The UKIP phenomenon: party makes dramatic gains

The party has already made 42 gains and is averaging 26 per cent of the vote in those areas where it stood.

Most county councils haven't even begun counting yet, but it's already clear that it's Nigel Farage who'll be wearing the biggest grin today. With seven of 34 councils declared, UKIP has gained 42 seats - two more than it was forecast to gain in total - and is averaging 26 per cent of the vote in those wards where it stood. It is, as the usually restrained pollster John Curtice said, "a phenomenal performance". 

After a comfortable win in the South Shields by-election (in which UKIP finished second), Labour has gained 30 seats and is hoping to win back Derbyshire and possibly Nottinghamshire and Staffordshire, three of the four councils it lost in 2009. The party is pointing to gains in marginal seats such as Harlow, Stevenage and Hastings as proof that is recovering in those areas it needs to win for a majority at the next election. 

The Tories have already lost 66 seats and appear likely to perform worse than forecast, with the party prepared for losses of up to 500.

After a humiliating result in South Shields, the Lib Dems are taking comfort from their performance in their strongholds. In the eight Lib Dem parliamentary seats where the result has been declared, the party is averaging 33 per cent of the vote, with the Tories on 31 per cent, UKIP on 22 per cent and Labour on 11 per cent. In a by-election in Nick Clegg's Sheffield Hallam constituency, the party won the seat on an increased share of the vote, with a 4 per cent swing away from Labour. As in Eastleigh, this is evidence that the Lib Dems are benefiting from an incumbency factor, something that should worry the Tories, who are in second place in 37 of the Lib Dems' 57 seats and who need to capture more than half of those if they are to stand any chance of winning a majority in 2015. 

 

UKIP leader Nigel Farage answers questions from the media as he canvasses for votes in the South Shields by-election. 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