Shadow Cabinet economic policy divisions deepen

DEEPENING division in Labour's ranks over economic policy emerged yesterday as two more Shadow Cabinet ministers called for Labour to back a realignment of the pound.

David Blunkett, the health spokesman, said a comprehensive realignment within the ERM was 'absolutely vital' to save British industry, in a speech that hinted at backing for a lone British devaluation if that could not be achieved.

Michael Meacher, the overseas aid spokesman, joined him, saying: 'Labour should be pressing the Government to use its presidency of the EC to bring about the conditions for recovery - and a general realignment of the ERM has to be part of that package.'

Their calls followed similar arguments for realignment from John Prescott and Bryan Gould, their positions contrasting sharply with the words of Gordon Brown, the shadow Chancellor. He was forced to deny 'any question of a division in the Shadow Cabinet over these central issues of economic policy', but called again at the TUC in Blackpool for Britain to bring together EC finance ministers to put more pressure on Germany to cut interest rates. 'There is no policy for devaluation on the part of the Labour Party,' he said.

Mr Smith has moved from a pre-election promise not to lower the pound's value to saying a revaluation of the German mark should not be ruled out if it would help cut German interest rates. He and Mr Brown remain determined not have Labour painted as the devaluation party.

Peter Hain, secretary of the Tribune group of MPs, accused Labour's economic team of 'failure to offer a coherent economic policy beyond condemnation of Tory inaction'. He called for a 15 per cent cut in the pound's value to a narrow ERM band. Without that, Labour lacked credibility in saying that its alternative would produce prosperity.

Mr Gould appeared not to rule out the possibility of resignation over Maastricht. That was in theory always open to any Shadow Cabinet member on any issue, he said on the BBC's Breakfast News. But he added: 'I have no reason to suppose that when the Shadow Cabinet reaches (a decision), it won't be one I cannot support.'

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