Whilst in government

Tony Blair became leader of the Labour party in 1994 with a message of modernisation, this was largely in response to the success Thatcher had during her period as Prime Minister. Thatcher had spent so long in power Labour realised that if they were ever going to get back into power then they were going to have to reinvent the party to make it electable. Labour had given up on trying to create a Socialist society and instead started to look for the best way to accommodate capitalism. "To the new Labour modernizers, the economic debate has centred on what model of capitalism is best for Britain; any idea of counterbalancing, let alone overthrowing, capitalism has been decisively rejected".

One of the most symbolic features of the new Labour party was that Tony Blair dropped clause four of the Labour party constitution, the clause was written on every membership card from 1918 to 1995 and it committed the party to Socialism. "The rewriting of clause four was thus a public break with Old Labour and the past"2. Clause four committed the Labour party, among other things, to common ownership of the means of the production, distribution and exchange and the most equitable distribution that may be possible3.

These Socialist principles had been what had appealed to Labour's natural voters: the working class, and Blair now wanted a wider electoral appeal. Although the dropping of clause four was of huge symbolic significance, Labour hadn't actually been committed to applying clause four to their policies. "In practice, Old Labour was committed to limited social ownership….limited redistribution of wealth and income and……limited planning"4. Blair, when he revealed that clause four was to be dropped, admitted that the Labour party should "say what we mean and mean what we say"5 meaning that although Labour has intended to be a Socialist party it rarely acted as one whilst in government.

The belief of how to run the economy changed from the ideology of old to new Labour quite dramatically, this once again is due to the impact of Thatcher. The economic theories of Keynes were universally accepted post war, this was all a belief in demand management and planning and public ownership. "Keynes regarded capitalism as having irrational qualities but he believed these could be controlled to save capitalism from itself"6. Old Labour had been committed to planning and public ownership to deliver their Socialist goals. It had brought many industries under nationalisation, it felt that planning by the state would be more efficient and productive than if it was privately run. "Keynes showed how market capitalism could be stabilized through demand management and the creation of a mixed economy…..one feature of the mixed economy was nationalisation".

This was carried on until the 1970s when Britain was continually performing badly and the public were tired with failing governments and looked towards Thatcher and her neo-liberal ideas to improve the country. Due to the fact that the Conservatives were in power for 18 years with the ideology of Thatcherism it meant that the political spectrum was shifted to the right, and after defeat after defeat for Labour, New Labour realised that they couldn't reverse everything that had gone on for the past two decades. "It (Labour) does not seek to extend the public sector or reverse privatisation to any significant degree. It does not propose to raise the overall level of taxation, but promises to adjust its incidence in a mildly more egalitarian direction"8.

New Labour has accepted many parts of the neo-liberal ideas such as privatisation whereas "old style social democracy saw free market capitalism as producing many of the problematic effects Marx diagnosed but believed these could be muted or overcome by state intervention in the market place"9. This is a stark difference between the ideologies of old and new Labour, with new Labour dropping the idea of state intervention and advocating some neo-liberal such as privatisation, a recent example of this being the air traffic control. New Labour is also including "changes such as globalisation, the rise of the information society, post-Fordist flexibility and increased insecurity".

As New Labour lose Keynes economics they herald the global age where they have to look at a broader picture as money is flying all around the world and "Governments have to keep taxation spending and inflation at levels which are comparable with those of competitor countries in order to attract capital, hence ruling out any looseness with inflation, tax rises or public spending". With old Labour in the past having been associated with running the economy badly and not having the public's trust, after the Conservatives running the economy extremely badly under Major with the Black Wednesday disaster, new Labour want to fix the image in the minds of the people that they are the party to be trusted with running the economy and so Gordon Brown is being very cautious so to get it right. To show how much New Labour had actually broken away from old Labour, Blair actually said he would stay with Ken Clarke's spending plans that had been set out in the previous Conservative budget before the 1997 election.