The battle David Cameron dare not lose

More than a quarter of a century ago, a young, recently-elected Labour leader found himself caught on the horns of an excruciating political dilemma as he sought to drag his party into the post-industrial era.

The National Union of Mineworkers under its leader Arthur Scargill had just gone on strike in protest at Margaret Thatcher's pit closure programme without calling a national ballot of its members.

Did Neil Kinnock condemn the strike and put himself at odds with the union which, more than any other, defined the Labour movement, or support it and leave his modernisation agenda holed below the waterline?

In the end, he did neither, choosing to sit on the fence until the battle was effectively over, although with the benefit of hindsight, he now says he regrets not having called for a ballot at the outset.

Was it possibly this example that the current Labour leader, Ed Miliband, had in mind, when he came down firmly against this week's one-day stoppage by the public sector unions over pensions?

It certainly represented a gamble for a man who owes his entire position to the trade union barons whose votes swung last year's knife-edge Labour leadership election in his favour.

Predictably, one of them has already branded him a "disgrace" for failing to support Thursday's action but, to give him his due, Mr Miliband is at least trying to show some leadership over the issue.

Whether he is proved right or wrong in his judgement depends of course on how the battle for public opinion already under way over the pensions issue ultimately pans out.

The argument on this score is currently pretty finely balanced. While some will invariably blame the unions for Thursday's disruptions, many are instinctively sympathetic to their cause.

Attempts by ministers to frame the debate in terms of a comparison between "generous" public sector pensions and those in the private sector risk being seen as advocating a "race to the bottom."

Mr Miliband's calculation, at the moment, is that the strikes will harm the union's cause and by implication the Labour Party's if it is seen to be supporting them.

But by focusing his arguments this week on the timing of the action – at a point when negotiations with the government are still ongoing – he has at least left himself a way out if there is a shift in the public mood.

For Prime Minister David Cameron, too, the stakes are high, partly because of the sheer amount of taxpayers' money involved, and partly because of the government's recent series of U-turns.

First it was the forestry sell-off, then the plan to reduce sentences for offenders who plead guilty early, and finally and most damagingly of all the proposed shake-up of the National Health Service.

Any more climbdowns – particularly in the face of pressure from the unions – and his government's credibility would surely be permanently shot to pieces.

The fact that Mr Cameron was prepared to put his personal authority on the line over the pensions issue in a series of interventions last week suggests he is well aware of this danger.

I began this column by alluding to the Thatcher-Scargill prize-fight of 1984-85 and, for both of the two main parties, its legacy continues to hang heavily over the politics of industrial relations in the UK.

If the strike hampered Mr Kinnock's attempts to modernise his party, it also helped cement Mrs Thatcher's reputation as the woman who transformed Britain from the economic basket-case of the 70s to the self-confident nation it became in the course of the ensuing decade.

All subsequent Tory leaders bar none have since struggled to escape her shadow, and for all his efforts to fashion a more compassionate brand of Conservatism, the current one is no exception.

Just as Ed Miliband hopes to be compared favourably with the Welsh Windbag, David Cameron cannot afford to be compared unfavourably with the Iron Lady.

Blair's last mission - to save Labour from the 'sons of Brown'

At first sight, former Labour health secretary Alan Milburn's criticisms of the Conservative-led Coalition's revamped health reforms this week might have seemed like routine political knockabout.

"The biggest car crash in the history of the NHS" was the former Darlington MP's withering verdict after Prime Minister David Cameron and his deputy Nick Clegg performed their screeching U-turn.

But closer inspection of Mr Milburn's argument reveals a rather more subtle agenda than simply Coalition-bashing.

For as well as highlighting the government's ongoing difficulties over the health changes, his comments also illuminate the continuing deep divisions within the Labour Party over its attitude to public service reform.

"David Cameron's retreat has taken his party to a far less reformist and more protectionist position than that adopted by Tony Blair and even that of Gordon Brown," Mr Milburn wrote in a newspaper article on Thursday.

"The temptation, of course, is for Labour to retreat to the comfort-zone of public sector producer-interest protectionism...it would be unwise in my view for Labour to concede rather than contest the reform territory."

This was, of course, an implicit criticism of Labour leader Ed Miliband for having allowed Mr Cameron to seize the reform mantle and supplant Labour as the "changemakers" of British politics.

And coinciding as it did with a renewed bout of internal Labour feuding , the timing of Mr Milburn's comments looked far from accidental.

First, there was the leak of documents purporting to implicate both Mr Miliband and Shadow Chancellor Ed Balls in a "plot" to overthrow Tony Blair soon after his third election victory in 2005.

Then the 'victory speech' that was to have been delivered by South Shields MP David Miliband had he not unexpectedly lost to his younger brother in last year's leadership contest mysteriously came to light.

If that wasn't enough, Mr Blair himself then plunged back into the fray, looking every bit the once-and-future-king as he broke a self-imposed four-year silence on domestic political issues in an interview with The Sun.

By showering praise on the Coalition for its education and health reforms, claiming they had carried on where he left off, he too called into question 'Red Ed's strategy.

"New Labour was the concept of a modern Labour Party in the middle ground with a set of attitudes orientated towards the future – and I believe if we had carried on doing that we would have won the last election," he said.

Asked whether Mr Miliband was right to say the New Labour era was over, he said: "It can't possibly be over, because it isn't time-related.

"It is about the Labour Party constantly being at the cutting edge, being a modernising party – always being full of creative ideas and isn’t pinned in its ideological past.

"That is always the choice for the Labour Party. It is the choice for progressive parties."

Knowing from past experience how these guys tend to operate, it is impossible to believe that this sudden spate of activity by the former Prime Minister and his allies was not in some way co-ordinated.

So what is Mr Blair up to? Is he simply trying to flog a few more copies of his book – or does he have a higher purpose in mind?

Could it be that the architect of New Labour is embarking on one last great battle to rescue the party he dominated for 13 years from the clutches of the "sons of Brown?"

The Blairites are back – and Ed Miliband had better watch his.

The Archbishop was simply doing his job

Over the course of the last couple of centuries, the Church of England has frequently if rather inaccurately been caricatured as "the Conservative Party at prayer."

If it was ever true, it certainly ceased to be so in the 1980s, when the church's trenchant critique of Margaret Thatcher's policies led to it being dubbed "Marxist" by Norman Tebbit – although perhaps the "SDP at prayer" would have been nearer the mark.

Thirty years on, the church again finds itself again in conflict with a Conservative-led administration, and for much the same sorts of reasons.

