Nick Clegg speaks during the launch of the Lib Dems' European election campaign at Colchester United's Weston Homes Community Stadium. Photograph: Getty Images.
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Labour's election broadcast shows it fears a Lib Dem revival

The party is determined to deny Clegg the chance to make a fresh appeal.

After yesterday's volley of attacks on the Lib Dems, Labour has continued the theme with its new party election broadcast, which depicts Nick Clegg as the "un-credible shrinking man". In the black and white film, the Lib Dem leader is shown diminishing in size as his Tory superiors overrule him and triple tuition fees, raise VAT  introduce the bedroom tax and cut taxes for millionaires.

Opinion on the broadcast's artistic merits is divided (it's not the best PEB I've seen, but far from the worst), but what about the politics? My former NS colleague Mehdi Hasan asks why Labour is bothering to attack a party that currently sits in fifth place in the European election polls. But a year away from the general election, the film is a signal that Labour recognises the importance of retaining the support of the electorally crucial group of Lib Dem defectors.

With around 25 per cent of 2010 Lib Dems currently supporting the opposition, it can't risk going soft on Clegg and handing them "permission" to return (as some already have). In addition to those seats that Labour can hope to win directly from the Lib Dems, strategists point out that in 86 of the party's 87 Tory targets, the Lib Dem vote share in 2010 was larger than the Conservative majority. In 37, it is more than twice as large. Even if Clegg's party partially recovers before 2015, Labour stands to make sweeping gains.

The Lib Dems' decision not to replace Clegg with a more left-wing figure such as Vince Cable or Tim Farron has limited the potential for the party to make a fresh appeal to the electorate. But with both coalition parties increasingly obsessed with differentation, Labour clearly recognises the potential for the Lib Dems to recover ground as May 2015 approaches. With two polls today putting them just a point ahead, they can't afford to allow Clegg the opportunity to do so.

A third of 2010 Lib Dems are undecided, with one in five considering UKIP. Which side they come down on will be crucial to determining whether Labour wins.

In his conference speech last year, Clegg memorably listed 16 "heartless" Conservative policies he had blocked. Labour's mission is to remind voters of those he has enabled (one party source ridiculed his claim to be "equidistant"). When you study the numbers, it's not hard to work out why.

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.