Why Nick Clegg's still taxing Cameron and Miliband

The Lib Dem leader and the coming Budget.

It remains a curiosity of today's political scene that a small and unpopular party bumping along on 7 to 10 per cent in opinion polls is making the waves on the central issue of tax policy. On this one issue at least, the two main parties find themselves reacting to the gauntlet the Liberal Democrats have laid down.

Nick Clegg's recent speech to the Resolution Foundation making the case for going further and faster in reaching a personal tax allowance of £10,000 has been widely reported as a significant moment in the genesis of the forthcoming budget which due to the precarious position of the economy, and the increasingly creaky nature of the Coalition, is destined to be a highly charged affair both fiscally and politically.

Significant it may have been, but not for the rather mundane reason that the leader of the Liberal Democrats made the case for delivering on one of his central manifesto commitments as soon as possible. Dog bites man.

It was, however, noteworthy for three less commented upon reasons.

First, because it was an attempt to signal the end of the Liberal Democrats "give and take" strategy in relation to those on low and middle incomes. Up until now each rise in the personal allowance (or indeed progress on other Liberal Democrat priorities) has been funded in large part by cuts to tax credits and increases in taxes that particularly hurt the precise group the Liberal Democrats state they are seeking to help.

Hitherto this has completely neutered their claims to being a force for tax fairness. Clegg's new and unmistakeable message is that this time it will be different. From now on the wealthy should pay for further increases in the tax allowance - whether through wealth taxes, less avoidance or cuts in higher rate pension tax-relief.

If Clegg can make this approach stick -- and that is a very big if -- it makes additional increases in the personal allowance a different political proposition for both the Conservatives (a straightforward hit to some of their core support) and Labour (why oppose?).

That said, this new and potentially more progressive approach to funding increased tax allowances may well be completely lost on the public given that deep cuts to tax credits already in the pipeline (based on previous budgets that Clegg signed up to) will bear down on the working poor for years to come.

Second, Clegg's budget intervention represented the next stage in the Lib Dem's differentiation strategy. They expect, but still don't know for sure, that Osborne will agree to some progress on personal allowances. But even if they fail their judgement is that they would be better to do so having at least have looked publicly distinct (even if ultimately ineffectual), rather than seeming to meekly go along with whatever Osborne ends up announcing.

Playing your budget hand quite so openly is a high-stakes move, and not one borne from a position of strength.

Finally, Clegg's open air budget negotiations have certainly turned up the heat on Labour. Over the last few weeks there have been many more column inches written about Liberal Democrat-Tory budget disagreements then there have been about the opposition's position.

Moreover, Clegg has stolen a march on his opponents both in terms of being the leader talking about taxing the rich and the one reported as caring about cutting income tax on the low paid. Right now it is he who is occupying this large swath of political terrain -- more baggy centre, then squeezed middle -- which is about rebalancing the tax system so it better chimes with our straightened times.

Labour to date have been largely silent on this tax rebalancing argument, though Ed Miliband has been nodding towards the need for increased taxes at the top. Ed Balls' intervention yesterday was significant therefore not just in that it broadened out Labour's position on tax cuts from VAT towards other measures, like personal allowances, that the coalition might actually move on. But it also succeeded in inserting Labour into the middle of the Budget debate.

All three parties face some delicate judgements over the next four weeks. George Osborne will need to balance carefully his instinctive reluctance (and that of his backbenchers) to hand a major victory to Clegg with the potentially destabilising effects for the Coalition of the Liberal Democrats coming away with nothing.

Labour will need to strain to explain to a sceptical public how its call for large tax cuts in the here and now fits with its renewed determination to reclaim fiscal responsibility over the medium term, a theme which was so much in evidence at the turn of the year. And they rapidly need to come up with ideas of their own to prove it is they who are best placed to lead the debate on tax fairness.

Meanwhile Clegg desperately needs to show that he can convert his recent media momentum on tax reform into a Budget victory -- and, more than that, into an upward tick in the polls.

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.