Walker's World: U.K. local election threat

WASHINGTON, May 21 (UPI) -- The curtain looks likely to rise on the final act of Britain's Labor government with this week's by-election in the old railway and industrial town of Crewe. It used to be a reasonably safe Labor seat with a majority of more than 7,000 at the last general election, but all the polls agree that it is almost certain to fall to the Conservative opposition.

The Conservative lead ranges from 8 to 20 percentage points, and if that last figure were to be repeated at the next general election, there would be a Conservative government. It would have close to 400 seats in Parliament, while Labor would be down below 220 seats.

Usually political observers in Britain pay limited attention to by-elections. They tend to see low voter turnout, and the votes are skewed by protest votes and a tendency to bash the incumbent government that is not a reliable guide to the next general election. This one was caused by the death of a highly popular member of Parliament who had a large personal vote that no longer will help the Labor government.

But this time, the result will be important because it will be the first real indication that the voters at last are taking the Conservatives seriously after 11 years of Labor dominance. The Conservatives lost three general elections in those 11 years, because the voters had not forgiven them for the economic incompetence that provoked the 1992 recession and the government's subsequent civil war over Europe.

The political rule in Britain is that the opposition does not win elections; governments lose them. And Prime Minister Gordon Brown, just one year in office, has not done well, backtracking over plans to hold an election last year, or to slash a low-income tax ban this month, making him look indecisive just as the economic slowdown is hitting hard.

Moreover, the rise in the value of gold to close at $1,000 an ounce reminds voters that as finance minister, Brown 10 years ago sold off more than half of Britain's gold reserves (some 400 tons) at a knockdown price of around $275 an ounce. He thought gold was no longer important. Had he waited to sell, Britain would have been almost $20 billion better off.

But the opposition party must be sufficiently credible in their policies and their personnel for the voters to take a chance on their prospective competence. This is what Tony Blair and Gordon Brown were able to establish in the years before their landslide victory in 1997, and it is what the Conservative David Cameron is hoping to achieve now.

Crewe will be the test, and the signs are that he will pass it, and in that case we may start preparing for a Conservative government at the very latest by May 2010, but probably in October 2009.

Will it make much difference? A Cameron government would come into office during an economic slowdown that with luck should be then coming to a close. It will be facing a new American president and probably an end to Britain's involvement in Iraq, but the nasty war in Afghanistan probably will still be under way.

And a new government will have to decide what to do about Europe, although a sizable Thatcherite rump of the Conservative Party would like to end or at least minimize Britain's part in the European Union. This is now getting close to impossible. Some 60 percent of Britain's trade is with its EU partners, and the American alliance is a great deal less important (and less popular) than it was in the days of Thatcher and Reagan -- or even in the days of Blair and Bush.

So in the light of the old saying that it took the veteran anti-communist Richard Nixon to open diplomatic ties with China, it might well fall to a Conservative leader like David Cameron to recognize that the EU looks to be Britain's future and that the Atlantic alliance is a fading asset.

That could mean accepting, given the likelihood of continuing dollar weakness, that it is time for Britain to join the euro and to join full-heartedly in the European project.

The current strength of the euro and relative weakness of the pound could make for an attractive exchange rate for Britain, particularly if Cameron has the nerve to follow Ireland in slashing corporate taxes to 10 percent. This would nail down London's role as Europe's financial and corporate center.

But it might be a step too far, even for Cameron. It now looks as though Britain's decision to give up 7 billion pounds ($14 billion) from its rebate on the net taxes it pays to Europe was surrendered in vain. It was supposed to buy a sweeping reform of the European Union's wretched Common Agricultural Policy, but the French are refusing to budge, and the anti-Europeans are claiming Britain was swindled.

The issue is already reverberating among the voters of Crewe, who are likely to launch the endgame of the Labor government when they vote Thursday. Some of them might even remember Brown's expensive bet against gold.

Even more might be swayed by the front-page report in Tuesday's Times and Daily Telegraph that the Home Office is set to establish a database to store the details of every phone call made, every e-mail sent and every Web page visited by British citizens in the previous year in order to implement an EU directive developed after the July 7, 2005, bombings to bring uniformity of record-keeping.