Eastleigh shows why Labour-Lib Dem tactical voting will matter in 2015

With the Tories in second place in 38 of the Lib Dems' 57 seats, Labour will need to consider whether to tacitly advise its supporters to vote for Clegg's party.

The first poll on the Eastleigh by-election, courtesy of Lord Ashcroft, suggests that the contest will be as tight as expected. The Conservatives are in the lead on 34 per cent, three points ahead of the Lib Dems, who have held the seat since 1994 (another by-election). But when all responses are included, rather than those certain to vote, the positions are reversed, with the Lib Dems three points ahead of the Tories (32-29). The challenge for Clegg's party, which holds all 36 council seats in the constituency, will be getting out its vote. 

Labour is in third place on 19 per cent, an increase of nine points since the general election, but far behind the Lib Dems and the Tories. On last night's edition of This Week, Alan Johnson bluntly declared: "Labour aren't going to win." 

Among other things, then, Eastleigh is a reminder that tactical voting will be a major issue in 2015. Indeed, if the Conservatives win on 28 February, it will become an issue immediately. The Tories are in second place in 38 of the Lib Dems' 57 seats and half of those on its target list are held by Clegg's party. If Labour is to prevent the Tories from decapitating scores of Lib Dems, it will need to consider whether to advise its supporters to cast tactical votes. In 2010, Ed Balls and Peter Hain both argued that Labour supporters should consider lending their votes to the Lib Dems in seats where the party couldn't win. But after five years of Clegg and co. acting as the Tories' "accomplices", it is doubtful whether many Labour figures will repeat this call. 

The biggest electoral headache for the Conservatives remains that any collapse in the Lib Dem vote will work to Labour's advantage in Tory-Labour marginals, as was shown in the Corby by-election. If this patten is repeated at the general election, the Tories stand to lose dozens of seats - there are 37 Con-Lab marginals where the third place Lib Dem vote is more than twice the margin of victory. 

If they are to stand any chance of winning a majority at the next election or even remaining the largest single party, the Tories need to hope for a partial Lib Dem recovery.

Nick Clegg with Ed Miliband at Buckingham Palace to mark the Duke of Edinburgh's 90th birthday on June 30, 2011 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR