Blair prepares fightback on economy

TONY BLAIR ordered a government fightback over the economy yesterday, amid growing concern amongst ministers about the toll of job losses caused by the slowdown.

On another day of gloomy economic news, Ford announced a further cutback in production and engineering employers warned that 100,000 jobs could be lost next year.

Gordon Brown, the Chancellor, told yesterday's Cabinet meeting ministers should do more to get over the message that there were 400,000 more jobs in Britain than when Labour won power 18 months ago. The Prime Minister insisted that the Government would win the economic argument as its tough policies were proved right in the long run.

However, there is increasing anxiety inside the Government that it will suffer a public backlash over the job losses. Margaret Beckett, the Labour Party's campaign co-ordinator, will draw up a policy to reassure voters in the run-up to next spring's elections to local authorities, the European Parliament and Scottish and Welsh assemblies.

Privately, some ministers want the Bank of England's remit changed so that it takes more account of jobs and growth when setting interest rates. But Mr Blair and Mr Brown look certain to reject the move, fearing it would be seen as weakening the Government's commitment to its 2.5% inflation target.

"It's too late to change course now and all we can do is to batten down the hatches," one minister said last night. "We could have done more six or nine months ago, but the Treasury and the Bank were slow to see how badly manufacturing would be affected."

Mr Brown rallied to the defence of Eddie George, the governor, despite his suggestion that unemployment in the north had to rise to keep inflation down in the south. "I am happy with the way Eddie George and the Bank of England are doing their job," Mr Brown said.

In a speech in London, the Chancellor rejected Tory claims that the economic slowdown had exposed a pounds 36bn "black hole" in his spending plans. He insisted he had made provision for slower growth.

"It would not be in the national economic interest for us to be diverted by opportunist calls for emergency cuts in public investment which are not justified on economic grounds," said Mr Brown.

The Government will be called to account over its handling of the economy in a debate on Monday staged by the Liberal Democrats. But Mr Brown will not speak, leaving the job to Stephen Byers, the Chief Treasury Secretary.

William Hague, the Tory leader, backed Mr Brown's moves to tackle the global economic crisis but warned: "There is no substitute for each national economy sorting itself out - for having its own house in order."

Ford blamed falling demand in mainland Europe for fresh cuts in output at its plant in Dagenham, Essex. It told 5,000 workers it would be cutting production of Fiesta cars by a further 4,000 in November and December. The news came as union leaders at Rover were locked in talks with management in an attempt to save 2,400 jobs, and ICI, the British chemicals giant, yesterday announced a 45 per cent drop in profits in the three months to the end of September.

The Engineering Employers' Federation (EEF) warned that a further 100,000 jobs could go next year. Its latest quarterly forecast predicted growth in the economy will slow to 0.7 per cent in 1999, a significantly sharper slow down than forecast by the Treasury.

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Peter Mandelson,

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