My view is that the Prime Minister [Tony Blair], far from lacking conviction, has almost too much, particularly when dealing with the world beyond Britain. He is a little too Manichaean for my perhaps now jaded taste, seeing matters in stark terms of good and evil, black and white, contending with each other, and with a consequent belief that if evil is cast down good will inevitably follow. I am more inclined to see the world and the regimes within it in varying shades of grey. The experience of the past year, not least in Afghanistan, has given more support to that view than to the more Utopian one that a quick "change of regime" can make us all live happily ever after.

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My central belief is that there are only two coherent British attitudes to Europe. One is to participate fully in all the main activities of the Union and to endeavour to exercise as much influence and gain as much benefit as possible from inside. The other is to recognise that Britain's history, national psychology and political culture may be such that we can never be other than a foot-dragging and constantly complaining member. If so, it would be better, and certainly would produce less friction, to accept this and to move towards an orderly and, if possible, reasonably amicable withdrawal.

...the basic fact of Tony Blair's election does make it, in my view, the most exciting Labour choice since the election of Hugh Gaitskell in December 1955. ... The most fundamental presentation issue for the Labour Party is one of openness or inwardness. Nothing does the party more harm than when it turns in on itself in a mood of proletarian sullenness. Tony Blair epitomises the reverse of this. ... I hope he will use this opportunity in favour of sticking to a constructive line on Europe, in favour of sensible constitutional innovation...and in favour of friendly relations with the Liberal Democrats. ... I hope Mr Blair will not lead the Labour Party further in a free-market direction. Good work has been done in freeing it from nationalisation and other policies. But the market cannot solve everything and it would be a pity to embrace the stale dogmas of Thatcherism just when their limitations are becoming obvious.

My broad position remains firmly libertarian, sceptical of official cover-ups and uncompromisingly internationalist, believing sovereignty to be an almost total illusion in the modern world, although both expecting and welcoming the continuance of strong differences in national traditions and behaviour. I distrust the deification of the enterprise culture. I think there are more limitations to the wisdom of the market than were dreamt of in Mrs Thatcher's philosophy. I believe that levels of taxation on the prosperous, having been too high for many years (including my own period at the Treasury), are now too low for the provision of decent public services. And I think the privatisation of near monopolies is about as irrelevant as (and sometimes worse than) were the Labour Party's proposals for further nationalisation in the 1970s and early 1980s.

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In retrospect we might have been more cautious about allowing the creation in the 1950s of substantial Muslim communities here, although when one observes the, in some ways, greater problems which France and Germany have in this respect, it is an illusion to believe that in the integrated world of today any major country can remain exclusively indigenous.

We have been building up, not dissipating, overseas assets. The question is whether, while so doing, we have been neglecting our investment at home and particularly that in the public services. There is no doubt, in my mind at any rate, about the ability of a low taxation market-oriented economy to produce consumer goods, even if an awful lot of them are imported, far better than any planned economy that ever was or probably ever can be invented. However, I am not convinced that such a society and economy, particularly if it is not infused with the civic optimism which was in many ways the true epitome of Victorian values, is equally good at protecting the environment or safeguarding health, schools, universities or Britain's scientific future. And if we are asked which is under greater threat in Britain today—the supply of consumer goods or the nexus of civilised public services—it would be difficult not to answer that it was the latter.

Undoubtedly, looking back, we nearly all allowed ourselves, for decades, to be frozen into rates of personal taxation which were ludicrously high...That frozen framework has been decisively cracked, not only by the prescripts of Chancellors but in the expectations of the people. It is one of the things for which the Government deserve credit...However, even beneficial revolutions have a strong tendency to breed their own excesses. There is now a real danger of the conventional wisdom about taxation, public expenditure and the duty of the state in relation to the distribution of rewards, swinging much too far in the opposite direction...I put in a strong reservation against the view, gaining ground a little dangerously I think, that the supreme duty of statesmanship is to reduce taxation.

I therefore think that our negotiations have achieved a satisfactory prospectus for an electable left-of-centre alternative to Thatcherism. And that was what the SDP was always intended to be: a party which was free alike of proletarian sullenness or of bourgeois triumphalism and which challenged both the old arrogance that the establishment always knows best (particularly if it can use secrecy to prevent anyone judging whether it really does) and the new heresy that the mystical entity of "the market" can run everything. A controlled economy is not much good at producing consumer goods. But "the market", in terms of protecting the environment or safeguarding health, schools, universities or Britain's scientific future, cannot run a whelk-stall. And if asked which is under greater threat in Britain today, the supply of consumer goods or the nexus of civilized public services, I unhesitatingly answer the latter.

They [the Government] argue that if the rich are made rich enough, some wealth will spill over to make the poor less poor. There is no sign of that happening. On the contrary, the gap has widened. The number of those below the poverty line and with little hope of rising above it has grown inexorably. Connected divides become deeper and wider—that between the employed and the unemployed, that between the north and south, and that between those who share prosperity and those to whom it looks like a closed fortress. The Budget...does nothing to counteract that. ... If I were the Chancellor, I would be deeply apprehensive for the future cohesion of our society under his policies.

We have Mr. Wright's allegation that a surveillance operation was mounted against Lord Wilson of Rievaulx when he was Prime Minister in the mid-1970s...Many criticisms can be made of Lord Wilson's stewardship—I have made some in the past and I have no doubt that I may make some more in future—but the view that he, with his too persistent record of maintaining Britain's imperial commitments across the world, with his over-loyal lieutenancy to Lyndon Johnson, with his fervent royalism, and with his light ideological luggage, was a likely candidate to be a Russian or Communist agent is one that can be entertained only by someone with a mind diseased by partisanship or unhinged by living for too long in an Alice-Through-the-Looking-glass world in which falsehood becomes truth, fact becomes fiction and fantasy becomes reality. The result of the allegation has been substantially to fortify the view that I expressed in a letter to The Times 18 months ago, which is that MI5 should now be pulled totally out of its political surveillance role.

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The combined efforts of Government policy since 1979 have been not to improve but substantially to worsen our competitive position. We have gone from a huge manufacturing surplus of £5.5 billion in 1980 to a 1986 third quarter deficit of £8 billion a year...Even with oil production continuing for some time, the current account has gone from a £3 billion surplus to a deficit predicted by the Chancellor of £1.5 billion...Sadly, the Government's great contribution, having refused to stimulate the economy by more respectable means, is a roaring consumer boom, which there is not the slightest chance of their moderating before an election. A roaring consumer boom does not, to any significant extent, mean more employment. In our competitive position, worsening under the Government, it means overwhelmingly higher imports, a still worse balance of payments position and a classic path to perdition. To have produced, after seven and a half years, the combination of total monetary muddle, a worsened competitive position, a widespread doubt in other countries as to how we are to pay our way in the future, a desperately vulnerable currency and the prospect of an unending plateau of the highest unemployment in a major country in the industrialised world is a unique achievement over which the Chancellor is an appropriate deputy acting presiding officer.