Lib Dems

Kiran Stacey

Vince Cable’s speech to Lib Dem conference was just about on-message as regard to the coalition’s economic strategy. We need the state, he said; we need a demand stimulus, he said; we are taking advantage of low interest rates and borrowing more, he said. But he didn’t quite call for more borrowing for an immediate fiscal boost.

In fact, any Lib Dem wanting to call for a departure from George Osborne’s Plan A will now find it very difficult to do so after the party conference voted overwhelmingly in favour of the current fiscal plan.

This morning, delegates were asked to vote for a motion backing the “difficult decisions taken by the coalition government” and calling for the government to “do everything possible to stimulate growth within its fiscal mandate” (emphasis mine). Read more

Kiran Stacey

The Lib Dem conference, which starts on Saturday, could be an awkward affair for the party leadership. It is the first conference when Nick Clegg has been faced with members of his own parliamentary party calling for his resignation, and the second successive one where the party has been languishing in the polls.

The agenda for the conference shows the party leadership willing to give the faithful some red meat in the form of Tory-bashing motions. There is a motion insisting on national pay bargaining, one recommitting the party to Lords reform and one resisting any attempts to expand Heathrow.

But the biggest problem could come during the debate on the economy, when an amendment will be discussed calling for the government to rip up its fiscal mandate and take immediate measures to stimulate the economy. Read more

Kiran Stacey

Nick CleggNick Clegg took many by surprise this morning by appearing in the Guardian calling for an emergency, temporary tax on wealth to help pay down the deficit. Why make the call publicly, when he’s a senior member of the government that decides whether this happens or not? And why now, so far away from Budget time?

The obvious answer is that this is not a thought-through policy proposal, but merely a bit of positioning to cheer the troops ahead of next month’s party conference. It will not happen, say many (including the BBC’s Nick Robinson), so there is no need to worry about what Clegg actually means.

But, that analysis ignores a couple of things. Read more

Kiran Stacey

Nick Clegg on the campaign trailLib Dem strategists are fond of telling reporters their assumptions about a Lib Dem collapse at the 2015 election are wrong. The theory goes that there are many more LD-Tory marginals than there are LD-Labour ones, and in those seats, Tory voters will be happy to back a Lib Dem to keep out Labour.

Lib Dem HQ hopes that by going into coalition and signing up to the stringent departmental spending cuts they will combine their traditional strength in local campaigning with a new level of trust to be a party of national government.

The argument is questionable: will Tory voters really back then Lib Dems, especially as the two parties go into the election playing up their differences to appeal to their core voters? And won’t lots of left-wing voters cross over to Labour, even if they know it means letting in the Tories, since many view the Lib Dem as just as bad as their Tory counterparts? Read more

Helen Warrell

As I reported today, the Treasury is looking seriously into the idea of adopting German-style “mini jobs”, a scheme long championed by free market Conservative MPs. The model is that workers can earn up to €400, or £314, tax free each month, while their employers benefit from flexible labour with minimal bureaucracy: they pay a flat rate of wage taxes, insurance and pension contributions.

It is easy to see why companies and jobseekers might be clamouring for the government to pick this up, but there is actually a serious political case as well. Tories who were frustrated by the Liberal Democrats’ opposition to radical labour market reforms put forward by Adrian Beecroft have been calling for ministers to come forward with some new deregulation measures for some time.

The Lib Dems themselves are keen not to be seen as too obstructionist on this issue given the drive for growth, and party officials have assured me that they are not pushing back against the mini jobs idea. Could this be the middle way? Read more

Kiran Stacey

George Osborne

George Osborne

This morning’s papers are not going to make comfortable reading for George Osborne (not the first time we’ve said that recently…).

The Guardian has splashed on a story in the New Statesman that several of the 20 economists who signed a letter in 2010 backing the Osborne deficit reduction strategy had now changed their minds. The story was picked up in other papers too.

But of greater political significance is the piece I wrote in this morning’s FT about how the first fissures are starting to show in the joint coalition commitment to Plan A. Three Lib Dem MPs went on the record to say they wanted the chancellor to be more flexible with his   spending plans, and allow the deficit reduction targets to slide in order to pay for a short-term stimulus. Read more

Kiran Stacey

 

Sir John Vickers

Sir John Vickers

I revealed in this morning’s FT that Nick Clegg and Vince Cable want to reopen talks on how to put the Vickers recommendations on banking reform into law.

When the commission led by Sir John Vickers first set out its proposals, the government accepted most of them – most significantly that banks’ retail operations should be ringfenced from their investment banking side.

