TWO WEEKS ago, David Hill, Labour's Director of Communications, presented John Smith with what amounted to a psephological bombshell: highly confidential voter research which raises the question of whether the party can ever win again.

The research was based on only a small number of interviews. But they were in-depth - the sort that anyone testing a commercial product would set great store by - and involved a carefully selected group of people: lower middle- class and skilled working-class people aged between 25 and 40 living in the South of England. Most important, all of them had contemplated voting Labour in 1992 but had finally decided, in some cases only in the privacy of the polling booth, to switch to the Conservatives.

The devastating truth for Mr Smith was that nothing has changed. If these people fooled the opinion pollsters in April, they are possibly still fooling them now. Despite one of the most unpopular governments of modern times, despite the Opposition's double-figure lead in the polls, not one of these people would vote Labour if there were an election tomorrow.

Mr Smith received the research results as doubts about his leadership, the performance of his front bench and the Labour Party's direction bubbled to the surface. Mr Smith himself, according to Westminster gossip, lacks dynamism; Frank Dobson, the employment spokesman, has failed to land knock-out blows on the rising jobless figures; Jack Cunningham, the shadow foreign secretary, is making too little impact on Europe; a few critics even mutter about Gordon Brown, the Shadow Chancellor, blaming him for Labour's lack of a credible alternative to the Government's economic policies.

Last week, some of the complaints became embarrassingly public. Bryan Gould, Mr Smith's defeated rival for the leadership, said it was 'pointless to pretend there is not some degree of concern about what is seen as a lack of direction, and perhaps even a lack of vision'. A leaked statement prepared for the Labour Co-ordinating Committee drew the most unfavourable of contrasts between the British Labour Party and the American Democratic Party. The latter had been galvanised by Bill Clinton. The Labour Party 'is laid back to the point of indolence . . . the Blackpool party conference (in October) proceeded as if Labour had never lost the election . . . The two attitudes which pervaded Blackpool were 'one more heave' and 'we wuz robbed' '.

The co-ordinating committee is not, as it happens, a body of formal significance. It is an essentially soft-left 'Kinnockite' grouping, made up mainly of young, middle-class, Labour 'pols'. Michael Craven, its secretary, who wrote the critical statement, is a lobbyist and consultant. But its membership, though only a few hundred, includes many of the political advisers to the party's senior front benchers.

The statement provoked a predictable response from the traditionalist left of the party. 'It must be Christmas,' Dennis Skinner contemptuously told a colleague. 'The yuppies are attacking Smith.' John Prescott, the transport spokesman (and a failed deputy leadership contender) went on television in aggressive mood. The leadership was awaiting reports from committees on tax policy, links with the unions and electoral reform. The critics were trying to pre-empt debate, he said. On Tuesday, at a meeting of the party's campaign committee - chaired by Margaret Beckett, the deputy leader - Mr Prescott challenged the reformers head- on. The abandonment of unpopular policies, he and some colleagues argued, had not won Labour the last election. Would it not be better to consolidate Labour's traditional base rather than compromise further in an attempt to win back voters who had possibly turned their backs on the party for good?

THESE ARE the questions - rather than the day-to-day performance of the Opposition front bench - that really trouble Labour. The Tories, after all, have 65 more Commons seats than Labour; vigorous and forceful opposition is difficult when you have just been rejected by the electorate and have no imminent prospect of forming a government. Labour's front-bench performances may be patchy; but no more so than at equivalent stages in other parliaments.

The important debate is over what, if any, vision the party should construct if it is to defeat the Tories in an election that is still highly unlikely to be called before 1996. This is where the research that Mr Hill delivered to the party leader becomes so crucial. Giles Radice, a former education spokesman, now a prominent backbench reformist, had already drawn uncomfortable conclusions from earlier research for the Fabian Society.

In a pamphlet aptly named Southern Discomfort, Mr Radice said the party must drastically alter its tax policy, shed its image of trade union domination and scrap Clause IV of its constitution which nominally commits it to wide-ranging state ownership. But the findings Mr Hill delivered go further. They suggest, on the one hand, that Labour lost the April election because too many voters saw it as an untrustworthy, inexperienced 'party of the past', in favour of minorities rather than ordinary men and women.

But, on the other, it makes it clear that voters saw the changes of policy between 1983-92 as a mark of inconsistency in the party leader. In other words, the Tory charges about Neil Kinnock's U- turns on Europe, defence and nationalisation struck home more deeply than was realised before.

The disturbing news for Mr Smith is that the negatives have not been removed by the change of leadership. Labour, said many of those interviewed, did not understand the 'aspirational' working classes who set the highest premium on their own and their family's financial well-being. The party, they thought, was a further threat to a precarious prosperity already threatened by recession. Most startling of all, perhaps, even quite sharp policy changes seem to take years to remove deep-seated prejudices against Labour. For example, the party abandoned its opposition to council house sales well before the 1987 election. Yet, five years on, many still believe Labour does not support the homeowner.

