There is a new consensus about the economy and – believe it or not – Labour called it first

Buried in the coalition’s austerity programme is the kernel of acceptance that, ultimately, government is the solution to economic malaise.

The Conservative Party’s dedication to the memory of Baroness Thatcher is hardly in doubt. Grief at her death earlier this year brought more unity to the party than any of the policies David Cameron has devised for that purpose. In case the point was missed (it wasn’t), a group of Tory backbenchers propose renaming the August bank holiday in honour of the Iron Lady (it won’t be).

But when it comes to influencing government policy, Mrs T is rivalled by the man who brought her down. Michael Heseltine may not enjoy the veneration of his party but he has the ear of its leaders. Earlier this year, he published a plan for stimulating growth by giving regions more control over spending. Chunks of the report have been adopted as government policy. Ask Treasury ministers and advisers about their economic strategy and the chances are that Heseltinian intervention will get a reference before Thatcherism.

Westminster has been so busy noticing the victory of the right in an argument about cuts it has barely clocked the left’s victory in an argument about the duty of the state to foster growth. There is cross-party agreement on the need to spend scarce resources on infrastructure. There is near consensus that the state should be doing more to nurture promising, innovative sectors of the economy. The discredited 1970s practice of “picking winners” has been adjusted and rebranded. It is now a “modern industrial strategy”. Every party will have one in its 2015 manifesto.

Not everyone has received the new wisdom. There are Conservatives who despise all state meddling and think that the only good government intervention is lighting a bonfire of employment rights and workplace protection. Osborne recognises the need to keep that wing of his party fed with meaty policy chunks but his own views are more nuanced.

Cabinet colleagues say the Chancellor privately accepts that Britain already has a liberal labour market and a relatively low-regulation economy. Future growth, in other words, will be spurred by government getting stuck in, not getting out of the way.

Osborne took a gamble on hard and fast cuts in the hope of fighting an election with a tamed deficit and booming economy. That move failed. But cynical risk-taking is not the same as ideological rigidity. Osborne’s allies say his urge to win is greater than his eagerness to parrot Thatcherite shibboleths.

The really zealous expressions of Conservatism are elsewhere, in Michael Gove’s campaign to prise schools away from localauthority control, for example, or in a welfare policy that sees help from the state as a cause of poverty rather than its alleviation. In a fiercely ideological field, economic management is one of the more pragmatic bits of the coalition agenda.

Labour detests the idea that Osborne is flexible. The Chancellor’s refusal to change course has been an opposition mantra. Any dabbling in pro-growth intervention is dismissed with scorn. Money for infrastructure, say shadow ministers, is dwarfed by earlier cuts to capital spending budgets. Funds aimed at supporting new businesses sit idle. If the coalition wanted local growth plans, why scrap regional development agencies? Vince Cable might fancy a new industrial policy but, says Labour, the real agenda is set by old Tory reflexes: tax cuts for the rich; devil take the hindmost.

There are obvious reasons for Ed Miliband and Ed Balls to depict Cameron and Osborne as captives of an outmoded and callous creed. At a glance, the cap fits. But by belittling the Tory conversion to active government, Labour misses the opportunity to claim a moral victory. Under the last government, Peter Mandelson led the interventionist revival with his call for a more “strategic state” to navigate chaotic forces of globalisation. In candid moments, Heseltinian Tories concede that Mandelson was right.

Neither Labour nor the Conservatives dare admit that their economic views are converging. The fortification of opposing trenches, separated by boggy no-man’s-land (aka the Lib Dems), has become a strategic necessity and a source of intellectual comfort. Yet the proximity is clear to anyone outside the two tribes. Labour has accepted that budgets must be cut, as the Tories said all along. The Tories are borrowing to keep the economy afloat, as Labour predicted they would.

Both want to spend on infrastructure and skills. Both are working their way towards a more vigorous industrial policy. Both are planning manifesto chapters on beefing-up consumer regulation to address the rage of people who feel permanently ripped off by banks, utilities, rail companies and pretty much every other essential service, many of which are in the private sector. The political pendulum is swinging towards more, not less, intervention in the economy. That should favour Labour – but before the opposition can take any credit for the new consensus, it has to prove that the consensus is there. That means recognising there is more to Tory economic policy than cuts.

Buried in the coalition’s austerity programme is the kernel of acceptance that, ultimately, government is the solution to economic malaise, not the cause. Miliband and Balls may not want to give the Chancellor credit for getting anything right but they also need to look as if they are winning some big arguments. Full-frontal attack is Labour’s default stance towards Osborne. Sometimes faint praise can be more damning.

David Cameron and Ed Miliband look on during the service to celebrate the 60th anniversary of the Coronation of Queen Elizabeth II at Westminster Abbey in London. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 01 July 2013 issue of the New Statesman, Brazil erupts

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.