Nick Clegg leaves the Hall Park Centre after casting his vote in the AV referendum on May 5, 2011 in Sheffield. Photograph: Getty Images.
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Why Labour's "decapitation strategy" could help Clegg keep his seat

Local voters resent outside interference and Lib Dem activists will be encouraged to rush to their leader's defence.

For Labour, talk of a future coalition with the Lib Dems is politically dangerous. Party strategists fear that the prospect of Ed Miliband entering government with Nick Clegg in just over a year's time could be viewed by Lib Dem defectors as "permission" to return home. With Labour's poll lead heavily reliant on this group (it enjoys the support of around a quarter of 2010 Lib Dem voters), the party needs to do all it can to discourage this impression. 

Ed Miliband, then, has been quick to dismiss Clegg's latest overtures. While no longer insisting that the Lib Dem leader's departure would be a precondition of any coalition agreement (in common with Ed Balls), he told Daybreak: "What I'm looking for is a majority Labour government. There are such big issues that the country faces, I think Nick Clegg should be worried about the Liberal Democrats." Today, the party is briefing that it has launched a "major bid" to defeat Clegg in his Sheffield Hallam constituency at the next election, with one NEC source declaring that it is "pouring resources" into the seat. 

Whether these "resources" amount to more than a few extra leaflets is unclear. As I said, the story has much more to do with conveying the broader message that Labour isn't going soft on Clegg. But given his dismal approval ratings and the large student population in the area, the Deputy PM might be thought an easy target. Yet for several reasons, the odds are against Labour taking the seat. For a start, Clegg currently enjoys a majority of 15,284, making him the safest Lib Dem MP in the country. In 2010, Labour finished in third place with just 16.1 per cent, 3,812 votes behind the Tories (it has never won and last finished second in 1979) and 19,096 behind Clegg. That Labour chose not to make the seat one of its 106 targets suggest that it recognises there is little prospect of advancing to first. 

In October 2010, a Lord Ashcroft poll put Labour just two points behind the Lib Dems (33-31) but recent council election results suggest the party's vote is holding up better than many expected. In a by-election in the suburb of Fulwood last year, for instance, it won 400 more votes than in 2012. 

Labour's decision to explicitly target the seat could, if anything, tilt the odds further in Clegg's favour. Lib Dem activists now have an excuse to rush to their leader's defence (albeit potentially drawing valuable resources from other seats), while local voters are likely to resent interference by outsiders with little knowledge of the constituency. For the latter reason, no prominent "decapitation strategy" has succeeded in recent times. As Lord Ashcroft wrote (see p. 304) of the Lib Dems' attempt to oust prominent Tories, including Oliver Letwin, David Davis and Theresa May in 2005, "My polling uncovered many interesting facts, including that voters in the Liberal Democrats' decapitation seats were less inclined to vote against the sitting Conservative MP when they were told of the decapitation motivation...Oliver Letwin clearly understood the message because when he was interviewed by Ann Treneman of the Times during the campaign, he asked her to use the word 'decapitation' a lot because he said it would help him to get elected"

In 2010, the Tories similarly failed to oust Labour heavyweights such as Ed Balls, Jack Straw and John Denham. The smart money is on Clegg continuing this trend. 

George Eaton is political editor of the New Statesman.

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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