Brown warns of no-work ghettos under Tories

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The spread of lawless, inner-city ghettos would be threatened by the re-election of the Tories for a fifth term, shadow Chancellor Gordon Brown will warn today.

In a speech concentrating on the positive action Labour would take to get people back into work, and reform the welfare state, Mr Brown will spell out the downside dangers of another election victory for John Major.

Against a background of yesterday's further fall in unemployment, he will argue that the figures disguise the fact that one-fifth of all non- pensioner households have no one in work - and that the Tories propose no action to tackle that problem.

"The danger is that the re-election of the Tories would risk the creation of a fifth-term underclass that would take us down the road of America, with no-work and no-go inner city areas plagued by lawlessness," Mr Brown will say.

The warning echoes similar predictions from senior Tories, including the Deputy Prime Minister Michael Heseltine, who wrote 10 years ago in his book, Where There's a Will: "Against a background of high unemployment, the invitation to crime becomes more appealing. Idleness becomes a resentment that gives crime an indefensible normality."

Anticipating more Conservative attacks on the windfall tax - the pounds 5bn-plus levy on the excess profits of privatised utilities, Labour last night published the legal opinion that it was watertight.

The opinion, signed by Michael Beloff QC, said there could be no challenge under domestic law; it should not attract a challenge under European law, "but, if it did, such challenge would fail"; and would withstand any challenge under the European Convention of Human Rights.

Yesterday's good news on unemployment was mitigated by another Bank of England swipe at the reluctance of the Chancellor, Kenneth Clarke, to raise interest rates - and Opposition endorsement of the warning from Niall FitzGerald, chairman of Unilever, that future United Kingdom investment could be at risk if Britain opted out of European monetary union.

As Unilever and its subsidiaries are the largest corporate employers in Wirral South, the by-election battleground, Mr FitzGerald's warning could not have come at a more politically sensitive moment - a point aggravated by the fact that the Chancellor was campaigning in the constituency yesterday.

But the warning also coincided with publication of the Bank of England's quarterly Inflation Report, in which Mervyn King, the Bank's chief economist, said: "There should be a rise in interest rates now. The longer you delay, the more interest rates will have to go up."

News of a 68,700 drop in the number of unemployment benefit claimants last month, taking the jobless rate down to 6.5 per cent, and a faster pace of earnings growth, added weight to the Bank's claim that the economy was expanding too rapidly. However, the combination of the political timetable and mixed signals on the economy means interest rates will almost certainly not rise ahead of the election.

Bank puts the pressure on Clarke, page 20