Miliband delivers the performance he needed in Queen's Speech debate

The Labour leader brilliantly ridiculed calls for a Tory-UKIP pact, but his borrowing problem remains.

After one of his most difficult months since becoming Labour leader, Ed Miliband needed a strong performance in today's Queen's Speech - and he delivered. His best moment came when he referenced the calls from Tory MPs for a pact or even a coalition with UKIP. "They used to call them clowns. Now they want to join the circus," he quipped, a line that improves with each reading. 

He went on to remind the House how Cameron's promise of an in/out EU referendum (which many predicted would prove disastrous for Labour) had failed to counter UKIP or sate his recalictrant backbenchers. In a well-crafted passage, he declared: "The lesson for the Prime Minister is you can’t out-Farage Farage. Banging on about Europe won’t convince the public. And the people behind him will just keep coming back for more. A Europe referendum tomorrow. Drop same sex marriage. The demands go on and on. They will never be satisfied. And every day he spends dealing with the problem behind him he’s not dealing with the problems facing the country."

Earlier in the speech, referring to Iain Duncan Smith's suggestion that wealthy pensioners hand back their Winter Fuel Payments, he asked Cameron: "why doesn’t he set an example and hand back the tax cut he’s given himself?" Seizing on David Davis's plea for "no more old Etonian advisers", he quipped that it was "time for some diversity" - "let's have someone from Harrow". After the abandonment of minimum alcohol pricing and plain cigarette packaging, Miliband also brought up Lynton Crosby's links to the alcohol and tobacco industries, declaring, once again, that Cameron stands up for "the wrong people".

This is what they used to say about cigarette packaging: 'It's wrong that children are being attracted to smoke by glitzy designs on packets … children should be protected from the start.'

That was the previous Health Secretary. Before they hired their new strategist. The one whose company worked for big tobacco. And now what’s happened? They’ve dropped the bill.

After his now-infamous World At One interview, in which he was unable to say whether Labour would borrow more to fund a temporary VAT cut, three Conservative MPs intervened to challenge Miliband over his plans. In response to the first, Jacob Rees-Mogg, he replied that "of course" a VAT cut would "have a cost" and "lead to a temporary increase in borrowing" (perhaps the first time Miliband has admitted in the Commons that Labour would borrow more), but that the increase would be justified since it would help to stimulate growth. But he was unable to answer Penny Mordaunt's claim that the measures included in Labour's alternative Queen's Speech would cost an extra £28bn, insisting that he had "already addressed this" (he hadn't). After he was challenged again, he fell back on the line that it was the government that was "borrowing more". This is true (£245bn, in fact) but it invites the Tory rejoinder, "you would borrow even more", leaving the Labour leader back where he began. The danger for Miliband is that Tory MPs will continue to challenge him over the total cost of Labour's plans until, as with the VAT cut, he finally gives way.  

But while Miliband still gives the impression of running scared of his own economic policy, today he did enough to remind his party why he could emerge as the victor in 2015. 

Ed Miliband speaks at the CBI's annual conference on November 19, 2012 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.