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The article discusses political and economic conditions in Great Britain in the year 2002-03. Despite its comfortable re-election in June the Labour government, led by Prime Minister Tony Blair, faces a difficult second term. Having spent much of its first term trying to reassure voters that it could be trusted to manage the economy competently, Labour's main domestic priority will be to improve the parlous state of the health, education and transport systems. The world economy is not only experiencing its most severe slowdown since the 1973-74 oil price shock, it also faces increased uncertainty following the terrorist attacks on the U.S. in September.