The last glimpse of a mainstream political party not assuming that Britain’s future lay in ‘the service economy’ (in general) and the City (in particular) was in 1988 when the Labour Party was doing its policy review after the defeat of 1987. The economic part of that review was done by a committee chaired by Bryan Gould MP. Gould represented a current within the Labour Party and wider labour movement at the time which was hostile to the bankers. It had concluded that the key structural conflict in Britain wasn’t between the classes, the Marxist view, but between the interests of the domestic and overseas sections of the economy; which in shorthand boiled down to the City on the one hand and manufacturing on the other. 1 This group included Neil Kinnock, as his 1986 book, Making Our Way, shows, and Bryan Gould, who was appointed by Kinnock to chair the committee on economic policy. Gould’s committee duly produced a detailed analysis of why the bankers had too much power and how to reduce it.
But the Gould committee report was rejected by Neil Kinnock as soon as it was finished. Gould tells us that, just before the report was due to be published, a group of Labour MPs came to see him to try to get it stopped or modified. One of them was the then rising star of the back-benches, Tony Blair. This was 1988. Gould went on to stand against John Smith for the leadership of the party in 1992 and lost heavily. New Labour – at its core the capitulation to the financial sector– could be said to have begun there.
We still don’t know why the Gould report was dumped. My guess would be that the group around Kinnock wanted to get elected more than they cared about the state of the British economy or the fate of its citizens; and having lost two general elections, decided that the bankers were too powerful to challenge. By this time – 1988/9 – the City had been largely sold off to American banks in the so-called big bang of 1986 and was well on its way to being an extension of Wall Street; and thus to be anti-City of London increasingly meant being perceived as anti-American. But for a while a Labour Party which was explicitly an anti-City of London party did seem a real prospect. For whatever reason, the policy review document on the economy was abandoned and Labour began the long process of making itself acceptable to the City of London – even though the City then was only about 2% of the British economy.