But the banks won two crucial victories in their attempts to water down these proposals. The first was that the government scrapped the Vickers recommendation that ringfenced banks should have stricter standards on how much equity they had to issue compared with their assets. The second was that ministers allowed for interest-rate and currency swaps to be sold from within the ringfenced arms of banks, putting them in the same category as ordinary loans and making them cheaper and easier to sell. Read more

Kiran Stacey

Nick CleggNick Clegg yesterday exacted the price his ministers and advisers had long warned would be paid for the Tories scuppering Lord reform: the Lib Dem leader in turn killed off the boundary changes, which are important to his coalition partners’ chances of a 2015 majority.

Most Westminster watchers saw it for what it was: a piece of tit-for-tat politics that was not particularly edifying, but probably important for the Lib Dems to show they were willing to use their muscle to get what they want.

Clegg attempted to appeal to principle when giving his rationale for the move yesterday. He said:

Lords reform and boundaries are two, separate parliamentary bills but they are both part of a package of overall political reform. Delivering one but not the other would create an imbalance – not just in the Coalition Agreement, but also in our political system.

 Read more

Kiran Stacey

 

Stephen Hester, RBS CEO

Stephen Hester, chief executive of RBS

We reported this morning on high-level discussions in the government about the possibility of buying out the remaining 18 per cent of RBS that taxpayers do not already own.

The argument for doing so runs like this: we are already exposed to the vast majority of the bank’s hugely damaged balance sheet, and the losses only look like getting worse as we find out more about its distressed debt.

Given that, would it not be better to take advantage of our holding and actually use the bank to pump some credit into our stagnating economy?

At the moment, the problem with doing this is that it means making loans the bank does not currently consider commercially viable. That would be a dereliction of duty to the remaining private shareholders, who would have every reason to sue. The answer therefore is simply to buy them out, and actually use the government’s stake to achieve what it is trying to do. Read more

Jim Pickard

Wind turbinesLast month it emerged that George Osborne had ordered the energy department to carry out deeper cuts to onshore wind subsidies in a move designed to appeal to Tory backbenchers – 100 of whom have signed a petition to that effect.

While Decc is already planning a 10 per cent cut to “Rocs” (renewable obligation certificates) the Treasury was seeking cuts of up to 25 per cent, it was widely reported.

But I have been handed a letter from the chancellor to Ed Davey, energy secretary, which suggests that the wind subsidies are only a microcosm of a wider battle over the green agenda raging in Whitehall. Read more

Kiran Stacey

David CameronDavid Cameron’s interview with the Telegraph this morning was interesting for lots of reasons. But the main one was his big hint of having to cope with austerity until 2020. Asked if there was likely to be a decade of cuts, the prime minister said:

This is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off.

I don’t see a time when difficult spending choices are going to go away.

Bleak words, which echoed what Sir Jeremy Heywood, the cabinet secretary, said last month. He told an audience at the Institute for Government:

 Read more

Kiran Stacey

Members of the House of LordsAfter weeks of shadow boxing, ministers are finally publishing their proposals on reforming the House of Lords today. They include an 80 per cent elected chamber, filled with 450 part-time “senators”, elected by regional list.

Tory backbenchers are already up in arms, threatening rebellion and, in the case of some ministerial aides, resignation. Conor Burns, PPS to Owen Paterson, said this morning:

If I lose my job for something that was a mainstream view within the Conservative party within the last parliament, which serving cabinet ministers held as their view, so be it.

 Read more

Kiran Stacey

Reading this morning’s papers, you would have known that Michael Gove’s proposals to scrap GCSEs and bring back two levels of qualification for 16-year-olds have sparked a row. But to a greater extent than any recent government, this row is not between the government and the opposition, it is within the government. The papers reported:

Michael Gove has ignited a furious coalition row with the Liberal Democrats… (FT)

Nick Clegg vows to block Michael Gove’s plan to ditch GCSEs (Guardian)

Nick Clegg erupted with fury and vowed to block Michael Gove’s proposals… (Daily Mail)

To an extent, this suits both coalition partners: Gove gets to posture in front of the Tory faithful, while the Lib Dems get to show their muscle when the eventual compromise is reached. Read more

Kiran Stacey

Vince Cable has reignited one of the questions that has dogged the coalition since it formed: when will it split up? Talking to BBC 5 Live’s John Pienaar, the business secretary said:

Everybody involved knows that before the next general election the two parties will have to establish their own separate platforms and identity.

But how that disengagement takes place, over what time period is very much an issue for the future, certainly not something we’re talking about at the moment.

The question is, what exactly does Cable mean by “disengagement”? Read more

Kiran Stacey

Nick Clegg hit the campaign trail for the last time yesterday, jetting to Edinburgh (where the party could lose half its seats), then down to Stockport (where it could lose control), and then catching the train over to his constituency home in Sheffield.

