Why Britain's Laborites Are Frantically Wooing Business

On Apr. 29, Britain's Labor Party is likely to vote to quash the controversial clause in its constitution calling for the "common ownership of the means of production, distribution, and exchange." Expunging this bit of Marxist dogma may not seem like a big deal, but it will be a landmark victory for Labor's leader, Tony Blair. The telegenic 42-year-old has been struggling for years to drag his party back into Britain's mainstream.

Few outside Britain realize it, but Blair has already taken huge strides in this direction. One sign of his progress is Labor's 30-point lead in the polls over Prime Minister John Major's Conservatives. The conventional wisdom is that Blair will be Britain's next Premier.

WANING RECOVERY. But Blair's big lead could quickly evaporate if he doesn't keep his rehabilitation campaign on track. His next big task is to flesh out the specifics of what a Labor government would do, especially on the economy. His policies could damage an economic recovery already showing signs of waning. They could also affect billions of dollars in direct investment that Britain has grown accustomed to receiving annually from the U.S., Japan, Korea, and others during 16 years of Conservative rule. Because of the uncertainty, the markets have already imposed costly political-risk premiums on the pound, equity prices, and government-bond yields.

Blair's strategy is to win over white-collar office workers and suburban homeowners, Britain's fastest-growing voting bloc. These people are weary of Tory rule, but they are also skeptical of Labor. To gain the credibility he needs on the economy, Blair is now frantically wooing business leaders. He and his youthful aides, dubbed Blairheads, have dined with media magnate Rupert Murdoch, whose newspapers helped defeat Labor in 1992. They have also met privately with a group of top bankers, made the rounds among fund managers in Edinburgh, and given numerous after-dinner speeches to local business groups.

But the charm offensive has had limited success. "I don't know what Labor stands for," says Martin Taylor, CEO of Barclays Bank PLC. Lord Hanson, chairman of conglomerate Hanson PLC, is more explicit. "Remember what happened to inflation and the pound the last time we had a Labor government"--in 1974-79, he warns.

So far, Blair's economic agenda is vague. For new tax revenue, he would look to "the undeserving rich." He's offering some costly new benefit programs but doesn't say how he would pay for them. Blair's people are in regular contact with President Clinton's political consultants James Carville and Paul E. Begala. Like Clinton, Blair vows to make his country more competitive in the world economy. But he's short on specifics.

Business is already concerned about some of Blair's plans. He pledges that one of the first acts of a Labor government will be to implement the "social chapter," the part of the European Union treaty that spells out workers' rights and from which Major negotiated an opt-out in 1991. Executives worry that rigid, costly labor rules will be imposed on them. Blair also supports a minimum wage, which Britain now lacks.

City of London insiders fear that Labor could put a damper on the financial industry that now employs 2.5 million people and accounts for 20% of Britain's economy. The fear is that Labor's financial guru, Alastair Darling, will use the collapse of Barings PLC and mther scandals as an excuse to push for tighter regulation of everything from banking and insurance to executive pay.

Blair can't afford to inspire such doubts because they will turn off voters he is targeting. His challenge is to convince voters he will create and protect jobs, not wreck the economy.

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