Just as Archbishop Robert Runcie in the 1980s took the Iron Lady to task over her government's apparent lack of concern for the poor and for social cohesion, so his present-day successor Rowan Williams is motivated chiefly by the impact of the government's reforms on the worst-off.

It would be tempting to think he had planned his attack to cause maximum discomfort for David Cameron in a week which has seen the Prime Minister forced to defend his handling of health and justice reforms.

Not so. The New Statesman article in which Dr Williams launched his salvo had been long planned, as the archbishop was actually guest-editing the publication.

In one sense, Dr Williams was simply doing his job. What on earth is a national church for, if not to occasionally offer a faith-based perspective on the politics of the day?

But of course his is not the only interpretation of how Christian teaching should impact on present-day political debates, as Roman Catholic archbishop Vincent Nichols reminded us when he praised the "genuine moral agenda" driving the Coalition's reforms.

Dr Williams' intervention may even have helped Mr Cameron this week by diverting attention from his internal difficulties over health and sentencing.

A fortnight ago, in this column, I posed the question whether the government's health reforms, and the career of health secretary Andrew Lansley, were now effectively dead in the water.

The answer on both counts would appear to be yes, with even the Health and Social Care Bill's central proposal for GP consortia to commission local health care now in danger of being watered-down.

And Justice Secretary Ken Clarke was forced to tear up his plan to give sentencing discounts to rapists and other offenders in return for early guilty pleas as Mr Cameron made a belated move in the direction of Prime Ministerial government.

Ordinarily this would all have presented a gift-horse to Labour, but the party is beset by internal difficulties of its own.

Party leader Ed Miliband was generally held to have had the worst of this week's Commons exchanges with Mr Cameron and the muttering over his leadership is increasing in volume.

The revelations about Shadow Chancellor Ed Balls' involvement in a "plot" to oust Tony Blair from power in 2005 will hardly help matters.

Having read some of the leaked documents myself yesterday, I would say a more accurate description of what was going on was a bid to rebrand Gordon Brown rather than oust Mr Blair, but the damage has been done.

Ultimately it is not up to archbishops to assemble a coherent critique of government policies. It is the opposition's job to do that.

And until Mr Miliband and Co can step up to the mark in that regard, Mr Cameron can continue to sleep easily in his bed at night.

That said, Dr Williams' claim that radical policies are being introduced "for which no–one voted" is a very hard one to answer – even if those self-same policies are now being trimmed.

The question of legitimacy that has dogged this Coalition from the start is not, I suspect, one that is going to go away in a hurry.

Does Ed need David back like a hole in the head?

With Labour leading in the opinion polls and the relationship between the Coalition partners growing increasingly fractious, it would be easy to make the assumption that these are good days for Ed Miliband.

And doubtless on a personal level they are, what with him having finally tied the knot with long-standing partner Justine at a ceremony in Nottinghamshire last week.

But as he returns from his short honeymoon this weekend, I suspect that Ed himself will be feeling rather less complacent about his party's prospects.

Any serious analysis of Labour's performance in last month's local and devolved elections suggests it is currently a long way away from being in a position to win power again.

Sure, the party did well in its Northern heartlands, recapturing big city councils like Newcastle after the Lib Dem interregnum – but it made few inroads in the Southern marginals it needs to win back from the Tories.

And as for Scotland and the party's defeat to Alex Salmond's resurgent SNP….well, the less said the better.

One idea increasingly doing the rounds at present is that what Ed really needs, apart from the operation on his adenoids that is due later this summer, is his brother David back on the front bench.

But while the return of the South Shields MP and former Foreign Secretary would certainly make the Shadow Cabinet look more like a government-in-waiting, I wonder if it might ultimately cause more problems than it would solve.

The biggest and most obvious danger would be that David's return in a senior role would invite comparisons between he and his younger brother which would be less-than-flattering to the latter.

Ed Miliband is already being outshone by his namesake Ed Balls, who has taken to the job of opposition like the proverbial duck to water.

But the Shadow Chancellor and Coalition-basher-in-chief is not even popular within his own party, let alone with the wider public, and as such represents no real threat to his leader.

The elder Miliband is a different matter. Not only did a significant number of Shadow Cabinet members support him for the top job, a majority of Labour members did too.

If history is any guide, neither of the Miliband brothers will be the one to lead Labour back to the promised land.

Whenever the party has lost power after a long period in government, it has usually taken several goes before alighting on a leader capable of persuading the electorate to entrust it with power again.

After the fall of the Attlee government in 1951, it took the party 12 years before it found such a leader in Harold Wilson. And after 1979, it had a 15-year wait before Tony Blair came along.

Some think Labour's next Prime Minister is likely to come from the 2010 intake - with Stella Creasy and Chuka Umunna the names most frequently mentioned - although for my part I wouldn't write off class of '97 alumnus Yvette Cooper just yet.

Either way, if David Miliband isn't going to come back onto the front bench, it calls into question why he is still in the House of Commons at all.

For all his genuinely heartfelt commitment to the people of South Shields, he is a big politician who demands a big stage for his next political role.

The trouble is that, whether David likes it or not, there are still a lot of people around who would dearly like his next role to be that of leader of the Labour Party in his brother's stead.

And so long as that remains the case, the odds must be on him staying where he is.

Are Lansley's health reforms now dead in the water?

First David Cameron announces a “pause” in the government’s plans to reform the National Health Service in order to listen further to the views of health professionals and the public.

Then the doctor’s trade union, the British Medical Association, reveals that it thinks the Health and Social Care Bill should be scrapped, and any changes achieved without legislation.

Finally, deputy premier Nick Clegg announces that the Bill is to go back before a committee of MPs for further scrutiny, setting back its likely passage through Parliament by at least six months.

The question on the lips of many Westminster watchers this weekend is: Are the government’s NHS reforms dead in the water?

Predictably, backbench Tory MPs are up in arms over Mr Clegg's intervention, claiming yesterday that he had "bounced" the government into delaying the Bill.

They made clear that whatever changes are ultimately made to the Bill, there are certain "red lines they wish to draw against Lib Dem encroachment on the original blueprint.

In an email sent to all Conservative MPs yesterday, backbencher Nick de Bois called on his colleagues to "reclaim the debate" over the NHS.

He said the "red lines" should include the requirement for all GPs to take on responsibility for primary care across England – ignoring the fact that GPs themselves oppose this provision.

The backlash against the reforms was growing long before the Lib Dems' hopes of changing the voting system went up in smoke, but it was nevertheless this that proved the tipping point.