That is why the decisions that Labour makes now - about image, policy and internal democracy - are so important. And that is why the real debate for Labour is not so much about John Smith's performance in the daily sprint at the Commons despatch box but about where he intends to lead the party over a longer distance.

MR SMITH is a different leader from Neil Kinnock in many more respects than is sometimes realised. Mr Kinnock believed that a day was wasted in which the party was not kicked into some further concession to electability. But he did not have Mr Smith's lawyerly ability to consume briefs, to read everything put before him - from all the 'Iraqgate' documents to every policy report that goes to the National Executive Committee. He tends to do his reading before he makes decisions; and, since he is a more self- contained man than his predecessor, he tends to make them alone.

Mr Smith, therefore, is slower to show his hand than Mr Kinnock. On Europe, he has been typically canny. The Euro-sceptic left in the Shadow Cabinet still believes that it is possible to find a way of inflicting a government defeat; on the other hand, Mr Smith looks unlikely to allow Labour to sabotage ratification of the Maastricht treaty.

Again, on reform of the party's trade union links, Mr Smith bides his time. In the Shadow Cabinet room behind the Speaker's chair in the Commons, he has replaced Mr Kinnock's Welsh miners' banner with a Turneresque scene of the Thames at Westminster. Although not instinctively radical on the trade unions (as an MP, he is sponsored by one), he did commit himself to 'one member, one vote' democracy in the Labour Party when he became leader in July. A draft report of the review committee on the union link would therefore have been an embarrassment if it had been published in that form. It was archaic in its repeated restatement of 'collective values'; and its proposals for a Helot army of 'registered supporters', assigned to Labour by the unions, was an affront to modern notions of party democracy. But Mr Smith made his worries known and the committee's stance has shifted. It has agreed to present the leadership with 'options' rather than recommendations.

On electoral reform, Mr Smith is more lukewarm than his predecessor. Here, he may be in tune with the party mood. The balance has shifted away from proportional representation. But, again, Mr Smith will wait - this time for the report of a committee under Professor Raymond Plant. So also with tax and benefits policy. Mr Smith, as Shadow Chancellor before the election, proposed raising taxes for anyone earning more than pounds 21,000 a year - Bill Clinton's threshhold, by telling contrast, was dollars 210,000 a year. It was a commitment partly forced on him by the party's huge spending commitments on pensions and child benefits, made two years' earlier.

He has done nothing to disabuse the party of the idea that the tax proposals helped lose the election. But, once more, he will wait - this time for the party's Social Justice Commission. 'He will wait,' one close aide said last week, 'for all these reports to come in. Then he will read them and dissect them to within an inch of their lives. And then he will come to a decision.'

There remains the question of what wider vision Mr Smith can present for the next election. Labour is not all that well served - with the brave exception of the Fabian Society - with intellectual powerhouses, as Margaret Thatcher was in the late 1970s by the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. Labour has the Institute of Public Policy Research - borrowing the Tory trick of camouflaging political commitment in an innocuous and academic-sounding title - but this is more closely associated with the party than any of the think-tanks that helped Mrs Thatcher. In effect, it supplants the inadequate research department at Labour headquarters in Walworth Road. It has produced detailed and useful reports; but it has little capacity to think the unthinkable as the Thatcherite think-tanks did.

The biggest anxiety about Mr Smith is that he will put too much emphasis on altruism as a central theme. Though no class warrior, he believes instinctively that the better-off should have regard to the interests of the poor. This is not easy to sell to the 'swing' voters in the C1 and C2 social classes who, for the purposes of taxation, may well count among the better- off. It is not even easy to sell to the D and E social classes, many of whom, as one Shadow Cabinet minister observed last week, want to become C2s.

The alternative view is that it is better to win back voters by appealing to their enlightened self- interest. If you can convince better-off people that it is in their own interests to have a society in which poverty and unemployment are progressively reduced - because they will have to spend less on protecting their homes against burglary and they need not be so bothered by beggars in the street - then you may get their votes.

After Mr Clinton's victory in America, there is a temptation for Labour to sit back in the belief that, as after Kennedy's victory in 1960, the Anglo-Saxon political climate has changed in its favour. The importance of the Labour Co-ordinating Committee's statement was that it suggested that the Clinton triumph has unpalatable lessons for Labour. 'The message,' the statement said, 'is not that the tide of history turned; it was that Clinton totally repackaged the Democrats to appeal to working-class Reagan and Southern Democrats . . . It was a message which loudly rejected the tax and spend, or altruistic approach, of the old Democrats. It appealed to working people on the grounds that they would be better off under Clinton'.

