Yes, the boom is coming

Tories lay plans for election as spending figures raise Major's hopes

A consumer mini-boom will be under way within months, figures released yesterday show. They gave John Major one of the strongest signs yet that he could be reaping the electoral benefits of economic recovery by the autumn.

The prospect of good times to come was held out by figures showing that growth in consumer spending in the first three months of 1996 was the fastest for more than two years.

Total consumer spending rose 0.8 per cent in the first quarter of this year, the biggest advance since the end of 1993. Growth in the underlying volume of spending on the high street recovered to 2.2 per cent, the fastest for just over a year. The pace of retail sales growth was even faster in some important sectors, such as household goods, clothes shops and department stores.

In a separate survey, the House Builders' Federation said market conditions for new house-building were the best since 1994. Almost three- quarters of members expect an increase in sales this year.

The combined evidence suggests the economy will increasingly help the Government's hopes of re-election. Although separate figures showed that manufacturing industry remains in the doldrums, most economists think growth will have built up a head of steam by the Autumn.

While the Tory high command continues to insist it prefers a Spring election, the new economic figures will inject hope into the party of its electoral chances if it is forced to go to the country in the autumn - by a defeat in a Commons confidence vote, for example.

Tory strategists dismiss the idea that Mr Major would voluntarily seek an autumn election unless there was a dramatic leap in the party's opinion- poll rating, now languishing 25 points below Labour's. Mr Major has also let it be known he does not intend to call a snap "beef election" on the back of his plans to disrupt Brussels business.

But Brian Mawhinney, the Tory chairman, has continued to urge key party figures to maintain contingency plans for an Autumn election. The limited room for tax cuts has heightened speculation that a November budget may not prove to be such an election springboard as once hoped, thus reducing the need to wait until the spring. A written answer from Angela Browning, the Agriculture minister, confirmed that the costs of BSE measures for 1996-97 would be pounds 1.1m, and pounds 740m and pounds 680m in the two following years, further reducing the scope for deep tax cuts.

Well-advanced campaign plans include setting up a top-level secret committee, including: Maurice Saatchi, head of M&C Saatchi, the Tory party's advertising agency; Sir Tim Bell, the public relations guru to Baroness Thatcher when she was prime minister; Tim Collins, the party's former director of communications and a close Major adviser; and Peter Gummer, chairman of the PR firm Shandwick, and brother of the Secretary of State for the Environment.

The Treasury said that it was clear that consumer demand was starting to pick up, and that the economy would be strong in the second half of this year. This opinion was seconded by the Confederation of British Industry, even as it reported that manufacturing orders were at their lowest since December 1993.

The CBI urged the Chancellor, Kenneth Clarke, not to reduce interest rates or cut taxes too much in view of the signs of surging consumer spending.

"The economy needs a little bit more boredom as we run up to the excitement of the election," said Sudhir Junankar, a CBI economist.

City of London experts said there was no doubt a consumer recovery was under way. But they were less sure it would deliver enough votes to rescue the Conservatives.

"The famous feel-good factor is there. But you can feel great and still not like the Government," said Steven Bell, chief economist at the merchant bank Deutsche Morgan Grenfell. He added: "It could be in 1997, the first year of a Blair government, when we see really rapid growth."

The latest signs of recovery do not yet show the impact of last month's tax cuts. These delivered the biggest boost to spending power since Nigel Lawson cut the basic rate of income tax to 29p a decade ago, according to official figures last week.

However, the weakness in industry, reflected in a drop in exports and slower stock building in the first quarter of this year, is likely to keep the overall pace of economic expansion modest. The Treasury has downgraded its internal forecast for GDP growth this year from 3 per cent to to 2.5 per cent.

Tory strategists said yesterday that there was a clear decision that next spring was the optimum time for an election.

Creating fear, page 3

Tarnished boomlet, page 22