Once the Tories decided to throw the kitchen sink at AV, it was obvious that Nick Clegg would have to be thrown some sort of bone to keep the Lib Dems in the government, and it was equally obvious that this would be it.

Politically, sacrificing a set of unpopular health reforms in exchange for keeping a voting system that kept them in power for most of the 20th century might seem like a smart move for Mr Cameron.

But the downside is that so much had been invested politically in these reforms that the now seemingly-inevitable retreat will be seen as a major blow to the Prime Minister's authority.

Even if the reforms are not dead in the water, the political career of Health Secretary Andrew Lansley surely is.

If the government ultimately decides to press ahead with the changes, Mr Lansley is likely to be replaced by someone who can more successfully sell them to the relevant stakeholders.

If on the other hand they are watered down or abandoned, his job is almost certain to go to a more emollient politician who can re-build bridges with the health professionals.

The latter scenario is surely the most likely one. Tory MPs want the new GP fundholding consortia in place by April 2013, but in the light of Mr Clegg's latest intervention, this is looking like an increasingly forlorn hope.

The danger for the government is that, if the measures do not reach the statute book this summer, the institutional upheaval will still be ongoing in the run-up to the next election, due in 2015.

Mr Cameron is nothing if not a pragmatist, and he will surely view the prospect of organisational chaos in the NHS as a risk he can do without as he prepares to face the country again.

In those circumstances, it would make more sense for Mr Lansley's proposals to go into the next Conservative manifesto rather than into a revised Health and Social Care Bill.

And who knows - if Mr Cameron can win an outright majority next time, the Tories might even be able to claim a mandate for them.

Opponents come to aid of Great Survivor

The story is often told of the new MP who remarked on what a pleasure it was to look across the Chamber into the eyes of his enemies. The old sweat next to him responded: "No laddie, they are your opponents; your enemies are behind you."

Never was this hoary old adage more true than in the case of the Justice Secretary, Kenneth Clarke.

Like Tony Blair, Denis Healey and Rab Butler before him, Mr Clarke has always been one of those politicians who are more popular outside their own parties than they are in them.

There can be absolutely no doubt that had Mr Blair been up against Mr Clarke in either of the 2001 or 2005 elections, his majorities would have been significantly smaller. But the Tory Party might also have split in two.

As we have seen this week, Mr Clarke continues to divide opinion. Many on his own side – not to mention the right-wing tabloid press – would not have been at all displeased to see him lose his job over his comments on rape.

By contrast, it was instructive to see the conscience of liberal Britain,
Shami Chakrabarti, passing up the opportunity to twist the knife in Mr Clarke when they appeared alongside eachother on the BBC's Question Time on Thursday.

But it was not Shami who ultimately saved him, but a much more obvious 'opponent' - Labour leader Ed Miliband.

The moment Mr Miliband urged David Cameron to sack Mr Clarke over the Commons Despatch Box on Wednesday, it became virtually for the Prime Minister to do so.

My initial reading of this was that it was a smart piece of politics by the often under-rated Mr Miliband.

Keeping Mr Clarke in the government is, after all, in Labour's interests - firstly because, because he exacerbates the divisions between Mr Cameron and his backbenchers, and secondly because the policy agenda he is pursuing is not so very different from Labour's own.

Others might argue that this is way too Machiavellian for the young opposition leader, and that Mr Miliband was simply showing his inexperience.

Either way, the man who has become the great survivor of British politics lives to fight another day.

There is much less confidence this weekend in the future of Mr Clarke's Lib Dem Cabinet colleague, Chris Huhne.

Essex police are now formally investigating claims that he asked someone close to him to take some speeding penalty points he allegedly incurred in 2003 before he became an MP.

Mr Huhne has described the claims as 'inaccurate' but his denials seem to be cutting little ice with some colleagues.

One Lib Dem insider was quoted as saying on Thursday: "The conventional wisdom is that Huhne will end up having to go. He is being highly reckless in taking it to the wire like this. Chris clearly doesn't think they will find the evidence. He wants to brazen it out. He is brazen. That's what he does."

The departure of Mr Huhne would doubtless have a further destabilising impact on the Coalition, already under strain as a result of the AV referendum debacle.

Under the terms of the Coalition agreement, he would have to be replaced by another Lib Dem, with Ed Davey, Jeremy Browne and Norman Lamb among the potential candidates

Meanwhile more able Tories in the ministerial middle-ranks would once again be forced to wait their turn, as was the case when David Laws was defenestrated after just 17 days in office.

Maybe that is one of the reasons some of them were so keen to see the back of Mr Clarke.

The gamble that paid off

And so the problems continue to pile up for Nick Clegg and the Liberal Democrats.

First it was the local elections and the loss of 700 council seats, then the overwhelming referendum 'no' vote to electoral reform, now the finding of 'serious breaches of the rules' in relation to rising star David Laws' expense claims.

And it's not over yet. There are serious question marks over the future of another of the party's leading lights, Energy Secretary Chris Huhne, following claims by his ex-wife that he asked someone else to take some penalty points for a speeding offence.

The allegations have been denied, but with further revelations expected in tomorrow's Sunday papers, some Westminster observers are rating Mr Huhne's survival chances as "less than 10pc."

Is this what happens when a party that has been out of power for the best part of a century finds itself struggling to adapt to its new responsibilities, or is it simply a run of bad luck?

Either way, it was hardly surprising that Mr Clegg should have sought to reassert his party's influence in government this week, with the government's NHS reforms likely to be the new battleground between the Coalition partners.

Mr Clegg at least has public opinion on his side as far as that one is concerned , but the harsh reality is that he dare not push the Tories too far.

If he gets too big for his boots, Prime Minister David Cameron can simply threaten him with a general election which would in all likelihood delivery a Conservative majority and a Lib Dem wipeout.

For all the initial focus on the council election carnage, it is the AV referendum result that will hit the Lib Dems hardest, setting back for at least a decade the cause of electoral reform that is closest to the hearts.

With the benefit of hindsight, the whole thing now looks like a car crash waiting to happen.

As one pundit put it: "Here is a referendum recipe for disaster. Choose an issue that no one cares about, get the most unpopular man in Britain to champion it, and hold it on a day when everyone will use it to kick the most unpopular man in Britain."

Yet it's too simplistic to blame the failure of AV entirely on Mr Clegg, and in any case the outlook at the start of the campaign looked very different, with the 'yes' camp seemingly comfortably in the lead.

