Why the Lib Dems did better than you think

The party is now in second place in 242 seats.

The Liberal Democrats may have won just 57 seats on Thursday, five fewer than in 2005, but the extra 850,000 votes they received still allowed them to progress elsewhere.

As UK Polling Report's Anthony Wells notes, the Lib Dems are now in second place in 242 seats, up from 188 at the last election. And the party is now within 10 per cent of the winning party in 45 seats, up from 31 in 2005.

By contrast, Labour is now in third place in 232 constituencies, up from 151 at the last election. There are large parts of the country, most notably Scotland and inner-city London, where the Tories were pushed into third place in 1997 and have struggled to win ever since. Some in Labour must now fear that it faces the same fate.

In other circumstances, the Lib Dems would be in a good position to progress at the next election, but the present situation puts them at risk. If they strike a deal with the Tories they risk alienating floating Labour voters, and if they strike a deal with Labour they risk alienating floating Conservative voters. The party may be gambling that the dividend it would gain from electoral reform will compensate for this.

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George Eaton is political editor of the New Statesman.

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Brexit has forced the Tories to retreat from austerity

George Osborne's decision to abandon his budget surplus rule is an acknowledgment of economic reality.

Before Brexit, it was intensified austerity that was threatened by George Osborne. But after the event, the Chancellor has taken the reverse course. In his speech to the Manchester Chamber of Commerce, Osborne abandoned the ambition that has defined his Treasury tenure: a budget surplus.

He said: "The referendum is expected to produce a significant negative economic shock to our economy. How we respond will determine the impact on jobs and growth.

"We must provide fiscal credibility, continuing to be tough on the deficit while being realistic about achieving a surplus by the end of the decade. That's exactly what our fiscal rules are designed for."

Rather than a dramatic reversal, Osborne's decision is now merely an acknowledgment of economic reality. The rule is automatically suspended when growth falls below 1 per cent (as it almost certainy will) in order to avoid further depressing output. But even before Brexit, Osborne was regarded by the IFS as having only a 50 per cent chance of achieving his target.

Labour is highlighting its consistent opposition to the rule, which it again called for the abandonment of after Brexit. A senior source hailed a "huge victory" for the "centrepiece of our economic criticism of the government over the last nine months since Jeremy [Corbyn] took over the leadership." I'm told that Labour will not abandon its Fiscal Credibility Rule as it is "more robust and flexible". Unlike the government's surplus target, it allows borrowing for investment, mandating only that day-to-day spending be balanced (a condition suspended if the Bank of England believes monetary stimulus has become ineffective).

As well as reflecting the new economic reality, Osborne's announcement was also an acknowledgment of the new political one. It will most likely be a future Chancellor who determines the path of fiscal policy (starting with this year's Autumn Statement). At her leadership launch yesterday, Theresa May pre-empted Osborne by declaring that "we should no longer seek to reach a budget surplus by the end of the parliament". Among the Home Secretary's notable supporters is Cabinet Office minister and arch-Osborneite Matt Hancock. The Chancellor's decision to echo May's stance is being seen by some as the prelude to an endorsement. But Michael Gove, who reportedly wants Osborne to remain in post, also acknowledged the new fiscal reality at his launch this morning.

Far from more austerity, it is already clear that Brexit will mean considerably less. As Osborne knows, there is no alternative.

George Eaton is political editor of the New Statesman.