Labour holds South Shields as UKIP takes second

Lib Dems pushed into seventh place as Labour wins in David Miliband's old constituency.

The result has just been declared in South Shields, where, as expected, Labour comfortably held the seat vacated by David Miliband. Party sources had earlier suggested that they expected to poll in the "mid-40s" but in the event, Labour's vote share fell by just 1.5 per cent to 50.5 per cent.

The real story of the night, however, was UKIP's performance. The party finished second with 24 per cent of the vote, just four per cent short of its record performance in Eastleigh earlier this year. Given that it had no previous presence in the seat - it didn't even stand a candidate in 2010 - and that the campaign lasted just 17 days, this is a remarkable achievement, confirming its status as the new protest party of choice in all regions.

It was another disastrous by-election result for the Lib Dems, who lost their deposit and finished seventh, behind UKIP, the Tories, an independent, the Socialist Party and the BNP. The party received just 352 votes, only 155 more than the Monster Raving Loony Party and a vote share of just 1.4 per cent - its worst by-election result since 1948.

Most of the county councils don't begin counting until 8:30am tomorrow but early results suggest that Labour and UKIP will make significant gains, with the Tories suffering heavy losses.

Here's the South Shields result in full

Emma Lewell-Buck (Lab) 12,493 (50.51%, -1.51%)
Richard Elvin (UKIP) 5,988 (24.21%)
Karen Allen (Con) 2,857 (11.55%, -10.04%)
Ahmed Khan (Ind) 1,331 (5.38%)
Phil Brown (Ind Soc) 750 (3.03%)
Lady Dorothy MacBeth Brookes (BNP) 711 (2.87%, -3.65%)
Hugh Annand (Lib Dem) 352 (1.42%, -12.79%)
Howling Laud Hope (Loony) 197 (0.80%)
Thomas Darwood (Ind) 57 (0.23%)

Labour majority 6,505 (26.30%)
Electorate 62,979; Turnout 24,736 (39.28%, -18.42%)

Labour candidate Emma Lewell-Buck celebrates after winning the South Shields byelection Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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George Osborne's mistakes are coming back to haunt him

George Osborne's next budget may be a zombie one, warns Chris Leslie.

Spending Reviews are supposed to set a strategic, stable course for at least a three year period. But just three months since the Chancellor claimed he no longer needed to cut as far or as fast this Parliament, his over-optimistic reliance on bullish forecasts looks misplaced.

There is a real risk that the Budget on March 16 will be a ‘zombie’ Budget, with the spectre of cuts everyone thought had been avoided rearing their ugly head again, unwelcome for both the public and for the Chancellor’s own ambitions.

In November George Osborne relied heavily on a surprise £27billion windfall from statistical reclassifications and forecasting optimism to bury expected police cuts and politically disastrous cuts to tax credits. We were assured these issues had been laid to rest.

But the Chancellor’s swagger may have been premature. Those higher income tax receipts he was banking on? It turns out wage growth may not be so buoyant, according to last week’s Bank of England Inflation Report. The Institute for Fiscal Studies suggest the outlook for earnings growth will be revised down taking £5billion from revenues.

Improved capital gains tax receipts? Falling equity markets and sluggish housing sales may depress CGT and stamp duties. And the oil price shock could hit revenues from North Sea production.

Back in November, the OBR revised up revenues by an astonishing £50billion+ over this Parliament. This now looks a little over-optimistic.

But never let it be said that George Osborne misses an opportunity to scramble out of political danger. He immediately cashed in those higher projected receipts, but in doing so he’s landed himself with very little wriggle room for the forthcoming Budget.

Borrowing is just not falling as fast as forecast. The £78billion deficit should have been cut by £20billion by now but it’s down by just £11billion. So what? Well this is a Chancellor who has given a cast iron guarantee to deliver a surplus by 2019-20. So he cannot afford to turn a blind eye.

All this points towards a Chancellor forced to revisit cuts he thought he wouldn’t need to make. A zombie Budget where unpopular reductions to public services are still very much alive, even though they were supposed to be history. More aggressive cuts, stealthy tax rises, pension changes designed to benefit the Treasury more than the public – all of these are on the cards. 

Is this the Chancellor’s misfortune or was he chancing his luck? As the IFS pointed out at the time, there was only really a 50/50 chance these revenue windfalls were built on solid ground. With growth and productivity still lagging, gloomier market expectations, exports sluggish and both construction and manufacturing barely contributing to additional expansion, it looks as though the Chancellor was just too optimistic, or perhaps too desperate for a short-term political solution. It wouldn’t be the first time that George Osborne has prioritised his own political interests.

There’s no short cut here. Productivity-enhancing public services and infrastructure could and should have been front and centre in that Spending Review. Rebalancing the economy should also have been a feature of new policy in that Autumn Statement, but instead the Chancellor banked on forecast revisions and growth too reliant on the service sector alone. Infrastructure decisions are delayed for short-term politicking. Uncertainty about our EU membership holds back business investment. And while we ought to have a consensus about eradicating the deficit, the excessive rigidity of the Chancellor’s fiscal charter bears down on much-needed capital investment.

So for those who thought that extreme cuts to services, a harsh approach to in-work benefits or punitive tax rises might be a thing of the past, beware the Chancellor whose hubris may force him to revive them after all. 

Chris Leslie is chair of Labour's backbench Treasury committee.