In this and other respects, the referendum reminded me of the one that took place in the autumn of 2004 on whether the North-East should have an elected assembly.

On that occasion, too, the 'yes' camp seemed to have a fair wind to start with, but lost the initiative once people started to take a closer look at exactly what was on offer.

Just as the people of the North-East might have supported a less lily-livered version of regional government than the one actually put before them, so the UK public might have supported a genuine form of proportional representation given the opportunity.

Instead, they were offered what appeared to many as a non-choice between the status quo and the 'miserable little compromise' – Nick Clegg's words -that was AV.

In the days following the general election last May, there was a perception that Nick Clegg had emerged as the big winner of a contest that seemed initially to have produced only losers.

If I'm honest, I may have bought into some of that myself, but the result of the AV referendum forces us to revise that view of history.

The truth is that Mr Cameron's great gamble of offering the Lib Dems a referendum on the voting system in return for handing him the keys to Number 10 Downing Street has handsomely paid off.

Twelve months on, the Conservative leader has finally proved himself the real election victor.

Is Clegg's only option now to join the Tories?

Ever since the Coalition government was formed a year ago with the intention of governing for five years, a single overarching question has hung over its ultimate long-term survival.

It is what would happen if and when membership of the Coalition became a political liability for one or other of its partners.

Well, to no-one’s great surprise, least of all mine, that question has now assumed a certain degree of urgency.

The Liberal Democrats’ calamitous performance in Thursday’s council elections will surely lead to fresh unease among party members over just how long they can go on being David Cameron’s fall-guys.

Even leaving aside the result of the referendum on the voting system, still to be officially announced as this column goes to press, it was a bad, bad night for Nick Clegg and his party.

The loss of Newcastle City Council to Labour after seven years was not the half of it.

That result merely restores what has always seemed to be the natural order of politics in the city after a Lib Dem interregnum which was initially a consequence of the post-Iraq backlash against Tony Blair.

More damaging by far was the slump to 15pc of the national share of the vote, some 22pc behind their Coalition partners whose support held steady from last year’s election.

There will doubtless be some bemused Lib Dem activists who wonder why they, rather than the Conservatives, are currently taking the political hit for the government’s spending cutbacks.

There are several reasons. For starters, while those who voted Tory last May were by and large supportive of the cuts, that is not necessarily true of Lib Dem voters.

It stands to reason therefore that Conservative support is holding up better in the wake of the cuts than that of a party whose supporters were more in sympathy with Labour’s more gradualist approach to deficit reduction.

More specifically, the cuts are disproportionately affecting many of the areas, particularly in the North, where the Lib Dems were doing quite well until Thursday night.

But the biggest and most fundamental reason for the Lib Dem collapse is that the decision to enter the Coalition, and the way Mr Clegg had handled the relationship with the Tories, has left many voters confused about the party and what it stands for.

Ever since Paddy Ashdown abandoned “equidistance” between the two main parties in favour of a closer relationship with Labour, it has been perceived as a centre-left party – a perception strengthened by its opposition to the war in Iraq.

In the light of this, Mr Clegg should perhaps have taken more care to appear as a reluctant participant in the Coalition, emphasising that he was joining it purely in the interest of providing stable government rather than out of any sense of policy convergence.

But by making it appear instead like he and ‘Dave’ were enjoying some kind of ideological love-in, he has alienated that segment of Lib Dem support for which the Tories have always been the enemy.

The end result is that Mr Clegg may well now face a leadership challenge, if not from fellow Cabinet member Chris Huhne, then quite possibly from someone outside the Coalition such as former deputy leadership candidate Tim Farron.

Given the Lib Dem collapse on his home territory of Sheffield, he may struggle even to remain an MP at the next election.

On the face of it, probably his best chance of retaining his seat would be to do something which many of us think he should have done a long time ago.

It is to join the Conservative Party.

When two tribes go to war....

At the beginning of this year, I wrote that if the Coalition government survived 2011, it would in all likelihood achieve its original objective of serving out a full five-year Parliamentary term.

What I was trying to say was not so much that it will all be plain sailing from 1 January 2012 onwards, but that if there was a point of maximum danger for the Cameron-Clegg government, it will come this year rather than any other.

The past few weeks seem to have proved the point, as tensions have erupted between the Coalition partners over a series of issues ranging from the NHS to immigration.

A year on from the opening TV debate between the party leaders which shaped the 2010 election campaign, serious commentators have started to pose the question whether another election might not be so very far off.

Last week I focused on the health reforms, and the ongoing Lib Dem-inspired backlash against health secretary Andrew Lansley's plan to hand control of the NHS budget to GPs.

Although they refrained from saying as much, the Lib Dems will doubtless have been privately rubbing their hands with glee at Mr Lansley's humiliation at the hands of Royal College of Nursing conference on Wednesday.

The yellows showed no such restraint however when Chancellor George Osborne suddenly enlivened what has thus far been a sleep-inducing campaign on whether to change the voting system.

Mr Osborne criticised the role of the Electoral Reform Society in simultaneously receiving taxpayers' money to run some of the referendum ballots and helping to fund the Yes campaign, saying: "That stinks frankly."

The comments earned the Chancellor a rebuke from his own Lib Dem deputy, chief secretary to the treasury Danny Alexander, who accused his departmental boss of "pretty desperate scaremongering."

It showed that, although the two sides have agreed to disagree on the subject of voting reform, it is very hard to have a civilised disagreement when the whole future of how we conduct our politics is at stake.

Predictably, however, the week's biggest Cob-Lib bust-up arose over Prime Minister David Cameron's decision to make a speech highlighting the impact of immigration on local communities.

Lib Dem Cabinet colleague Vince Cable said his words were "very unwise" and that the PM risked inflaming extremism.

Partly this was down to the timing of the speech, three weeks before some local elections in which the British National Party will once more attempt to make inroads.

But it also exposed real disagreements over the issue at the heart of the Coalition, with business secretary Dr Cable consistently arguing that putting a cap on immigration will limit firms' abilities to recruit key workers.

The Lib Dems have pointed out that Mr Cameron's wish to take net migration back to the levels of tens of thousands a year rather than hundreds of thousands is Conservative, as opposed to government policy.

The Coalition Agreement speaks merely of an "annual limit" on people coming to the UK from outside the European Union for economic reasons, making no reference to specific numbers.

One of the commentators who openly speculated this week that the Coalition might not see out its five-year term was the constitutional expert Vernon Bogdanor.

