George Osborne talks to the press as he arrives for an economic and financial affairs meeting (Ecofin) in Brussels on November 7, 2014. Photograph: Getty Images.
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Osborne drops legal challenge to EU bank bonus cap

With attention on the Rochester by-election, the Chancellor makes his retreat.

Under the cover of the Rochester by-election, George Osborne has abandoned his long-running legal challenge to the EU's cap on bank bonuses. The decisive blow came earlier today when an advocate general at the European Court of Justice advised that the new law, which restricts payouts to 100 per cent of a bankers’ salary, or 200 per cent with shareholder approval, should be upheld. 

Osborne said: "I’m not going to spend taxpayers’ money on a legal challenge now unlikely to succeed. The fact remains these are badly designed rules that are pushing up bankers’ pay not reducing it. These rules may be legal but they are entirely self-defeating, so we need to find another way to end rewards for failure in our banks."

Ed Balls has been swift to respond, deriding the move as "a humiliating climbdown". He said: "The Chancellor revealed his true priorities when he decided a year ago to spend taxpayers’ money fighting a bank bonus cap while working families face a cost-of-living crisis. He should tell taxpayers how much money he has now wasted on this challenge, which we warned him against.

"It shouldn’t have taken the EU to act to rein in excessive bonuses, but George Osborne has totally failed to act here in Britain.

"Labour will reform the banks and levy a tax on bank bonuses to fund a paid starter job for young people out of work for over a year."

The cap has been criticised by left-wing economists on the grounds that it simply allows banks to inflate employees' basic pay (which is not subject to claw-back) and does little to tackle the underlying causes of excessive risk-taking. But the politics of this debate are too exquisite for Labour to get caught in technicalities. Expect it to swiftly FOI the Treasury to find out just how much of the public's money Osborne spent on his doomed challenge. 

Meanwhile, it's worth noting that forced to side with either the EU or the City of London, Nigel Farage has sided with the City. He told the Evening Standard: "A lot of people in Rochester and Strood commute to London to work in the finance industry. They will be reading about this in the Evening Standard on their way home and may well feel dismayed by the verdict.

"It is the constant drip, drip, drip of Britain losing every single negotiation and ruling. We never win and it’s time we woke up to that fact."

The former trader added: "If you applied this law to the Premier League you would not expect Britain to remain one of the world’s greatest footballing nations. London is the world’s greatest centre for a lot of industries, including finance."

Farage's stance is consistent with his europhobia and his free market principles. But it is unlikely to go down well with Ukip voters, who, as polls have consistently shown, lean to the left on economic issues. 

George Eaton is political editor of the New Statesman.

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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.