Delegates at last year's Labour conference in Manchester. Photograph: Getty Images.
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Why Labour MPs are in such good spirits

Backbenchers who were in despair last autumn are confident that their party has had the best start to the year. 

After two weeks of the long campaign, it's Labour MPs' faces that are the most cheerful in Westminster. "Buoyant" was how one reliable barometer of backbench opinion described the mood to me. Every party has its eternal optimists but it's notable that many of those in good spirits are the same figures who poured out their angst last November. Back then, the party's listless conference, the crisis in Scottish Labour, the near-death experience of Heywood and Middleton, and Ed Miliband's plummeting approval ratings had cast a funereal aura over it. Today, Labour advances towards the election with relative confidence. What accounts for this transformation?

The rising salience of the NHS

Labour's strongest suit - it leads the Tories by 18 points -  has risen dramatically in importance to voters as the A&E crisis has worsened. Polls show health displacing the economy and immigration as the public's top issue. The result is that Miliband's ambition to put the NHS "on the ballot paper" looks increasingly plausible. As the party that founded the service and that is most trusted to preserve it, it is Labour that will benefit if health is one of the defining issues of the election. Having promised to spend an extra £2.5bn a year on the NHS through the introduction of a mansion tax, a windfall levy on tobacco firms and a crackdown on hedge fund tax avoidance, the party will publish its 10-year vision for health and social care at the end of this month. 

The Tories' recent panicked pledge to spend £2bn more on the NHS was aimed at neutralising Labour's attack. But the deteriorating state of the health service, and the blame the Conservatives have incurred as a result of their reorganisation, means they will struggle to reduce the opposition's advantage. Labour's lead on the issue has remained stubborn despite the Tories' repeated attacks over Mid-Staffs and Wales. Indeed, one aide recently told me that every time Cameron mentions the NHS, Labour benefits as the subject rises up the agenda.

Labour's continued poll lead

Long after many predicted it would fade, the party's narrow but stubborn advantage in the polls endures. The Tories had hoped that January would be "crossover month" but as one Conservative MP observed to me this week, there remains no swing towards the party: "We're flatlining at 32 per cent". 

Osborne and 1930s levels of public spending

After the Autumn Statement gifted Labour a new attack line in the form of the OBR's forecast that George Osborne's planned spending cuts would reduce the state to its lowest level as a share of GDP since the 1930s, the party has maintained the assault this year, making the issue the subject of its first poster. MPs are confident that this debate will work in their favour, noting polls showing that the majority of voters do not believe that austerity should continue after the deficit has been eliminated and that tax rises should be prioritised over further spending reductions. 

They recall that in 2001 and 2005, Labour won by vowing to outspend the Conservatives and that the Tories' "age of austerity" message eroded support for them in 2010. The party's bet that voters will be more worried by the prospect of slashed public services than by a slower pace of deficit reduction may prove right. 

The Tories' failed deficit traps

The Conservatives had long hoped to take the political advantage by attacking Labour, a party still viewed as profligate, for its refusal to match their deficit reduction plans. Osborne moved to stage a vote on an updated Charter for Budget Responsibility and, together with four other cabinet ministers, launched an assault on the party's fiscal credibility at a new year press conference. But neither event proceeded as intended. 

Having hoped to trap Balls into opposing the Charter, the Tories were taken by surprise when he agreed to support it. The document's flexible pledge to eliminate the current deficit over a rolling, three-year period (as opposed to the Tories' vow to achieve an overall surplus by 2020) meant that it was compatible with Labour's looser fiscal plans. 

Similarly, the new year blitzkrieg did not produce the intended headlines as journalists attacked the Tories for equating Labour's opposition to individual cuts with a commitment to reverse them. The sight of the opposition conceding that austerity would continue made it harder to frame Balls and Miliband as drunken Keynesians. To the added concern of Tory MPs, the deficit has continued to fall in importance to voters as attention has turned to the NHS, immigration and living standards (issues on which Labour and Ukip have long led). 

