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Why Is Britain's Campaign Getting So Nasty So Soon?


International Outlook

WHY IS BRITAIN'S CAMPAIGN GETTING SO NASTY SO SOON?

Prime Minister John Major doesn't have to call a general election until July, but it is obvious the campaign is already in full cry. London is festooned with political billboards. Conservative posters warn voters of "Labor's tax bombshell," while Labor fires back with a caricature of Chancellor of the Exchequer Norman Lamont as a tax-mad "Vatman." The parties are also slapping each other around in the tabloids. Labor MPs have raised the spectre of Watergate-style break-ins at politicians' offices, and some newspapers are charging Labor standard-bearer Neil Kinnock with inappropriately close contacts with Soviet diplomats in the early 1980s.

Why so nasty so early? One reason is that both parties are frustrated by being unable to establish a clear lead. Indeed, polls suggest Britain is heading for its first hung Parliament since 1976--with no single party in control. Such an outcome would force one of the two main parties to form a coalition with a third, the Liberal Democrats. The Liberals, who are pushing for electoral reform and home rule for Scotland, have in turn been shaken by the Feb. 5 acknowledgment of their leader, Paddy Ashdown, that he had an extramarital affair several years ago.

WAIT AND SEE. The prospect of a muddled outcome or even a Labor victory, which many fear would herald big tax increases, may pull down already-low business confidence. That would be bad news in a country struggling to emerge from a 20-month recession and find its niche in a fast-changing Europe. "Consumers are postponing decisions because they are unsure what their aftertax income is going to look like in six months' time," says Martin Taylor, chief executive of Courtaulds Textiles PLC. In addition, overseas investors are putting British plans on hold, according to John Nelson, a director of Lazard Brothers & Co. A case in point: American Telephone & Telegraph Co. recently backed away from talks with Cable & Wireless PLC, in part over concerns that a new government might change regulations.

A deadlocked Parliament would also cast further doubt on Britain's ability to play a strong role in Europe. Britain will take over the rotating presidency of the European Community for the last six months of the year. With such key European players as France and Germany suddenly beset with internal problems, the presidency needs a zealous advocate to push through the final rules to usher in the single market. But a weak British government may be so bogged down in local issues that it gives short shrift to Europe.

Major is running on the age-old platform that Labor is a tax-and-spend party. The Tories, by contrast, in their Mar. 10 annual budget, will probably announce modest tax cuts--thus paving the way for an April or May election. The centerpieces of another Tory government would be bigger tax cuts and a nebulous Citizen's Charter designed to improve public services. So far, this program has failed to stir the electorate. Kinnock, meanwhile, has won kudos from some industrialists for his commitment to spend heavily on training and infrastructure--although they worry about his plans to raise the minimum wage and to up the top personal-tax rate from 40% to 59%.

But many executives complain that neither party looks capable of coming up with sound ideas for revitalizing the economy. "The Conservatives have been very complacent on such issues as health service, infrastructure, and management of the economy," says David M. Cohen, finance director of retailer Alexon Group PLC. "But I'm very skeptical that Kinnock & Co. will do any better." That's hardly a cheery outlook for a country that still hasn't found its place in an increasingly competitive Europe.Richard A. Melcher in London EDITED BY STANLEY REED


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