I think economics has become a bit of a false dichotomy and debate in this country.
You are either for small state, apparently right wing, though I'd say libertarian, or more equality and large state spending. Actually this is false because Blair's 'third way', IMO, took the worst of both worlds(left and right) not the best. His Tax policy was 'rightist', compared to the past, and was much laxer on the rich than Thatcher, creating more inequality and less social mobility. Then with the 'leftist' side, he spent huge amounts on the state.
The welfare state creates dependency and despair, and you create less jobs by spending here. It's wrong also to assume that chucking money at the NHS helps, especially when you are beginning the marketization of it, not defending it's philosophical, structural basis. And why waste money on endless bureaucrats that meddle with individual liberty and 'targets' in professions like healthcare and education, when we all know these statistics are politicized anyhow, what would be more important would be continuity, confidence these things were not being destroyed or underpaid, and letting people have their individual liberty back to do these jobs as qualified professionals. (This is linked to Blair's general stance on civil liberties and what he calls 'libetarian nonsense' )
It's clear that New Labour was a chronically overrated, massively damaging project that still influences our politics.
You know my 3rd way, my ideal economy would also take elements from the economic left and right-
Higher taxes on rich, and lower taxes on poor, from the left.
Far less state spending from the right.
Clearly, this makes far more sense. It is not only compatible with libertarianism and the civil liberties so precious that NuLab wrecked. It also would favour lower unemployment and less regulated more happy professions and industry.
It would also take the demoralising injustice of the tax system and give people a boost and more freedom on the lower income brackets, whilst still being supportive of business, but especially more supportive of smaller business against large corporations.
Even if the tax system would always vary from government to government, from my ideal, just like the minimum wage would or could, I think a smaller state is better for smaller business and less well off people, for the aforementioned and constant, long term reasons.
It could always be made more conducive to reducing inequality or helping opportunity, there would be flexibility, yet even if governments voted in went the other way, the other benefits of the libertarian model would still be there and there for the future.
If, alternatively, you consider governments with more regressive tax policies that fostered inequality, that also used greater state spending, the less libertarian model, everything else is stifling and oppressive in addition- the corporations monopoly and stranglehold enhanced, the greater welfare state and less jobs at the lower end, with less personal liberties, plus a sense of stagnancy and lessened hope for people at the bottom(not to mention horrible, dehumanizing bureaucracy).
I believe Blair's 3rd way is like Euro communism for a lot of people at the bottom, and then like a sort of corporate super-rich protectorate class with a monopoly.
Far from being what the 3rd way could be, a civilized libertarian country with a conscience, far more social mobility, and capitalism in it's best sense of competition and smaller and medium sized firms providing for the customer, rather than corporate giants forcing governments and people to serve them.
I also think my model is more encouraging of philanthropy and charity.
The fact that a smaller state means lower overall taxes means that whatever gradation of taxes, however distributed across the income scale, people would be happier to pay less, and society would be freer, and more humane with more individual liberty.