Prescott to run by-election battle Prescott to spearhead Labour attack

COLIN BROWN

Chief Political Correspondent

John Prescott is to take control of Labour's by-election campaign in Littleborough and Saddleworth, raising the stakes with the Liberal Democrats in the fight to win the seat from the Tories.

The deputy leader of the Labour Party briefed the Shadow Cabinet yesterday at a private strategy meeting about the importance of Labour fighting hard in the seat, despite the risk of denting Labour's rise in popularity if they do not do well against the Liberal Democrats.

The Liberal Democrats, who came second in the general election, believe they are poised to win, following the death of Geoffrey Dickens, who had a majority of 4,494.

Peter Mandelson, a Labour MP and former head of communications for the party, will be in charge of day-to-day management of Labour's campaign for the by-election which is likely to be held in late July. But Mr Prescott is taking overall control.

The Labour leader Tony Blair warned party supporters against complacency, following the continuing record lead over the Tories in opinion polls. In private, the Shadow Cabinet heard at their meeting in London that the party's own polling showed Mr Blair's modernisation of the Labour's policy and image is gaining support.

The Shadow Cabinet was told that private qualitative research for the party showed the trade unions were still a problem for Labour, but Mr Blair's victory in the battle over Clause IV was paying dividends.

The survey also showed that Labour remained strong on education and health issues. David Blunkett, the education spokes-man, had emerged as a strong voice for Labour by his defiant stand against strike action by teachers' unions. It also reinforced Mr Blair's attempts to present Labour as the party of the people, against the Tories as the party of privilege.

Mr Blair's strategy meeting will be followed up this weekend by a policy forum at Reading in which Labour leaders will put the finishing touches to five key policy papers on health, the mini- mum wage, the economy, law and order, and access to justice.

Mr Blair said: "The Labour Party is doing extremely well. We must not be complacent. In particular whilst the Conservatives continue a series of negative attacks on the Labour Party, we have got to set out for the country how we can put Britain back on its feet."

Labour's main themes this summer will be economic modernisation, moving the unemployed from welfare into work, the quality of public services, replacing the "quango state" with more elected people, and measures to tackle crime.

tA Labour government would pledge to seek sweeping reforms of the International Monetary Fund - including a "rapid response" fund to support currencies under speculative attack if such an attack is unjustified.

The economic document to be considered by Labour's national policy forum this weekend argues that the IMF should be given a "greater independent role" to audit the management of national economies so that it can step in to warn off speculators threatening currency crises.