Miliband's increased activity 

One recurrent complaint from Labour MPs has been that their leader isn't visible enough and that he spends too much time in Westminster. Both have changed recently with Miliband visiting at least two target seats a week and increasing his public interventions. Last weekend's appearance on Marr has been followed by speeches on climate change (Thursday) and voter registration (today), and he will be the keynote speaker at tomorrow's Fabian Society conference. There is an optimistic belief that, in time, the public will warm to Miliband. The pessimists, however, fear that his poor personal ratings mean he remains a drag on Labour. "We always suffer when Ed's more visible," one lamented. 

Cameron's TV debates problem

While there is anxiety at the possibility that David Cameron may succeed in avoiding TV debates, Labour MPs have been cheered by how the Prime Minister has been forced onto the defensive. The sight of a leader who trades on his "strength" hiding behind the fig leaf of the Greens is one they believe will damage his personal brand (although as Cameron has correctly concluded, the cost of rejecting the debates is likely lower than the cost of participating). They are also satisfied that the debate over the debates has eaten up time that the Tories could have spent talking about the economy - their defining issue. 

But: can Labour maintain the advantage until May?

While Labour MPs are confident that they've had the best of the last two weeks, they are painfully aware that maintaining this advantage until May remains a foreboding task. To defeat the Conservatives, the party will need to do what no opposition has ever done and win despite trailing on the economy and on leadership. As polling day draws closer, the fear is that the Tories' advantages in these areas will prove decisive. Conservative optimists are of the view that if the short campaign begins with the parties' neck-and-neck they will end in front. With the SNP and the Greens still insurgent, Labour's slight lead is vulnerable - and not once in the last 50 years has the party gained support in the final six months.  

George Eaton is political editor of the New Statesman.

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John McDonnell praises New Labour as he enters conciliatory mode

The shadow chancellor sought to build a bridge between the past and the present by crediting the 1997 government. 

Ever since Jeremy Corbyn became Labour leader, John McDonnell has been on a mission to reinvent himself as a kinder, gentler politician. He hasn’t always succeeded. In July, the shadow chancellor declared of rebel MPs: “As plotters they were fucking useless”.

But in his Labour conference speech, Corbyn’s closest ally was firmly in conciliatory mode. McDonnell thanked Owen Smith for his part in defeating the Personal Independence Payment cuts. He praised Caroline Flint, with whom he has clashed, for her amendment to the financial bill on corporate tax transparency. Jonathan Reynolds, who will soon return to the frontbench, was credited for the “patriots pay their taxes” campaign (the latter two not mentioned in the original text).

McDonnell’s ecunmenicism didn’t end here. The 1997 Labour government, against which he and Corbyn so often defined themselves, was praised for its introduction of the minimum wage (though McDonnell couldn’t quite bring himself to mention Tony Blair). Promising a “real Living Wage” of around £10 per hour, the shadow chancellor sought to build a bridge between the past and the present. Though he couldn’t resist adding some red water as he closed: “In this party you no longer have to whisper it, it's called socialism. Solidarity!”

As a rebuke to those who accuse him of seeking power in the party, not the country, McDonnell spoke relentlessly of what the next Labour “government” would do. He promised a £250bn National Investment Bank, a “Right to Own” for employees, the repeal of the Trade Union Act and declared himself “interested” in the potential of a Universal Basic Income. It was a decidedly wonkish speech, free of the attack lines and jokes that others serve up.

One of the more striking passages was on McDonnell’s personal story (a recurring feature of Labour speeches since Sadiq Khan’s mayoral victory). “I was born in the city [Liverpool], not far from here,” he recalled. “My dad was a Liverpool docker and my mum was a cleaner who then served behind the counter at British Homes Stores for 30 years. I was part of the 1960's generation.  We lived in what sociological studies have described as some of the worst housing conditions that exist within this country. We just called it home.”

In his peroration, he declared: “In the birthplace of John Lennon, it falls to us to inspire people to imagine.” Most Labour MPs believe that a government led by Corbyn and McDonnell will remain just that: imaginary. “You may say I'm a dreamer. But I'm not the only one,” the shadow chancellor could have countered. With his praise for New Labour, he began the work of forging his party’s own brotherhood of man.

George Eaton is political editor of the New Statesman.