Straw falls into line on English regional bodies

Labour and Liberal Democrats face painful choices over election manifesto commitments

Labour is ready to press ahead with directly elected assemblies for the English regions. Home affairs spokesman Jack Straw has softened his opposition to the policy under pressure from John Prescott, the deputy Labour leader, dropping some of the conditions he set last year in a document for this weekend's National Policy Forum in Manchester.

The forum, which opens today, will discuss six papers which will make up a large part of Labour's election manifesto, and is likely to be dominated by tensions caused by the ruling from the shadow Chancellor, Gordon Brown, that all new spending pledges must be funded from existing resources.

Today also, Paddy Ashdown, leader of the Liberal Democrats, will at the Federal Policy Forum in Oxford warn senior members of his party that their commitments must be pared down to specified policy priorities.

Mr Straw has dropped his insistence that there should be referendums and the abolition of a layer of local councils before regional assemblies are set up. A source close to Mr Prescott said that, in the case of northern England, if local councils, trade unions, the Confederation of British Industry and chambers of commerce supported a directly elected assembly, there would be no need for a referendum. And the rationalisation of local councils could follow, rather than precede, an assembly.

Mr Prescott will address the forum tomorrow on the linked issue of regional development agencies - a key part of his bid for a role in a Labour government, which follows his warning this week to Mr Brown against the dominance of economic policy by a "super Treasury".

Tensions over public spending, which lie behind many recent reports of friction between Mr Brown and his senior colleagues, are likely to surface in several debates, notably on social security policy. A document on "welfare to work" has been blocked by the Treasury team.

Sensitivity over tax was exposed by yesterday's leak of Labour's transport policy document. Brian Mawhinney, the Conservative party chairman, seized on the leak to claim that Labour wanted to "slap a tax demand on Britain's car owners".

Robin Cook, Labour's foreign affairs spokesman, who chairs the policy forum, denied that owners of large cars would pay more tax. "No, I did not say that. We have made a specific commitment that within vehicle excise duty we will look at ways in which to reward those people who were going to use more efficient cars," he told BBC Radio 4's Today programme yesterday.

Clare Short, the party's transport spokeswoman, said: "It is wrong to say that Labour is planning to increase taxes on cars. It is the Government who have raised taxes on motorists. There have been seven separate tax rises on cars in the last three years."

Joan Lestor, overseas development spokeswoman, is also said to have had a "terrible battle" trying to secure a time limit of the first year of a Labour government for her pledge to "begin to reverse the decline" in Britain's aid budget - but she failed.

But Mr Brown's controversial plans to cut benefit for young people who refuse work or undergo training have received unexpected support from some left-wing delegates.

"There has got to be a general rule that options are taken up, but there has to be a safety net for young people whose families have collapsed or you will continue to get 16- and 17-year-olds begging on the streets," Clive Soley, Labour MP for Hammersmith and a member of the forum, said.

Although the papers are marked "Not Policy", and could be amended if this weekend's forum throws up fierce hostility, they have already been approved by the powerful Joint Policy Committee of the Shadow Cabinet and National Executive, and - equally important - have been vetted by Labour's Treasury team.

The forum, which meets in private and does not propose amendments or hold votes, consists of about 100 representatives of local Labour parties, trade unions, local councillors, MPs, MEPs and the party leadership.

Meanwhile, at a key meeting of the Liberal Democrats' Federal Policy Forum today, Paddy Ashdown will be warning senior members that they must face up to the "tough choices" needed to ensure that the party's general election manifesto consists only of fully and openly costed policy commitments.

The party will today begin the painful process of paring down a formidable list of commitments into a programme which will specify policy priorities and how to pay for them.

The meeting, at which Alan Beith, the party's deputy leader, will give an initial outline of manifesto thinking, will be told that the Liberal Democrats now have a historically unique opportunity to take advantage of the lack of trust faced by the two main parties - especially on tax.

It will also be told that after high-profile divisions in Labour ranks as well as among Tories it has clear potential as being seen as the united party.

The party is in buoyant mood, having confounded last year's predictions of collapse in the face of a Blair-led Labour Party and after seeing its vote share in the May local elections climb to 26 per cent - matching the level achieved by the Alliance at its electoral high-water mark in the 1983 general election.

The party's policymakers will be told that they are now in a position to build on that platform at the expense of both the main parties if they base their manifesto on clear, fully costed priorities. By criticising government borrowing as too high, Malcolm Bruce, the party's economic spokesman, has given a strong hint that unlike in the 1992 election campaign, there will be no plans for an increase in borrowing to pay for its programme.

Instead, it will make a virtue of what Liberal Democrats believe is still a low level of public trust in Labour as well as the Tories on tax by giving clear but limited commitments such as those for a pounds 2bn increase in education spending and taking more low income earners out of income tax.

The party has already said it is prepared to pay for the first by a 1p increase in the standard rate of income tax and the second by imposing a 50p rate on those earning more than pounds 100,000 a year.

In emphasising such costed specifics, party leaders believe they score a "double hit" by having bold commitments which will attract electors while not inspiring fears that they have a hidden tax-and-spending agenda.

But it will be made clear to today's meeting that this will require painful choices and the ditching of a formidable raft of commitments - including those for increased benefits such as income support and pensions.