Why Clegg could still face a leadership challenge next year

Lib Dem activists suggest that Clegg's position could still come under threat if the party finishes fourth or fifth in next year's European elections.

By any measure, Nick Clegg is having a good conference. He has won major votes on the economy, tuition fees, nuclear power, the 50p tax rate and Trident, confirming the Lib Dems' new status as a party of the "radical centre". These triumphs both reflect and reinforce Clegg's improved standing as leader. The Eastleigh by-election, which convinced the Lib Dems that they aren't facing wipeout in 2015, and the return of economic growth, which the party hopes to earn some credit for, means that talk of a leadership challenge by Vince Cable or anyone else has largely disappeared.

But speak to Lib Dems and you get the impression that Clegg's position isn't completely secure yet. One senior party activist told me that he could still face a challenge if the party performs particularly badly in next year's local and European elections, warning that "we could come fifth behind the Greens". Such a result would mean the loss of most or all of the party's nine MEPs. With a year to go until the general election, there would still be just enough time for the Lib Dems to contemplate a change of leader.

As Lord Oakeshott, one of those who would lead the revolt, noted in his pre-conference interview: "This will be much the biggest test we’ve had on a nationwide basis of our support and our appeal since the general election, so that’s why it will be crunch time. There will be no excuse when everyone has been voting, particularly in important areas like London. I think that’s when everyone will focus on things and I hope we will have a good hard look at our prospects for the election. There will still be time, but next May/June will be the last chance."

One group that hopes the Lib Dems might yet oust Clegg is the Tories. If it they are to win the next election, the Conservatives needs a Lib Dem leader who can win over Labour voters in Tory-Labour marginals. At present, after the defection of around a quarter of 2010 Lib Dem voters to Labour, the Tories stand to lose dozens of seats at the next election (Corby was an early warning) -  there are 37 Conservative-Labour marginals where the third place Lib Dem vote is more than twice the margin of victory.

The belief among the Tories is that a more centre-left figure such as Cable or Tim Farron, both of whom have signalled their availability, could prompt the party's former supporters to return home from Labour. Tim Montgomerie told me last year that "a left-wing replacement" of Clegg in 2014 was "vital to Tory hopes". Fortunately for Ed Miliband, the chances of him facing a new Lib Dem leader in 2015 have fallen further after Clegg's victories this week.

Nick Clegg on stage at the Liberal Democrat conference in Glasgow. 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.