Labour rift opens over economic policy: Smith and Brown urged to aim at full employment and to adopt alternative economic policy including devaluation of the pound

A GULF between the Labour frontbench economic team and rank and file MPs threatened to open up yesterday as a backbench member berated the leadership for adopting monetary policies barely distinguishable from those of the Government.

The outspoken attack by Brian Sedgemore, a member of the Commons select committee on the Treasury, was accompanied by a call to John Smith, the Labour leader, and Gordon Brown, shadow chancellor, to press for a 12 per cent devaluation of the pound within the European exchange rate mechanism.

A speech aimed at the respective jugulars of Mr Smith and Mr Brown to party members in Mr Sedgemore's Hackney South & Shoreditch constituency last night contained the thinly- veiled threat of an open backbench rebellion if the leadership fails to adopt an alternative economic policy and revive the commitment to the concept of full employment.

Mr Sedgemore, an ardent pro- European, told the Independent he believed the speech reflected the views of the bulk of Labour MPs. 'The backbench has suffered in silence,' he said. 'We have become so respectable and have shut up about these issues because we wanted to win the election.'

Deriding the Labour front bench's 'unexceptional' proposals to regenerate the housing market, training and investment as no consolation for its 'blunted' critical faculties on macro-economic policy - issues such as exchange and interest rates - Mr Sedgemore told his audience: 'Why should devaluation be a word that dares not speak its name for Labour?

'The Tories in the midst of their own creation are not being put under real pressure.'

Mr Sedgemore said devaluation would not provide a complete economic cure but was a necessary step on the road to economic recovery. Neil Kinnock's idea of a realignment of all currencies within the ERM would be blocked by the Germans. There would also be opposition from other EC countries to the proposal by Robin Cook, shadow trade and industry secretary, for a co- ordinated reduction in interest rates.

Of the Labour front bench, only Bryan Gould, national heritage spokesman and unsuccessful contender for the leadership and deputy leadership, has broken the line by effectively urging devaluation, although he has also hinted that Labour calls for 'co-ordinated' action across Europe on interest rates are code for the same thing.

Mr Sedgemore urged Labour to come up front yesterday and argue for the pound to be set at DM2.50 to 2.60, accompanied by entry to the ERM narrow band to show Britain was serious about staying in the mechanism.

'Since it was the Government that took Britain into the ERM at the wrong rate (DM2.95) it is difficult to see why Labour should wish, at the expense of the British, to defend so doggedly this Tory mistake,' he said. 'This Tory mistake is helping to create unemployment and reduce output and prosperity in Britain.

'Labour should also be pointing out that by leaving the currency overvalued in the ERM the Tories have provided anti-Europeans with a powerful weapon.'

Turning his fire to modern Labour-media relations, Mr Sedgemore claimed: 'Not so long ago a senior Labour back-room adviser told the press in a contemptibly patronising statement that Labour would not talk about the future of the ERM because this subject was too difficult for the public to understand. Instead it seemed that Labour politicians were to be asked to look to their next sound bite, their next press release, and their next predictable outburst of impressionable outrage as the Government once again got it wrong.

'Let the day of the sound bite be over: may our front bench economic team now get down to real work and come up with practical and radical solutions to difficult problems,' he said.

Mr Sedgemore said no political party in Britain was committed to policies that could bring about a return to full employment or anything approaching it. It would remain an aspiration unless Labour's treasury team could be convinced of the need for changes in policies on exchange and interest rates, in fiscal and interventionist policies and in policies related to Labour's 'current adoration' of the working of free markets.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

East15 Acting School: Finance and Contracts Officer

£20,781 to £24,057 per annum: East15 Acting School: The post involves general ...

Recruitment Genius: Domestic Gas Breakdown Engineer

£28000 - £32000 per annum: Recruitment Genius: ACS qualified Domestic Gas Brea...

Recruitment Genius: Product Packager / Stock Assistant

£16250 per annum: Recruitment Genius: A Product Packager / Stock Assistant is ...

Recruitment Genius: Head Chef

£22000 - £25000 per annum: Recruitment Genius: This Garden Centre complex base...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen