Next Step : Smith’s Death Sends Party Scrambling : A leadership fight could set back gains Labor has made against Britain’s Conservatives.

Britain’s opposition Labor Party, running way ahead of the ruling Conservative Party in opinion polls, is suddenly facing just what it doesn’t need: a bruising fight for the party leadership.

After a discreet silence following the unexpected fatal heart attack on May 12 of John Smith, the man who had stepped forward to give Labor a firm hand at the helm, speculation and maneuvering has begun over who will take over the leadership at this crucial point for the resurgent party.

Whoever is chosen stands an excellent chance of becoming prime minister in the next national election--a post Labor has not held since the victory of Margaret Thatcher’s Conservatives in 1979.

While the Conservatives do not have to call an election until 1997, Smith’s death has sharpened the focus on national politics. It has also put a spotlight on the potential for a rancorous political fight which, political observers say, could damage the responsible image that Labor Party chieftains had painstakingly built under Smith. Infighting has increased in the absence of an election date for party leader. It could be set Wednesday at a meeting of Labor’s executive committee.

The history of the modern Labor Party has been one of knock-down, drag-out battles, which, while providing entertaining material for political journalists, has hurt the party’s chances in national elections. Conservative Party leaders Thatcher and her successor John Major have successfully depicted the Labor Party as a fractious bunch of socialists, incapable of governing properly over the past decade.

But under Neil Kinnock and his successor as Labor leader, the 55-year-old Smith, a fresh and talented group of Labor lawmakers has emerged. The leading members of this group now form the party’s shadow cabinet, ready to step in should the Conservatives lose a national election. In opposition, shadow cabinet members act as Labor spokespersons in and out of Parliament for the various areas of government.

Five have emerged as the leading contenders for party leader:

* Tony Blair, 41, the handsome, personable spokesman for domestic affairs, a front-running candidate representing the moderate-right wing of the party.

* Gordon Brown, 43, the Treasury spokesman, who is an ally of Blair as a leading voice for the centrists inside the party. He could step aside to allow Blair to dominate the field for the moderates.

* John Prescott, 55, employment spokesman, a bluff, combative orator who represents the center-left of the party, and is considered tough competition for Blair and Brown.

* Robin Cook, 48, a brilliant, bearded spokesman for trade and industry, who represents the traditional left of the party and its insistence on government ownership, a welfare state and full employment.

* Margaret Beckett, 51, the deputy party leader who may contest the leadership but is given only an outside chance of winning it.

The leadership election could be held at any time but is expected to be delayed until after the June 9 European Parliament elections at the earliest.

Labor moderates would like to see a July date to avoid a prolonged wrangle that could tarnish the unified image that the party established under Smith. But supporters of Prescott, the center-leftist, are promoting an autumn date in order to build support for him. And they would like to see an American-style campaign that would test the contenders openly against each other.

“A rushed election would be an insult to members in the constituencies and the unions,” said Alan Simpson, a Labor Member of Parliament. “The most realistic and democratic timetable would be to hold the election at the party’s annual conference in October.”

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Under the complex rules of the party leadership, the decision will be made by a cumbersome balloting of an electoral college consisting of a one-third each of union members, Labor members of parliament and party members.

The chief interest lies in the possible fight between Blair and Brown--good friends but possible antagonists--since many analysts believe that if one steps aside the other could easily win the contest.

In a speech Sunday, Brown spelled out the moderate Labor view of the political future: party unity and a “fair” and “socially just” society with “full and fulfilling employment.”

As for unity, Brown declared: “We’ve struggled too long for harmony to allow discord now.”

Brown’s friends say he is the natural heir to Smith’s mantle, and could serve as the bridge between the left and right wing of the party--but so far support seems to be favoring Blair, who, in a clever departure from past Labor positions, has lifted the law-and-order issue from the Tories with the slogan: “Tough on crime but also tough on the causes of crime.”

The prospect of a Blair-Brown political fight, with undertones of lacerating battles among Labor leaders in the past, alarms moderates who believe that it would derail the continuing moderation of Labor’s policies and image. Furthermore, it could jeopardize their close working relationship between the two men in making the party more palatable to crossover Tory voters.

“Gordon is hanging in there,” said a colleague of the Treasury spokesman. “Blair’s team is in a state because they expected Brown to fold immediately, but he hasn’t.”

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For his part, Prescott has dismissed Blair and Brown as Labor’s “beautiful people,” and believes the next national election will focus on his own specialties: employment and welfare.

That view is shared by most of the contenders, and opinion polls show that the electorate is deeply concerned about job losses and the erosion of welfare benefits, particularly health, under Major’s Conservative government. Major’s chancellor of the exchequer, Kenneth Clarke, said last week that work and welfare were dominant themes.

In an earlier address, sounding almost Labor-like, Clarke declared: “Families need a sense of security in their personal finances; their home ownership depends on mortgage finance, and their old age requires adequate pension provision.”

The death of Smith has also changed the political calculus in the Conservative Party, where Trade Secretary Michael Heseltine has been considered the leading successor to the 51-year-old Major should his unpopularity force him to step down. Smith’s death directed attention to Heseltine’s own serious heart attack last year and caused doubts about his ability, at age 61, to take over as prime minister. Clarke, considered the second-strongest challenger to Major’s leadership, appears in no hurry to challenge the prime minister so Major may be safe for some time, particularly if, as Conservative MPs believe, Britain is headed for an economic upturn.

Meanwhile, Oxford-educated Blair keeps Labor’s torch burning in frequent television appearances and engaging parliamentary debate, putting forward an image of youth and modernization.

As one Conservative MP put it, with a note of chagrin: “People will vote for Tony Blair without feeling that they are voting for Labor.”