Economy casts long shadow over local elections

Three weeks from today, Gordon Brown will face his first electoral test as Labour leader and the backdrop could hardly be more gloomy as the economic clouds darken.

Most media attention has focused on the fight between Ken Livingstone and Boris Johnson for London Mayor. But more than 4,000 seats on 159 local authorities in England and Wales will also be up for grabs.

As usual, all the parties are playing down expectations so they can claim a victory of sorts when things are not as bad on the night. Labour officials say the party can expect to lose 200 seats, a figure dismissed as "ludicrous" by their Tory counterparts.

The scope for a Labour meltdown is limited because most of the seats being contested on 1 May were last fought in 2004, when the party performed disastrously amid an "Iraq backlash" – even though it recovered to win the general election a year later.

The row over Mr Brown's decision to scrap the 10p lower rate of income tax, which leaves 5.3 million people on low incomes worse off, could damage Labour as the elections take place largely in its heartlands. Labour MPs fear a backlash and are pressing for the blow to be softened.

Although Labour does not have a lot to lose this year, its officials say 1,200 of the seats being fought were not contested in 2004. Elections take place in four new all-purpose authorities, while in others there are boundary changes. Comparisons with previous elections will be difficult, allowing spin doctors from all the parties to find something to trumpet.

The Tories insist they have no chance of repeating their triumph at last year's local elections, when they gained more than 900 seats. This time, all but the 22 Welsh authorities and eight councils in England will elect only a third of their councillors, reducing the chances of big gains.

Tory strategists say their party and Labour might make small losses or gains. They claim Labour should be looking to make more than 100 net gains, while they will be happy to win between 60 and 80 overall.

Labour will be looking closely at the Tories' performance in northern England, where, in places such as Liverpool, Knowsley, Newcastle and Gateshead, they have no councillors at all. To stake a credible claim to head a government-in-waiting, David Cameron will be hoping to make some progress in the region.

The Tories claimed yesterday that they will field candidates in 96 per cent of the English seats –more than Labour and the Liberal Democrats – including their first full set of candidates in Yorkshire and Humberside to underline their fightback in the North. But Labour insisted it would contest more seats than the other two main parties when Wales is included.

The Tory leader will be looking to secure more than 40 per cent of the share of the vote, so that he can claim to be on course for a general election victory. Labour claims he should be winning 45 per cent at a time ripe for a protest vote.

The Liberal Democrats are playing down the prospect of big changes but will hope to emerge with more councillors. In his first elections as leader, Nick Clegg is campaigning on the record of Liberal Democrat-run councils, hailing their "success story" of "quality services and value for money".

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