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
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
Have you tried new the Independent Digital Edition apps?
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
Arts and Entertainment
Mark Wright has won The Apprentice 2014
tvThe Apprentice 2014 final
Arts and Entertainment
Darrell Banks’s ‘Open The Door To Your Heart’
Detective Tam Bui works for the Toronto Police force
Arts and Entertainment
X Factor winner Ben Haenow has scored his first Christmas number one
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs General

Recruitment Genius: Telesales & Customer Service Executives - Outbound & Inbound

£7 - £9 per hour: Recruitment Genius: Are you outgoing? Do you want to work in...

Recruitment Genius: National Account Manager / Key Account Sales

£30000 - £35000 per annum: Recruitment Genius: An opportunity has arisen for a...

Recruitment Genius: Operations Manager

£30000 - £35000 per annum: Recruitment Genius: An exciting opportunity to join...

Recruitment Genius: Recruitment Consultant

£30000 - £35000 per annum: Recruitment Genius: We have an excellent role for a...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'