He pointed out that while the leaderships of both parties will almost certainly want to hug together until the end, the fate of coalitions is determined by restless, committed party members whom leaders cannot always control.

Mr Bogdanor is right to point out that it is the wildly differing nature of the two parties' memberships that gives the Coalition its inherent instability, while the good relations between their respective leaderships have hitherto been its biggest strength.

If this week's events are anything to go by, however, that may not always be the case.

A listening government - or a government in retreat?

Of all the changes introduced by the Coalition government since it took office last May, it is fair to say that its proposed reforms to the National Health Service have been the most politically controversial.

What about the cuts, I hear you say? Haven't they caused much more widespread public anger and made a much deeper impact on local communities?

Well, yes. But there was a broad political consensus dating back to well before the general election that spending cutbacks needed to be made – the only real disagreement being about the extent of them.

More importantly, the Coalition had a mandate for them. Labour lost the election primarily because, rightly or wrongly, the party was seen to be in denial about the size of the deficit and the remedial action needed to address it.

By contrast, the NHS reforms were not even spelled out in the Coalition Agreement, which infamously promised that there would be "no more top down reorganisation of the NHS."

Indeed, the agreement implicitly accepted that Primary Care Trusts would remain, promising a stronger voice for patients locally through directly elected individuals on the boards of their local PCT."

However when the legislation was published, it turned out that health secretary Andrew Lansley was proposing the abolition of PCTs and the transfer of their entire commissioning role to GPs.

Much of the anger felt by Liberal Democrats over the reforms can be traced back to this piece of perceived duplicity on Mr Lansley's part.

There is said to be anger in Number 10 at the way Mr Lansley has handled the reforms – but to my mind the fault lies more with Downing Street for not paying sufficient attention to their likely political impact.

As with the Forestry Commission sell-off debacle, No 10 seems to have been so focused on deficit reduction in the government's early days that it took its eye off the ball in other, seemingly less contentious areas.

Deputy Prime Minister Nick Clegg must bear some of the blame too, for not realising the strength of feeling in his own grassroots against the proposals.

It is only since his party's Spring conference delivered a huge thumbs-down to the reforms that Mr Clegg has started to argue for changes to the legislation.

So it was no great surprise that, this week, the government was forced to announce it was taking a raincheck on the implementation of the reforms while it conducted a further "listening exercise" with the public and health professionals.

It amounted to an admission that the reforms had been introduced without the necessary buy-in from either the public or, more importantly, those people who will be charged with making them work.

Should we see it as the prelude to a dramatic U-turn? Or is it simply a belated effort by Prime Minister and ex-PR man David Cameron to 'sell' the proposed changes?

Time will tell….but Mr Cameron's apparent openness to changes in the legislation suggests this is more than mere window-dressing.

The backbench health committee of MPs, for instance, wants to see the new fund-holding commissioning bodies drawn from a much wider membership, including councillors and hospital doctors.

Although this is more in tune with the spirit of what was in the original Coalition agreement, any weakening of the central proposal to hand power to GPs will be seen as a major political reverse for Mr Cameron.

The political commentator Benedict Brogan said of this week's events: "The underlying impression was one of an administration in retreat, forced to trim on policy because it got the politics wrong."

Mr Cameron is finding that the line between being a "listening government" and a "weak government" is sometimes a very fine one.

Is Ed Miliband the man to inject some passion back into our politics?

One of the most frequent criticisms made of politicians these days is that they spend too much time agreeing with eachother.

For many, politics has become too risk-averse, a game fought over a narrow strip of ideological terrain in which the most important rule is to avoid saying or doing anything that might offend the fabled 'floating voter.'

In truth, it's an analysis that is only half-right. If you're lucky enough to be in government, or if the tide of public opinion is shifting in your direction, there is still a fair degree of scope for radical thought.

But that's not, by and large, true for opposition politicians. Here, the watchword is "don't frighten the horses," and oppositions which have tried to challenge the political consensus, such as Labour in 1983 and the Tories in 2001, have tended to come unstuck.

So in one sense, it was refreshing to see Labour leader Ed – or is it Edward? - Miliband address last weekend's protest rally in central London against the Coalition's spending cuts.

It was absolutely inevitable that he would be crucified in the right-wing press for doing so, particularly once the protests got hijacked by criminal elements which were nothing to do with either the Labour Party or the organisers.

Some in his own party even joined in, with disgruntled Blairites muttering that "Tony Blair and Gordon Brown never went on protest rallies."

If this comparison was somehow supposed to diminish Ed Miliband in the eyes of the voters, I suspect that it will actually have had the opposite effect.

Like many in the upper reaches of the Labour Party, Mr Miliband has in the past come across as something of a machine politician – a man whose career progressed seamlessly from university to researcher to special adviser to MP to Cabinet minister and finally to the party leadership without the intervention of anything resembling real life.

So the fact that he sounded, for the first time last weekend, like a leader of genuine passion and conviction is, for me, a point in his favour.

Sure, it's a gamble, particularly if the passions and convictions he is articulating turn out not to be shared by a majority of voters.

But there is just a chance that the country, bored by years of 'Blatcherite' policy clones fighting over the 'centre ground,' could warm to a leader who seems prepared to inject some genuine political idealism into our national life.

Two substantive charges have been made against Mr Miliband over his Hyde Park speech last Saturday.

The first was that he claimed to be speaking for the 'mainstream' when he wasn't – but David Cameron and George Osborne are perhaps a little too eager to dismiss people's concerns about the cuts – and the possibility that the Labour leader might be genuinely reflecting them.

The second, more serious charge is that Mr Miliband told us "there is an alternative" without actually saying what it is.

But this, too, is slightly disingenuous. As I wrote last week, Labour has fairly consistently said throughout the last election and beyond that it would aim to halve the deficit in four years – a difference of about £40bn in spending terms from what the Coalition is doing.

What the Tories really mean by the latter criticism is that Mr Miliband should tell us which cuts he agrees with rather than allowing voters to be given the impression he opposes all of them.

Here they are on slightly stronger ground. Although Mr Miliband specifically denies he is against all the cuts, he can be seen to be guilty of trying to have it both ways in this regard.

Sooner rather than later, the Labour leader will have to answer this point if he is to become a genuinely credible contender for power at the next general election.

But for now, the fact that he is starting to discover his own distinctive voice will surely stand him in good stead.

Steady as she goes Budget leaves dividing lines unchanged

A little late due to stuff I won't bore you with...but here's my take on the Budget as published in Saturday's Journal.