The challenge for Mr Smith is to recognise that altruism is not enough. Some reformists in the party worry that he is too much the outstanding barrister, mastering a brief, discharging it in Parliament as he would in court and then merely moving on to the next case; that in the words of one senior backbencher 'he will ignore the important for the urgent'. But there are signs that he is ready for a more vigorous and open debate on Labour's future vision. The research delivered by Mr Hill will have told him that time may be shorter than he thought.

The panel consisted of MPs Jerry Hayes (Cons), Austin Mitchell (Lab) and Simon Hughes (Lib-Dem) under the chairmanship of Stephen Castle, our political correspondent

DAVID BLUNKETT, health spokesman. New hope of the Euro-sceptic left, now that Bryan Gould has left the Shadow Cabinet.

Panel's verdicts: 'Robin Cook is a hard act to follow and the big issue (Tomlinson report proposing closures of London hospitals) is difficult to respond to. Perhaps less impressive first six months than expected.' 'Very good performances. Manages to conform in party terms without seeming to.' 'Hasn't quite made the transition from local government brief yet. Not wrong-footing Virginia Bottomley (Secretary of State for Health).'

Average mark: 7/10

FRANK DOBSON, employment spokesman. Affable and doughty, but has made less impact than he should on such a high-profile issue. Popular with MPs of all parties.

Panel's verdicts: 'Frank fits this job well. Predictable blend of bluster, humour and commitment, but has still to reveal how Labour's objective of full employment would be achieved.' 'Doing his best against a genial foe (Gillian Shephard).' 'Solid, reliable, honest.'

Average mark: 7.3/10

JOHN PRESCOTT, transport spokesman. Plain-speaking politician from the Labour left. Came through an unsuccessful deputy leadership campaign with his reputation enhanced. Since then has been quieter than usual.

Panel's verdicts: 'Good - and in tune with the public view. Better now he is less often seen saying: 'I told you so' .' 'Knows his business but has sunk without trace. Maybe the more he's off our screens the better for him.' 'Hard-working, radical instincts. Honest, tough Rottweiler. Labour's bulldozer.'

Average mark: 6.7/10

ROBIN COOK, Trade and Industry spokesman. Outstanding debating skills displayed to great effect in Iraqgate scandal. But not universally loved by Shadow Cabinet colleagues.

Panel's verdicts: 'Top-notch performances. Invents his portfolio as he goes.' 'A star. He has the knack of being in the wrong portfolio for the Government - whether health or trade and industry. A formidable debater but not so good on television.' 'The best of the Shadow Cabinet. Confident and convincing.'

Average mark: 8.7/10

GORDON BROWN, Shadow Chancellor. High profile heavyweight but performances are becoming a bit repetitive. Not yet provided the new thinking on the economy that some expected of him.

Panel's verdicts: 'Brilliant in 10-

second bursts. Very good at making lists of where the Government is going wrong. Not so good at alternatives.' 'Too media clever. In grave danger of being bitten by his own sound bite - has a tendency to smirk after each one.' 'Needs to be aware of the danger of the superficial rather than in-depth knowledge.'

Average mark: 7.3/10

JACK CUNNINGHAM, Shadow Foreign Secretary. Has difficult task shadowing Douglas Hurd, probably the most authoritative member of the Government. Criticised for not leading from the front on Europe.

Panel's verdicts: 'Sure touch but lazy.' 'After an almost silent summer, a not much less silent autumn. 'Still learning' would be a generous verdict. It would be interesting to discover how many people are aware he does this job.' 'Impossible job. Doing as well as could be expected.'

Average mark: 6.7/10

TONY BLAIR, Shadow Home Secretary. Lower profile than in last job as employment spokesman, in which he made his reputation as a rising star.

Panel's verdicts: 'Not bad, but not up to expectations. A little too nice to shadow Kenneth Clarke (the Home Secretary). Commons set-pieces a bit like Bambi versus Vlad the Impaler.' 'Generally persuasive but occasionally too much of the lawyer concentrating on the small print.' 'Political profile is that of a young Gaitskell, but not as solid.'

Average mark: 7/10

MARGARET BECKETT, Deputy Leader and Shadow Leader of the House. Has made no errors, but failed to make an impact in the job for which she was John Smith's preferred candidate.

Panel's verdicts: 'Ponderous, solid to the point of stolidity.' 'Does not yet carry very much weight in the public eye.' 'Hasn't set people's pens on fire, but her only chance to score points is by crossing swords with Tony Newton (Leader of the House) - a difficult thing for anyone to do.'

Average mark: 5/10

JOHN SMITH, Labour leader. Steady but undynamic start. Accused by some of soft-pedalling reform. Despite reputation as good Commons set-piece debater, has proved disappointing at Prime Minister's questions.

Panel's verdicts: 'Carries authority. No killer instinct but the best opposition leader we have got.' 'Had the Government on the rack in the last election; would have been the perfect leader for the 1992 election.' 'Content to let the Government set the agenda . . . Solid, cautious, unadventurous . . . Much less dynamic than his predecessor.'

Average mark: 5/10

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