects of paying people to be economically inactive when labour markets tighten (Jessop 2003, 13). And every time it had good news to report on unemployment figures it did so by highlighting the reduced burden on the taxpayer of social assistance (Finn 2001, 336). For these reasons, Levitas (2005, 140, 146) concludes her acclaimed study of New Labour's social inclusion strategy by arguing that the policy was ‘clearly cost-driven … Paid work is, it seems, only necessary for social inclusion for those who would otherwise become a charge on the state’.

This allows me to return briefly to where I began in the Introduction. Whatever else might be said of it, New Labour's welfare-to-work policy at least had the merit of being consistent in its application with the stated aims of the party's macroeconomic objectives. ¹ Indeed, it is no exaggeration to suggest that it grew directly out of the decision to prioritise a conception of macroeconomic stability which focused full-square on meeting pre-announced inflation targets. Its macroeconomic policy depended upon exercising stringent control over public expenditure, and this is exactly what the welfare-to-work policy delivered. New Labour counted downward pressure on spending commitments as a sign of the policy's success every bit as much as downward pressure on unemployment figures. Richard Layard, for instance, a consultant to the Department for Education and Employment on the welfare-to-work strategy, describes as ‘striking’ the overall effect of the first three years of the policy's life, but only within a very limited definition of what made it so remarkable: ‘the government recovered in benefit savings and higher tax receipts about 60 per cent of what it spent on the New Deal. For the economy as a whole, benefits exceeded cost’ (Layard 2001, 5).

Welfare objectives were therefore clearly subordinate to macroeconomic objectives in this phase of New Labour. Its most obvious achievement in keeping in check the social assistance bill was to provide positive reinforcement for attempts to reproduce the impression of a party that could be trusted to run the economy effectively. The responsibility that the Blair government wanted benefit claimants to display in accepting help to re-enter the labour market was merely the microeconomic counterpart of its own attempts to signal to financial markets that it could cope equally responsibly with budgetary pressures. New Labour was able to ride out the financial crisis of 2001 without it turning into an obvious political event because it did not affect the underlying mode of welfare delivery and therefore did not multiply the ways in which voters could be drawn into its orbit. As a consequence, there was no need for the government to commit additional public resources if it was to meet its stated welfare goals and also no need for it to pressurise the underlying state of the public finances. As will become apparent in due course, none of this proved to be the case in the later financial crisis that broke out in 2007, which is why that particular crisis had such profound political effects for New Labour.

Asset-Based Welfare

The basic rationale for a system of asset-based welfare is to present people with incentives to treat as an enhancement of their character increasing independence from the state in late-life consumption. If they can be persuaded to tie up a proportion of current income in investments with long maturity dates, such investments might always pay out significantly more than the initial outlay (Prabhakar 2008, 27). The beauty of asset-based welfare from New Labour's perspective was that it promised to solve a pensions conundrum at least partially of the Blair government's own making. Its desire to target counter-inflationary credibility criteria within a basically low-tax economy left an increasing shortfall in state pension provision relative to cost-of-living indices. At the same time, though, it hoped that securing a reputation for responsible budgetary management paved the way for the sorts of asset price trends that would allow more and more people to make good that shortfall out of their own accelerated savings. Its Pensions Commission's final report flirted openly with the idea of making private pension saving compulsory (Pensions Commission 2006, 14), both as a means of compensating for the perceived lack of financial competence among the population at large and as a means of locking in the resources of credibility that would increase the chances of the asset ownership policy being successfully activated through speculatively priced markets.

Getting people to save a proportion of their current income would send what New Labour hoped to be a positive signal to international financial markets about the government's determination to individualise responsibility for resolving the state pension overhang, thus minimising the need to bring extra pressure to bear on the public finances to achieve a similar end. Second-term savings policy documents began ever more openly to challenge patterns of behaviour consistent with the rights-claiming culture of the post-war welfare state amid attempts explicitly to moralise private pension insurance. To this end, senior party officials borrowed liberally from the justificatory rhetoric surrounding the introduction of the welfare-to-work policy when championing the moral foundations of asset-based welfare.