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Over the past 18 months, throughout the 2010 general election campaign and beyond, the main point at issue in British politics has been the question of how far and how fast to the cut the country's budget deficit.

To begin with, the Tories had the better of that argument, which is essentially why they ended up as the largest single party last May and why we now have a Conservative-led Coalition government.

Because the public blamed Gordon Brown for the scale of the problem, and perceived him as having been in denial over it, the Tories were able to win backing for a much deeper package of cuts than Labour had proposed.

But latterly, doubts have crept in. We may not have ended up in the dreaded double-dip recession, but as anyone running a small or medium-sized business will know, the fabled green shoots of recovery have thus far been very slow to appear.

For all the differences of emphasis between the former Chancellor Alistair Darling and the current Shadow Chancellor Ed Balls, Labour's position on the deficit remains essentially unchanged.

It is that cutting too far, too fast, will damage growth – a view that is now starting to be borne out by the actual growth figures as well as in the everyday experiences of people up and down the country.

So the political imperative for Chancellor George Osborne as he delivered his second Budget on Wednesday was clear: to demonstrate that the coalition is not just about cuts, but has a growth strategy too.

In this he was only partially successful, his task being made all the more difficult by the need to announce – less than five minutes into his statement - a downgrading of the economic growth forecasts for 2011 from 2.1pc to 1.7pc.

Labour leader Ed Miliband's obvious glee at this announcement – "every time he comes to this House growth is downgraded" he told MPs - is scarcely misplaced, given the thrust of his party's economic message over the past year.

It is also fair to say that as a 'Budget for Growth,' Wednesday's package was somewhat underwhelming.

Sure, the 1p cut in fuel duty, coupled with the cancellation of the planned 4p rise later this year, will provide a fillip for hard-pressed businesses which have seen their profit-margins eroded by ever-escalating fuel costs, as will the additional 1p cut in Corporation Tax.

And the creation of 21 new Enterprise Zones, including the Tees Valley and Tyneside, represents a welcome recognition that some part of the country are being hit far harder by the cuts than others - even it looks suspiciously like a re-run of what Margaret Thatcher's government tried in the 1980s.

But those measures apart, this was actually rather a dull Budget – much more a case of "steady as she goes" than the kind of political game-changer which Chancellors usually like to spring on us.

Perhaps the most significant paragraph in Mr Osborne's statement was the one in which he signalled the eventual scrapping of the 50p top rate of tax, drawing a line under the Brown era and pointing to his longer-term ambitions as a tax-cutter in the Nigel Lawson mould.

Meanwhile the key political dividing lines remain unchanged – the Coalition claiming its radical deficit-reduction strategy will ultimately deliver stronger growth, Labour maintaining that it has merely delayed any prospect of real recovery.

At the moment, the economic evidence is favouring Labour. But with another four years for the green shoots to flower before it has to face the electorate again, the Coalition has time on its side.

Dare the government take on the boys in blue?

There was once an old political saying – variously attributed to both Stanley Baldwin and Harold Macmillan – that neatly defined the limits of state power in the middle part of the 20th century.

"There are three bodies no sensible man directly challenges: the Roman Catholic Church, the Brigade of Guards, and the National Union of Mineworkers," it went.

Times change, of course, and a modern rendition would undoubtedly have different bogeymen in the guise of those with whom no government dare fall out.

Media baron Rupert Murdoch, as we saw in last week's column, would certainly be one. The all-powerful motoring lobby might be another. But if you had to pick a third, it would probably be the Police Federation.

Attempts to reform the police over recent decades have invariably foundered as soon as the Federation – as influential a trade union as the NUM once was – started flexing its muscles.

Three years ago, the then Labour Home Secretary Jacqui Smith tried to shelve a police pay increase that had been awarded by an independent assessor – and was swiftly forced to back down.

Fifteen years earlier, Ken Clarke – no softie he – had launched a much more wholesale attempt at reform.

When Clarke moved from the Home Office to the Treasury it landed in his successor Michael Howard's inbox - but even that legendary political hardman decided a scrap with the boys in blue was not worth the candle.

So it is not without political significance that this week has seen the publication of a brace of reports which taken together amount to something of a double whammy for police pay and conditions.

On Tuesday, former rail regulator Tom Winsor published the results of a review calling for the abolition of overtime payments worth up to £4,000 a year to officers.

The following day, Lord Hutton – that's former Barrow MP John Hutton rather than Tony Blair's favourite retired judge – published a much more wide-ranging review into public sector pensions.

Among other things, it recommended not only the end of final salary pension schemes in the public sector, but an increase in the retirement age which would see police, members of the armed forces and firemen working till they were 60.

Already, the public sector unions – including the Federation - have made clear that the government has a big fight on its hands if it tries to implement this week's proposals.

As Unison's Dave Prentice put it: "This will be just one more attack on innocent public sector workers who are being expected to pay the price of the deficit, while the bankers who caused it continue to enjoy bumper pay and bonuses."

There are certain to be demonstrations, possibly even strikes, which will put the Police Federation in an interesting position to say the least.

For of course its members will be expected to control the protests called by those campaigning against the very proposals which they and their colleagues are being threatened with.

In one sense, this is a reform whose time has come. Final salary pension schemes are a thing of the past across most of the private sector, and in that context the retirement benefits enjoyed by public sector staff have started to look more and more anachronistic.

Yet the country's six million public sector workers remain a big and powerful constituency for any government to take on, especially in the aftermath of a recession.

Ultimately it may come down to a rather crude consideration, namely how many votes there are in public sector pension reform.

The answer is: probably not many. But there are a great many more potentially lost ones.

Dave's useful idiots

Of all the many insults hurled at Gordon Brown during his troubled premiership, perhaps the most wounding was the one delivered by the then Lib Dem acting leader Vince Cable during Prime Minister's Questions in November 2007.

"The House has noticed the Prime Minister’s remarkable transformation in the last few weeks from Stalin to Mr Bean," he told guffawing MPs.

But three years on, the now former Prime Minister may well have permitted himself a wry smile or two at the transformation in Mr Cable's own political fortunes.

In the space of less than 12 months, he has gone from Saint Vince, the most trusted politician in Britain, to a man now widely regarded as little more than a useful idiot for the Tory-led coalition.

Some of it is purely by virtue of his having swapped the luxuries of opposition for the harsh realities of power, at a time when the government was bound to be unpopular whoever was in it.

Yet even within that context, Mr Cable has demonstrated an unusual ability to shoot himself in the head.

