IF another example were needed of how dead Old Labour is, surely its response on public sector pay provides it.

What do we have from Tony Blair and Chancellor Gordon Brown? A squeeze straight out of Tories' guidebook, backed up by the device that, in opposition, Labour used to resolutely condemn - a staged pay increase.

Nurses, doctors, teachers and troops are having to make do with rises of just two per cent, well below the inflation rate, for eight months from next April and becoming not much better off over a whole year - and certainly quite worse off in comparison to the 4.75 per cent average for all pay increases.

This may signify the government's determination to keep inflation in check - and, in any case, it is restrained by its two-year pledge to keep to the previous government's spending targets.

But it also points to its readiness to risk its first real battle with the unions.

That, surely, will be the real test of New Labour's pledge to govern as New Labour.

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