New Labour came to power on the back of a series of ‘tough love’ speeches which emphasised how the individual would grow as a person through acculturation to the work ethic (Jessop 2003, 12). Subsequently, it said that individuals who were working for a living would better learn the value of money by having earned it, which in turn would lead them to make more informed choices about saving (Harman 1997b). By investing in assets that could be used as private pension insurance, anyone who made a decisive break with this aspect of the rights-claiming culture of the post-war welfare state clearly helped the government to keep its macroeconomic strategy on track. However, in New Labour's presentation of both welfare-to-work and asset-based welfare policies, there was also an element of the government helping these individuals to reinvent themselves as ‘better’ people: a worker subject was to be preferred to a passive benefit claimant and a worker-saver-investor subject was to be preferred to a simple worker subject (HM Treasury 2008, 7). In this way, New Labour provided itself with the rhetorical armoury for intervening really rather coercively into the way in which people managed their everyday lives.

According to Geoff Mulgan, former director of the think tank, Demos, and early advocate of New Labour, the reworked conception of politics for which the party stood was to a significant degree about trying ‘to mobilise changes in public behaviour’ (Mulgan 1997, 178). The Blair government's first minister of welfare reform, Frank Field, was equally as bold in stating that ‘One of welfare's roles is to reward and to punish. The distribution of welfare is one of the great teaching forces open to advanced societies’ (Field 1996, 111). As David Blunkett put it: ‘those committed to a 21st century welfare state have to cease paternalistic and well-meaning indulgence’ in order to allow the development of political spaces in which the government can forcibly require responsibility from those currently lacking this aspect of character (cited in Jones and Novak 1999, 5). Blair arguably went furthest along these lines, claiming that it was necessary to acknowledge that ‘a decent society is not based on rights. It is based on duty’ (Blair 1997c).

The emphasis on the responsible individual was a common feature of both the welfare-to-work and the asset-based welfare programmes. However, the question of to whom the individual was responsible changed subtly between the two. In the case of welfare-to-work, the relevant policy documents suggested that benefit claimants had a primary duty to society as a whole to end their lives of passivity and therefore to reduce their reliance on others’ contribution to social assistance. They had only a secondary duty to themselves to explore the gain in character that came from embracing the work ethic. By contrast, in the case of asset-based welfare the primary duty was to the self. The enhancement of financial autonomy in later life was also seen as dutiful action to prevent others from having to subsidise a full state pension, but this appears to have been of only secondary concern. Thus, the asset-based welfare policy reversed the welfare-to-work policy's claim that newly activated individuals profit from social inclusion first and only after that from heightened independence. The asset-based welfare policy was only latterly about social inclusion through mechanisms such as the Saving Gateway and the Child Trust Fund; heightened independence was always the priority.

Treasury documents from 2001 onwards increasingly asserted the moral propriety of private insurance as a social technology that might bring about additional psychological ease through enhanced reassurance that future eventualities were now covered (Finlayson 2008, 96–98). The life-skills education programmes envisioned by New Labour were thus extended from learning how to be job-ready to learning how to invest successfully (Froud et al. 2007). Government initiatives trumpeted the possibility that people would receive exactly the same boost to their self-esteem by being able to assimilate themselves to higher levels of financial competence as to higher levels of the work ethic (HM Treasury 2008). In such scenarios, Blair wrote in his memoirs (Blair 2010, 588–589), people ‘will want to … take more of the burden on themselves, rather than paying ever higher general taxation’.

The goal was to persuade an ever increasing number of people to release themselves from ‘something-for-nothing’ suppositions and provide through private insurance ‘a secure income throughout retirement’ (HM Treasury 2001a, 6). It was assumed that this would lead to ‘increased self-reliance in the long-term’, which in turn would ‘enhance people's capacity to be more independent’ (HM Treasury 2001a, 2, 6). According to the House of Commons Treasury Committee (2003, 4), the policy was all about ‘encourag[ing] people to build up an asset so that they can think about their future in a different way’. In turn, this reduced the government's role as guarantor of late-life well-being to ‘providing a significant component of relevant financial education’ (HM Treasury 2001b, 29). The ‘something-for-something’ dimension of New Labour's welfare policy meant that the decision of which investment strategy to adopt was left solely to the individual (HM Treasury 2003 and 2007).

The Collapse of New Labour's Macroeconomic Credibility

While New Labour repeatedly said that it wanted to re-imagine the apparatus of government as an ‘enabling state’ (e.g. Bevir and O'Brien 2001, 539–540), Alan Finlayson has made the highly perceptive observation that what actually arose was an ‘exhortatory state’ through which the government increasingly told people how to conduct their lives (Finlayson 2003, 162). However, New Labour did not deal only in exhortation. Wherever possible, it also changed the prevailing structure of incentives to enforce its desired behavioural change if other methods were insufficient. For current purposes, it makes an important difference in this respect that the main emphasis of New Labour's asset-based welfare policy was to moralise enhanced personal autonomy rather than enhanced social inclusion.