His 'declaration of war' on media baron Rupert Murdoch, after being honeytrapped by a pair of female undercover reporters into speaking too frankly about his government role, has backfired more spectacularly than a turbo-charged boomerang.

The end result was that Tory culture secretary Jeremy Hunt this week nodded through a deal which will make Murdoch the dominant player in UK print and broadcast media, with even more financial clout than the BBC.

But if Dr Cable's ambitions in the field of media policy have been well and truly thwarted, the same would seem to apply to his conduct of regional policy.

After the election last May, Dr Cable put it about that he was going into bat to ensure that those English regions that wanted to would retain a region-wide political and economic voice.

Such a stance was, after all, in keeping with a Lib Dem election manifesto that promised to "reform" regional development agencies rather than abolish them wholesale as the Tories' did.

At one stage, Dr Cable was privately telling regional political leaders that the RDAs in the North East, North West and Yorkshire would be effectively be preserved, under the new guise of Local Economic Partnerships.

On the face of it, it hardly seemed Dr Cable's fault that this did not end up happening, and that communities secretary Eric Pickles prevailed in his determination to dismantle the entire regional political infrastructure.

Yet a Freedom of Information request by the Newcastle Journal has since revealed that, far from putting up a huge show of resistance, Dr Cable met his Tory counterpart just twice to discuss the issue.

In terms of the bigger picture, the RDA abolition and the Murdoch bid for BskyB point to a wider political reality - the inability of the Lib Dems to influence major policy decisions taken by this government.

And if proof was needed that this is now a widespread perception among the public, the result of Thursday's Barnsley by-election, which saw the party slumping to sixth place, surely provides it.

For some of us, the result brought back memories of those dear, dead days when world-weary Lib Dem activists used to sing a song called 'Losing Deposits' on the last night of their annual conference, to the tune of 'Waltzing Matilda.'

But for Dr Cable and his fellow Lib Dem ministers, there will be no such wallowing in nostalgia for more innocent political times.

Evidence is mounting that membership of this Coalition government is destroying the Lib Dems as a political force – possibly permanently.

How much more of it the party can take before it is obliged to go its own separate way will continue to be the defining question in British politics over the coming months.

Labour has future of electoral system in its hands

When Liberal Democrat leader Nick Clegg took the historic gamble of joining the Tory-led coalition government last May, he created for himself an excruciating political conundrum.

By forcing the Conservatives to grant a referendum on reforming the voting system, Mr Clegg opened up the tantalising prospect of turning the Lib Dems from a party of permanent opposition to one of moreorless permanent power.

Yet at the same time, by aligning himself with what was bound to be an unpopular administration, Mr Clegg simultaneously ran the risk of seeing the prize of electoral reform swept away on a tide of anti-government protest votes.

The fact that he then went on to make himself the most hated man in Britain in some quarters by breaking a 'solemn promise' on university tuition fees only served to underline the point.

For make no mistake, Mr Clegg is set to become the central figure in the May referendum that was finally given the go-ahead this week following a last-minute game of parliamentary ping-pong between the Lords and Commons.

At the moment, the 'no' campaign is not talking about him, trying instead to make the argument against the proposed new Alternative Vote system on the grounds of cost and complexity.

But don't be fooled – these are just the opening skirmishes, and before too long, this is going to get personal.

'Don't give Nick Clegg a permanent seat at the Cabinet table' is quite simply the no camp's most potent message in this campaign, and it's one we will be hearing a lot more of in the run up to the 5 May vote.

Perhaps understandably, Mr Clegg has so far been nowhere to be seen in the 'yes' campaign, even going so far as to tell Radio Four's Today programme yesterday that the referendum was "nothing to do with" him.

Instead, in the week that The King's Speech swept the board at the Baftas, the pro-reform camp wheeled out the film's much-decorated stars Colin Firth and Helena Bonham Carter to voice their support.

While Ms Bonham Carter, as the great grand-daughter of the Liberal Prime Minister Herbert Henry Asquith, does at least have some family political tradition to maintain here, one could be forgiven for asking 'who cares?'

But that is not the point. The point is that here are two high-profile personalities supporting electoral reform whose names are not Nick Clegg.

On the Labour side, several prominent ex-ministers have already got involved on the 'no' side, including John Prescott, whose track record in referendum campaigns should probably make opponents of electoral reform somewhat wary.

But what should Labour supporters of AV like party leader Ed Miliband do – stay out of it and let the luvvies do the talking, or seek to provide a measure of leadership themselves?

In a sense, it's a win-win situation for Mr Miliband. If the referendum results in a 'yes' vote, the evidence of recent elections suggests it will benefit his party.

But if the country votes 'no', the coalition will be destabilised, perhaps even to the extent that an early general election could result.

The attitude of the Labour leadership will ultimately be crucial, in that it will almost certainly be Labour voters who decide the outcome of this.

Conservative supporters will by and large vote to keep first past the post, as David Cameron urged yesterday. The Lib Dems will vote en masse for change.

The great temptation will be for Labour supporters to vote tribally against AV in order to give the Coalition a bloody nose, but given a strong enough lead from Mr Miliband, my hunch is that most of them will back the change.

That is, of course, assuming they can overcome their dislike of Nick Clegg.

'Gunboat diplomat' leaves Coalition in a pickle

More than 20 years ago, a young , Conservative council leader gained a measure of notoriety after unexpectedly seizing control of the hitherto safe Labour authority of Bradford.

Storming into office at the May 1988 local elections, he announced a five-year plan to cut the council's budget by £50m, slash the workforce by a third, and outsource most council-run services to private operators.

For a while, 'Bradford-style Toryism' became something of a by-word in local government circles, with some like-minded authorities modelling themselves on it, while others cited it as a warning of what happened when Tories took control.

After its brief flirtation with uber-Thatcherism, Bradford soon returned to the Labour fold - but that Tory council leader went on to become probably the most influential politician to emerge from local government since Labour's David Blunkett.

His name was of course Eric Pickles and, as Secretary of State for Communities and Local Government in the coalition administration, he is now in ultimate charge not just of Bradford but of every town and city hall in the country.

Among grassroots Tories, Mr Pickles is a hugely popular figure – but it is fair to say those feelings are not always shared by his Liberal Democrat Cabinet colleagues – or by political leaders in the North-East region.

During the early months of the Coalition, he fought a running battle with Business Secretary Vince Cable over whether the North-East should retain a distinctive regional voice – a battle characterised by briefing and counter-briefing on both sides.

