Gould steps over party line to attack Major

Bryan Gould, Labour's national heritage spokesman, launched a blistering attack yesterday on the Government's economic policy, but one that also departed radically from the official Labour Party line.

As well as front-bench calls yesterday for Labour to back a referendum on the Maastricht treaty, there is growing alarm among some Labour MPs at the apparent leadership split.

Mr Gould condemned Thursday's Glasgow speech in which John Major insisted there would be 'no devaluation, no realignment' of the pound as 'macho posturing'. He accused the Government of inflicting 'yet further wounds on the battered and bleeding body of British industry'.

But Mr Gould went further, calling for Labour to end support for an 'over- valued' pound. 'We have to lift the dead hand of monetarist orthodoxy which has decimated productive capacity,' he said.

Senior Labour sources have dismissed the growing attacks on Labour's line on the economy and Maastricht by senior figures such as Mr Gould, John Prescott and David Blunkett, as campaigning in this month's tight contest for national executive places.

Those involved, however, believe there is a real argument over Labour's future direction. Some MPs ask privately where John Smith's leadership is. His advisers say that after the French referendum a week tomorrow, front- benchers will have to toe the line.

Mr Gould, at a conference in Wales, said that cutting spending and holding interest rates high to defend the pound was short-termism that benefited asset holders, produced an enormous disincentive for investment, and enfeebled British industry, leaving it 'hopelessly under-skilled, under-equipped and under-invested' - and unable to compete when growth resumed. Maastricht would only make that worse by requiring massive spending cuts.

Pressure on Mr Smith for Labour to back a referendum on the Maastricht treaty rose sharply from both his front and back benches yesterday.

John Morris, the shadow Attorney General, demanded a plebiscite in a stinging attack on the treaty as David Blunkett, a shadow Cabinet member, also hinted at his support for a vote. From the back benches, George Howarth, the MP for Knowsley North, followed the former industry minister and Swansea West MP Alan Williams in demanding a referendum. A Gallup poll in yesterday's Daily Telegraph showed 65 per cent support for a referendum, with 16 per cent against and 20 per cent undecided.

A tense discussion looks likely when Labour's national executive meets on Monday to discuss aims and objectives.

Mr Smith's problems over a referendum are made worse because demands for a plebiscite are coming not just from the traditionally anti-EC wing of his party but from those who would count themselves as pro-Europe.

Mr Morris, Labour's principal law officer, is a former Cabinet minister who was once considered as successor to Roy Jenkins as EC commissioner. Yesterday, however, he launched into an attack on overpaid commissioners, Brussels busybodies and the international scandal of an inflated bureaucracy 'looking for something to do'.

Mr Morris's speech in Llanelli came as David Blunkett, speaking in Sheffield, warned that 'enthusiasm for further European integration', and centralised power in the hands of bankers and bureaucrats, may 'reinfornce genuine worries that influence and control are slipping away from ordinary people'. It was vital to 'open up rather than close down the debate', even after the French referendum.

Meanwhile, Mr Howarth launched a campaign on Merseyside for a referendum yesterday, saying: 'I make my comments as a supporter of the European ideal and of Britain's continued membership - but not the opt-out, sold-out, sweat-shop Britain in a bankers' Europe which John Major wants'.

The Foreign Secretary, Douglas Hurd, mounted a strong defence of the Maastricht treaty yesterday, claiming that it marked a 'setback for the centralisers' and would help Britain to achieve its national goals. But he acknowledged that the EC should 'develop at a rate with which its citizens feel comfortable'.