The strategy of enhancing social inclusion was much more conducive to the government creating mechanisms that would coerce the newly exhorted patterns of conduct. This is amply demonstrated by the welfare-to-work policy. New Labour treated social inclusion as a behavioural rather than as a material phenomenon: what mattered was not finding extra money for benefits but finding a means of making people perform their own inclusion by exhibiting their preparedness for work (Lister 2003, 430–432). Increased benefit conditionality was conducive to such a task, and it also had the added advantage given New Labour's focus on macroeconomic credibility of being the decidedly low-cost option (Finn 2001, 370). Increased benefit conditionality could also be used when trying to encourage conventional forms of savings activity among people with poor credit histories (HM Treasury 2003). As most of those people are either the out-of-work poor in receipt of benefits or the in-work poor in receipt of tax credits, the government could always enforce on them relationships with standard depository institutions by directing a proportion of their income into locked-down savings accounts (HM Treasury 2007).

However, the major preoccupation of New Labour's assets agenda was not enhanced social inclusion through granting access to conventional bank accounts so much as enhanced personal autonomy through accelerated savings activity. While much can be said in favour of helping people to overcome obstacles to starting bank accounts, saving small amounts of money at interest was never going to correct the projected future state pension shortfall with which the Blair and Brown governments wrestled throughout their lives. It hardly needs stating that it is a very different form of responsibility that New Labour attempted to pass on when asking people to purchase speculatively priced assets as a substitute for the state pension than if requiring them to save some of their benefits for a rainy day (O'Malley 2000, 475). However, the crux of its asset-based welfare policy was indeed to encourage people to risk already accumulated savings on the expectation that inflationary pressures within asset markets would continue to generate sizeable returns to money invested there.

The two asset markets to which individual savings were increasingly channelled during the Blair and Brown years were the housing market and the stock market. The housing market was appropriated directly as a mechanism for propelling the accelerated elements of the assets agenda, with New Labour being just as eager as its Conservative predecessors to extol the virtues of homeownership as a means of enhanced independence (Coates 2005, 171). The stock market was appropriated less directly and commanded fewer column inches when New Labour declared its success in allowing ‘hard-working families’ to secure additional autonomy in later life, but it was equally as important to the overall strategy. It was the route for savings invested in myriad mutual funds to be transformed into step increases in future consumption possibilities (Langley 2006, 920).

In these two instances we see perhaps the purest examples of Finlayson's exhortatory state in practice. In neither case could New Labour do anything other than stress the advantages to the individual of redrawing the boundaries of lifetime consumption patterns through investing larger proportions of current income in potentially high-performance assets. Having decided not to make contributions to private pension insurance schemes compulsory across the whole of society, it was powerless to mandate that money had to be transferred from individual deposit accounts into the housing and stock markets. It could do nothing to enhance the underlying level of liquidity in those markets in the interests of supporting prices unless it committed public money to the task. So, any move beyond mere exhortation required New Labour to pay for the privilege of doing so by finding public money that it had consistently argued was unavailable for more traditional forms of welfare spending. Even then, as it discovered in the wake of the recent financial crisis, it could offer seemingly blank cheque commitments to preserving asset prices and still it was only possible to stop house and stock prices from falling as far as they otherwise might have done rather than reversing the price trend altogether.

By delegating responsibility for late-life welfare increasingly to individuals, New Labour also rendered its own policy vulnerable to temporary seizures in the pricing structure of global financial markets. For both the housing and the stock market, the dominant price trajectory at any given moment of time results neither from the clarity of government exhortation nor from the liquidity provided by individual investors, but from perceptions held by traders themselves about the viability of the underlying market structures. The financial crisis that marred New Labour's last years in office arose precisely because confidence in that structure had already been shattered. Banks’ systematic exposure to the tangled webs of mortgage-backed securities trading had created a situation in which all traders stopped believing that their opposite numbers in other financial institutions remained creditworthy counterparties. The ‘hard-working families’ who had reacted most attentively to the government's pleas to conduct themselves responsibly and invest in their own futures consequently walked on to a potential hiding to nothing as the ensuing credit crunch threatened the imminent meltdown of asset prices.