It’s a grinding schedule, especially as the Lib Dems prepare for another year of heavy local government losses as they continue to suffer for their decision to join the Tories in government. The party could end up losing councils across the country: Cardiff, Stockport, Burnley, Cheltenham, and in other places it could be wiped out altogether.

You might expect Clegg to be jaded, especially as he visits places he’s expected to lose. But if the Lib Dem leader was tired, he didn’t show it. Far from it, as he turned on the charm for voters in a chip shop on a grey suburban shopping precinct in Stockport, it became clear why voters had taken to him so enthusiastically in 2010Read more

Kiran Stacey

Nick Clegg, Andrew Lansley and David Cameron at Guy's HospitalA month ago, ministers gathered round the cabinet table to be told by Andrew Lansley that the health bill was about to finally pass through parliament and become an act. Those attending banged their desks – partly in celebration, partly with pure relief. After 14 months of delays, negotiations and public rows, one of the most unpopular pieces of legislation from this session was finally about to be left behind.

Except it wasn’t. From next month MPs will start voting all over again on Lansley’s plans. What many in the coalition didn’t realise was that the act (as it now is) made so many changes to the infrastructure of the NHS that parliament will face a series of votes simply to create the bodies necessary to make them work. Clinical commissioning groups, Health Watch, Health Education England, Public Health England: the plethora of new quangos at the heart of the act all need to be legislated for. Read more

Jim Pickard

Lords reform is widely seen as a hobbyhorse of Nick Clegg and the Liberal Democrats –yet it is a Tory minister whose task is to push through the legislation to transform parliament’s upper house.

Indeed, aides to Mr Clegg have jokingly referred to it as “the Mark Harper bill” in their attempts to downplay the idea that the deputy prime minister is obsessedby removing the unelected peers.

Mr Harper has a delicate task in front of him; steering through a full shake-up of the Lords which has evaded other politicians for a century.

A press officer warns the FT that the minister keeps his office at a low temperature: but this habit may not prepare him for the frosty reception he will face in parliament during next year’s legislative marathon.

Peers and MPs of all parties have already lined up to oppose the bill. Even if it passes through the Commons without mishap it is likely to be ambushed by the combined forces of Tory, Labour, and even some Lib Dem peers.

There could be a repeat of the filibustering and all-night sittings dominated the Lords in the spring of 2011 over the alternative vote bill.

Nick Clegg has threatened to use the Parliament Act to force it through, but weeks of debate are expected, taking up large amounts of next year’s political calendar.

Mr Harper tells the FT that bill should not take up a “disproportionate” amount of time: but warns potential trouble-makers:

I don’t think the public would understand if people told the public they don’t care hugely about this legislation but then let it (in-fighting) damage the rest of the programme,” he says.

Even David Cameron once said he saw Lords reform as a “third term issue”, implying it was a very low priority. But Mr Harper says the prime minister is fully signed up to the Read more

Kiran Stacey

Ed Miliband took us all by surprise this morning when he went on the Andrew Marr show with a genuinely new proposal to reform party funding. The individual cap on donations should be set at £5,000, he said, way below Cameron’s preferred level of £50,000, and half of Sir Christopher Kelly’s proposal of £10,000.

Significantly, the Labour leader said this cap would include union donations. But, as always with this debate, the stumbling block is what happens with the levy – the automatic £3 that members of some unions pay to Labour as part of their subscription fees. At the moment, members may opt out of making such payments, but the Tories want them to back Sir Christopher’s proposal of having to opt in instead, something likely to have a significant impact on Labour’s coffers.

The row now turns on how much Labour actually makes from one-off union donations, which would be included under Miliband’s proposed cap, against how much it makes from the levy, which wouldn’t. Read more

Kiran Stacey

Nick Clegg has hit back at claims by David Cameron that he had signed up to plans to extend surveillance by the security services into social media messages and Skype calls.

The PM told hacks travelling on the plane with him to Japan:

You’ve got to remember that this was a national security council where sitting round the table was Chris Huhne, Nick Clegg, Ken Clarke – people from impeccable civil libertarian backgrounds.

 Read more

Kiran Stacey

The quad - David Cameron, Danny Alexander, George Osborne, Nick Clegg

Tim Farron, the Lib Dem president, told me yesterday:

I suspect that we are going to see a Budget which has got more Liberal Democrat stuff in it than Tory. The amount of money being returned to individuals will go overwhelmingly to middle and lower income earners.

He’s right, to the extent that by far the biggest spending measure announced by George Osborne tomorrow will be the increase in the personal tax allowance to around £9,000 – a move likely to cost around £3.3bn. Read more