The government of the United Kingdom has pulled off one of the great political con jobs.  The UK is wracked by economic woes caused by the great fiscal crisis of 2008, itself a product of a lack of proper regulation of the finance sector. And the frenzied program of slashing rather than stimulating being imposed by that living sneer, Chancellor of the Exchequer George Osborne, are manifestly making things worse.

The latest figures released by the Office for National Statistics yesterday show that GDP decreased by 0.2% in the fourth quarter of 2011. Britain is tanking.

Yet somehow — somehow — much of the electorate seems to have bought the story that the cuts are necessary because of the spending of the last Labour government, which lost office in 2010. In this bizarro parallel universe it isn’t out-of-control lending institutions that stuffed the UK’s economy, but the public programs of the last government. Gordon Brown — in his finest hour as Chancellor of the World Exchequer — probably did as much as anyone to act decisively in staving off global economic collapse in 2008, but this is popularly forgotten. It is as if, having been mugged, and helped, then mugged again, the British public is suffering from a collective partial amnesia, and is blaming the Good Samaritan in the middle.

Still, the Labour Party is not making matters any easier for itself. Opposition leader Ed Miliband inherited a party weary from 13 years of government under Tony Blair and then Brown, and encumbered by an ideological project that had manifestly imploded. The New Labour model of letting the financial sector run free and then spending the tax take of a booming economy on infrastructure and poverty alleviation has crashed beyond measure. In hindsight, New Labour was fools’ gold; a period of ersatz social democracy in which, in truth, redistributionist policies got a bad name, the working class were demonised, productive industry continued to decline, and the acid of market relations spread into health and education.

Inheriting the wreckage of a ruined vision, a party hollowed out by the obsessive centralising of Blair and Brown, and historical conditions of systemic global crisis, Miliband has sought  internal reform and a new ideological direction. But now the embattled opposition leader risks being suffocated by a rainbow of competing notions of what Labour should stand for. The social-conservative “Blue Labour” project associated with intellectual and peer Maurice Glasman, vies with the “purple” progressivism of Blairite think tank Progress; while the “in the black Labour” project of fiscal dries is denounced as “white flag Labour” by the influential pressure group Compass. It is perhaps unsurprising that Miliband and shadown chancellor Ed Balls struggle for cut-through and shared coherence.

In particular, the Blairite regiments continue to march on, insisting against all evidence and commonsense that there is life in New Labour yet. It is impressive chutzpah if nothing else. Wildly out of touch with what any serious party of the left in the UK should be making of the times, the Purple Book argues for “leaving the big state behind” and “high octane reform” for the public sector. One MP, 27-year-old Luke Bozier, a former web-campaign adviser to Blair, actually quit the party this week and deserted to the Tories. When still a member of the opposition, the departed Bozier, it seems, had wanted “Labour to be the party of business in the 21st century”, rather than the more conventional approach that Labour should be the party of, well, labour. In a departing statement Bozier said:

“Blair and New Labour had the reforming zeal to radically change our public services. It was a pro-aspiration, pro-business party, which made sense to me and to the country. The party has moved so far away from it that I no longer wish to be a part of it.”

While many within Labour were quick to denounce Bozier (though I’ve not heard the delightful expression “ratf-ck” to describe Bozier’s actions, which would be the preferred description among the Labor faithful in Australia) it seems that ideologically he does genuinely belong on the other side of Westminster. Good luck to a man who’s found his proper home. But among the Blairites at Progress, a new rallying cry was heard: “Remember Luke Bozier”!  It’s symptomatic not only of the internecine turbulence, but also the extent to which some of the right of Labour may have more in common with the government than their own rank and file.

Meanwhile, in UK society at large, things continue to strain and are torn. The great national institutions of the past 100 years — public tertiary education, the schooling system, the social safety net, and above all, the NHS — are being wrecked by the shock treatment of expensive and unnecessary neoliberal “reforms”. All over the country, lives are being churned by job loss and the human experience of the cuts. Memories of last year’s August riots remain fresh and the root causes have not been addressed. The reputations of the business and political elites remain in the doldrums. Almost daily, the Leveson inquiry set up in response to the News of the World hacking scandal discloses something freshly and ghastly.

The eurozone — which will have a grave effect on the UK if it collapses — is still teetering, and the UK itself could be no more if the final drive to Scotland’s independence is successful. Nothing seems certain except years of hardship and anxiety. It is January and wet and grey, and all is melancholy.

*Disclosure: the author is a member and past governing committee member of Compass