Labour soul searching as voters jump ship

The Labour Party starts a brain-storming session on Friday to figure out how to win back disillusioned voters, make peace with unions, and lift Prime Minister Gordon Brown's government out of the doldrums.

Labour's National Policy Forum, its main policy-making gathering, convenes at Warwick University over the weekend as the party that has ruled Britain since 1997 trails the Conservative opposition in polls and fears of a recession grow.

Its challenge is to find policies that address concern over a sharp economic slowdown and soaring prices, and packaging it in a way that will outshine the re-energised Conservatives.

"People have some sympathy with the Labour perspective but they are all worrying about what's in their wallet and we'd be very foolish not to recognise that," said Simon Burgess, vice-chairman of the forum.

Many party members fear defeat at the next election, due by May 2010, as party leader David Cameron's slick rebranding of the Conservatives catches the public's imagination. The days of Tony Blair's glitzy New Labour seem a dim and distant past.

One member of Labour's policy forum told Reuters Cameron was "a class act who sounds like Blair did in 1996" - a year before Labour forced out the long-serving Conservatives.

"Even I found myself applauding him the other day. If I feel like that, how does the rest of the country feel?" she said.

An indication of the depth of disaffection with Brown, 13 months after he replaced Blair as prime minister, could come on Thursday in Glasgow in a parliamentary by-election.

Labour is expected to hang on to its traditional seat in Glasgow East but its majority is forecast to be reduced due to a strong push by the Scottish National Party.

Brown has seen his popularity slump in office, dented by the credit crisis, which has hit economic growth and sent house prices sliding, and a sense that his serious style has failed to connect with voters.

Many campaigners feel Labour has not done enough to blow its own trumpet and has been too complacent about the Conservatives.

"We have done so much for people that has changed their lives," the policy forum member said.

Her frustration shows how desperately Labour needs to reunite, as well as rebrand, if it is to cling on to power.

Amid calls for his resignation, Brown has to pacify the restive unions - just as Blair did - without caving in .

LONG LIST OF UNION DEMADS

Unions have brought a long list of demands to the table, including more powers to strike and free school dinners. But Brown, who will address the forum on Friday, is expected to give little ground.

Labour's divide has been growing since Blair remoulded the party in the mid-1990s and swept to power with more centrist, business-friendly policies and then followed the United States into unpopular wars in Iraq and Afghanistan.

Blair managed to neutralise the threat of disaffiliation by the unions, who provide a huge chunk of the party's funding, with compromises at a similar policy summit at Warwick in 2004.

While the risk of unions deserting Labour is low, activists say Brown needs them and their funding on his side for an election. Relations have been frosty at best in the past year.

More than a million public sector workers have taken industrial action - often in vain - to try to get more money because inflation is at its highest since Labour came to power.

Brown's strict policy of pay discipline is seen by many as contrary to a key Labour principle of redistribution of wealth.

"There is very widespread concern that (the gap between rich and poor) hasn't narrowed," said Ann Black, a trade unionist and another Labour policy forum member. "People feel a Labour government should be reducing the gap."