Gray refuses to back a split in the ranks

THE row over whether Scottish Labour should separate from the main Labour Party has helped one of the Scottish leadership contenders claim a key part of the vote, his supporters have boasted.

Backers of Iain Gray have claimed that angry MPs are supporting him because of comments from his rival Andy Kerr over the role of the eventual winner needing to be leader of the Scottish Labour Party, not just MSPs in Holyrood.

The electoral college for the leadership contest is broken up in three parts – the unions, membership and elected members.

The elected members include the 46 MSPs, 16 of whom back Mr Gray, more than either Mr Kerr or Cathy Jamieson. The others are the 38 MPs and two MEPs, both of whom have backed Mr Gray.

He was expected to do well with MPs because he worked in Westminster for the Chancellor, Alistair Darling, but a Westminster insider and key supporter said the row over whether Scottish Labour should be a separate party has helped him further.

"We now expect to easily win that part of the electoral college," he said. "Andy (Kerr]'s comments have angered many of the MPs and the way Iain has handled it has been far more diplomatic and conciliatory."

The debate has been heated up by comments made by MSP Tom McCabe, who described Scottish Labour MPs as "arrogant" and failing to embrace devolution.

Mr Kerr has distanced himself from those comments, but has made it clear that he wants the Scottish Labour leader to lead the party in Scotland and come up with separate policies. Ms Jamieson has also made similar claims. And despite being more conciliatory Mr Gray has said he too disagrees with some Labour Westminster policies for Scotland and insisted he would have a wide mandate if he wins the election.

However, despite the boost from MPs, Mr Gray's campaign yesterday suffered a setback when he made an embarrassing retreat on the issue of abolishing the council tax.

On Monday he said he would consider abolishing it in favour of a different property tax.

But yesterday he said he would just reform it, after it was pointed out that abolition would mean Scotland would almost certainly lose its £400 million council tax benefit even if the replacement was another property tax.

Mr Gray's idea of a working party to fund an alternative to the SNP's 3p local income tax, had included looking at the Green's land value tax.

"I believe in a property tax and a reformed council tax would not lose council tax benefit," he said. "We must bring forward proposals for a fairer local tax, working where possible with other opposition parties, to fill the vacuum left by the SNP's incompetence on this issue."

But Joe Fitzpatrick, an SNP MSP, pointed out this was a long way from Mr Gray's talk of "replacing" the council tax earlier in the week

He said: "This is possibly the quickest U-turn in Scottish political history.

"His big idea has fallen apart at the first hurdle."


Stamp duty hint as Darling admits things will get worse

HOMEBUYERS could be given a stamp duty holiday in an attempt to kick-start the faltering housing market, Alistair Darling, hinted yesterday.

The prospect of a temporary reprieve from paying the tax to the Treasury was held out by the Chancellor, who admitted that he was considering a package of measures.

The shortage of mortgage finance combined with the general mood of economic gloom was pushing down property prices. "It is very difficult to speculate on what will happen to house prices over the next year or so," Mr Darling said. "But it is perfectly true that our economy, along with every other economy in the world, is going to slow down and that slowdown is pretty dramatic in many places."

Mr Darling, who is deputising for Gordon Brown while the Prime Minister is on holiday, gave a gloomy prediction that the economic recession would be longer and more intense than anyone had imagined.

"There's no doubt that what is happening now is far more profound and will be more prolonged than people thought 12 months ago when this problem first arose."

His downbeat assessment came as official figures showed the British economy was on the verge of a recession.

Yesterday the Office of National Statistics said that the British economy may grow by only 0.1 per cent in the second quarter because of a downturn in manufacturing output.

The news capped off a bad day for the government, when it was forced to issue another £3 billion in loans to the nationalised bank Northern Rock in exchange for shares, just as the bank announced losses of nearly £600 million.

Despite the negative economic assessments and a succession of by-election defeats, Mr Darling said he was hopeful that the Labour party would bounce back to win the next election.

Hinting at a relaunch by Mr Brown, the Chancellor said: "The Prime Minister, when he comes back from his holidays, will set out very clearly what he intends to do." The party "can get through this", he added.

"I believe we can win the next election, provided we discover the same zeal and enthusiasm that we had in 1997, 2001 and 2005."

Mr Brown has that zeal and enthusiasm, he said.

The Prime Minister was given another pat on the back yesterday by the former US president Bill Clinton. Mr Brown was praised as a man with a "big brain and a good heart".

The former president said he was not about to predict the Prime Minister's demise, and urged him to "trust the people" to make the right choice.

Gerri Peev

What next for Labour?

What is the current position with the Scottish Labour Party?

At the moment the Scottish Labour offices are a regional part of the Labour Party. Funds are directed centrally from London and strategy has to be agreed with London.

The leader of the party is the leader in Westminster, whereas the leader in Holyrood is only leader of the MSPs.

How would a separate Scottish party work?

The elected leader in Holyrood would be leader of the Scottish Labour Party.

It would be responsible for its own funds and could come up with separate policies, but would work together with the English party.

Does this happen with other parties?

The Scottish Conservatives are officially separate. The Liberal Democrats have a federal system, which means their parties in England, Wales and Scotland are separate and can have different policies.

Why is the issue of separation so controversial for Labour?

Gordon Brown is a Scottish MP and he does not want to lose control of his own party.