New Labour's response was to fund a massive public intervention to restore stability to banks’ faltering balance sheets and, thereby, confidence in their wider operations. The aim was to reassert as quickly as possible banks’ ability to act ‘normally’, and from there to revive flagging confidence in the underlying structure of asset prices (Callinicos 2010, 87–88). The most obvious example was the decision to recapitalise the banks using public money, leading the Brown government to purchase stakes in one supposedly private financial institution after another in the autumn of 2008 (Financial Services Authority 2009). In important ways this should be seen as the recapitalisation of the stock market just as much as of the banks. The price of financial stocks was in apparent freefall when the policy was announced, dragging the whole of the stock market down as banks offloaded their own stock holdings in an attempt to raise cash to counteract the adverse perceptions of their creditworthiness arising from their own stocks’ difficulties. A moratorium on short-selling financial stocks was also introduced so as to bring extra reassurance to the trading environment as a whole (BBC News, 5 January 2009).

In tandem with these initiatives, the Brown government introduced a damage limitation exercise for the housing market, making it easier for banks to keep lending into the mortgage market as a means of maintaining a high level of house sales. The headline intervention of this nature was the Special Liquidity Scheme established in April 2008, through which banks were able to use their discredited mortgage-backed securities to purchase new issues of government bonds at a knock-down price (Muolo and Padilla 2008, 274–275). The Bank of England was subsequently instructed in November 2008 to use its cash reserves instead of government bonds as its side of the trade (The Guardian, 24 November 2008). Brown also announced an interest repayment holiday if circumstances necessitated for the 90 per cent of British homeowning households in properties valued at £400,000 or less (Prime Minister's Office 2008). The idea here was to use direct state support of mortgage payments to keep as many people as possible in their homes, thus preventing increases in supply from pushing house prices down still further and protecting, to a degree, the value of existing housing assets.

In their own terms, these interventions were remarkably successful. On Election Day 2010 the FTSE 100 index was trading at almost the same level as when the first signs of banks’ balance sheet problems came to light in August 2007, compared with the 49.8 per cent peak-to-trough fall the first two Blair governments had presided over between December 1999 and March 2003. House prices on Election Day 2010, meanwhile, had partially bounced back to be only 9.8 per cent below the record levels of October 2007, compared with the assessment of many economic experts that they would fall 40–50 per cent below that level before the bottom of the market was reached. However, New Labour paid a significant political cost for having had to make pretty much open-ended financial commitments to bring the banking sector back from the brink. Its early priority of the conditions for budgetary balance had already been somewhat revoked in any case because of a growing desire to find extra money for popular front-line public services but without raising the middle-class tax burden to do so (Keegan 2004, 299–300). As this period developed—what Mark Bevir (2007, 333) has evocatively called New Labour's ‘tired stage’—all pretence ended of trying to keep the public finances on an even keel. The money that was thrown at the difficulties in the banking sector did not allow the Brown government to retain control over New Labour's own cherished credibility discourse. As it surrendered its long-held lead on questions of economic governing competence, it was unable to stop the financial crisis from becoming a political event which fatally holed its re-election chances.

To oversee successfully the shift in underlying welfare subjectivities to the active worker-saver-investor, New Labour ignited a genuine paradox of responsibility which eventually undermined its whole political economy strategy. The government placed itself in a position from which it had to act, in effect, as guarantor of the wealth that had been accumulated on asset markets in the event of those markets experiencing severe dislocations. Any other stance would have laid it open to accusations that it had allowed those individuals who had behaved in the most responsible manner to be punished for such behaviour. As was demonstrated, though, by the sheer scale of the remedial support needed in the wake of the recent financial crisis, even acting as partial guarantor of asset prices in the midst of severe market distress is hugely expensive. It is far too demanding to be met out of current tax receipts and therefore requires current budgetary imbalances of an often unprecedented nature. The paradox is this. By stepping in to assist responsible worker-saver-investor subjects, New Labour sacrificed its reputation for economic governing competence in allowing the public finances to spiral out of control. Yet it placed itself in this position in the first instance only because its understanding of responsible macroeconomic policy required it to lecture the population on the advantages of welfare self-sufficiency and to promise to protect accumulated wealth with public money in the interests of such self-sufficiency. Its own account of what a responsible government is required to do to promote responsibility in its welfare citizens therefore had a self-destruct button contained within it. The end of New Labour as an electoral force duly arose when the financial crisis activated that button.