It did not help that Prime Minister David Cameron was bored by the stalemate and told the protagonists to sort it out between themselves rather than taking sides.

What sort of regional political institutions will emerge from that process is still unclear. Many hope the proposed local economic partnership covering Durham, Northumberland and Tyne and Wear will be able to take on at least some of the role of axed regional development agency One NorthEast.

But the limitations of the scorched earth approach to all things regional employed by Mr Pickles and others in the Coalition's early days are already becoming clear.

As was revealed in a parliamentary answer this week, Dr Cable's department for Business, Innovation and Skills is having to create new local offices to carry out work previously carried out by the regional government offices.

This provides further proof of what some of us were saying all along: that if the regional tier of governance did not exist, it would be necessary to invent it.

But if Mr Pickles' pathological hatred of regionalism has caused controversy in the North-East, his attitude to local government spending has caused ripples on a far wider scale.

Newcastle council leader David Faulkner was only one of more than 90 Liberal Democrat councillors who signed a letter to The Times this week protesting at the scale and pace of cuts to their authorities.

Part of their anger stems from Mr Pickles' uncompromising political style, which they described as 'gunboat diplomacy.'

"The secretary of state's role should be to facilitate necessary savings while promoting the advance of localism and the Big Society. Unfortunately, Eric Pickles has felt it better to shake a stick at councillors than work with us," said the letter.

The reference to the Big Society was illuminating, in the context of Labour-run Liverpool's recent refusal to co-operate with Mr Cameron's flagship initiative.

But the wider political significance of the row over local government spending is that it plays into the area of relations between the two governing parties.

Lib Dem leader Nick Clegg needs to be able to take his party with him if the Coalition is to survive long-term, and on this issue he is clearly some way from succeeding.

And there is only one place that will ultimately leave the government: in a pickle.

Is there such a thing as the Big Society?

Nearly a quarter of a century ago, the then Prime Minister Margaret Thatcher gave an interview which for many summed up the 'greed is good,' every-man-for-himself culture of the era over which she presided.

"There is no such thing as society. There are individual men and women, and there are families," she said in an interview with Woman's Own magazine in October 1987.

Although she had merely been talking about the need for people to stand on their own two feet rather than relying on the state for handouts, the comment swiftly gained a life of its own.

And while it initially captured the late-80s zeitgeist, in time it came to be seen as part and parcel of the "nasty party" image that the Tories fought to shake off during their wilderness years.

At one level, the 'Big Society' was to David Cameron what 'New Labour' was to Tony Blair – a marketing slogan whose main purpose was to detoxify a brand that had become tarnished.

Its aim was to demonstrate that not only did the Tories now believe in society after all, they actually had a vision for the kind of society they wanted to create.

But whereas New Labour had a genuine philosophical basis - the embracing of the Thatcherite economic consensus and the abandonment of 'tax-and-spend' - the Big Society has always been much harder to pin down.

Tory candidates reported it had caused bemusement on the doorsteps during last year's election campaign, a state of affairs not helped by the fact that many of the candidates were similarly bemused themselves.

In government, the more urgent question has become less about what the Big Society is, and more about whether it is compatible with the kind of policies the Coalition is pursuing.

Liverpool City Council thinks not. It pulled out of a Big Society pilot project this week on the grounds that it is not deliverable in the context of £91m budget cuts and 1,500 job losses.

Although the Labour-run authority was swiftly accused of gesture politics, it is self-evident that it is hard to sustain local community activities and initiatives if the funding that underpins them disappears.

The closure of large numbers of Citizens' Advice Bureaux as a result of town hall cutbacks is surely a case in point here.

The wider problem with the 'Big Society, though, is not so much whether it is compatible with reductions in public expenditure as to whether it is compatible with free market economics at all.

Will our forests, for instance, end up in the hands of cuddly 'Big Society-ish' institutions like the Woodland Trust or other local community groups, or will they all simply be sold to the highest bidder?

Will local people really be able to club together to buy and run their failing village pub when the brewery is being offered ten times as much by a developer who wants to knock it down and build ten flats on the site?

It is for these sorts of reasons why people would not necessarily regard the Big Society and the Tory Party as the most natural of bedfellows.

Mr Cameron may be a skilled PR man, but to regard the Big Society as no more than a piece of spin is probably to do him a disservice.

He passionately believes in it, even if he sometimes struggles to articulate it in a way that the voters can relate to, and would probably like his government to be remembered for it above all else.

The great historical irony about the Big Society is that at the time Margaret Thatcher came out with her infamous quote, there was actually much more of one than exists today.

It will take much more than words if Mr Cameron is somehow to recreate it.

Wrong kind of snow - or wrong kind of government?

IN last week's column, I wrote that the coalition government's key political success since taking office was to have pinned the blame for the savage spending cuts it is implementing on Labour.

It is no small matter. On the question of who takes the rap for the country's current economic plight will hang much of the politics of the next five years.

If the government can hold the line all the way to the next election, it is inconceivable that the electorate would let Labour back in after just one term in opposition to atone for its economic sins.

But this, in turn, depends utterly on how the economy actually performs – and whether Chancellor George Osborne is proved right in his strategy of putting deficit reduction before economic growth.

Up until now, the country has by and large been prepared to give Mr Osborne the benefit of the doubt on this point.

Whenever Labour politicians – notably Ed Balls –have tried to argue the opposing point of view, they have been swiftly condemned as "deficit deniers."

But this week came the first sign of a chink in the Coalition's economic armour – a 0.5pc fall in GDP during the final quarter of 2010, following two preceding quarters in which the economy grew.

Could it be that Mr Balls was right after all, and that far from providing a springboard for recovery, the Coalition's deficit reduction strategy is actually strangling it?

Timing is everything in politics and in one respect, the GDP figures could not have come at a better time for Mr Balls, newly-installed as Shadow Chancellor following Alan Johnson's surprise resignation last week.

He certainly made the most of the opportunity, tearing into Mr Osborne with a self-assuredness that made the Chancellor look like the new kid on the block.

"My message to George Osborne is – get a Plan B, get a policy for jobs and growth and do it quick," he said, winning the war of the soundbites with some ease.

Mr Osborne's cause was not helped by the fact that he tried to blame the fall in output on the weather, which, as one union leader put it, sounded "a bit like a rail boss blaming delays on leaves on the line."

Whether this week's exchanges will turn out to be of lasting significance will of course depend on where the economy goes from here.

The risk factors for the government are obvious. This month’s VAT rise seems hardly likely to encourage a resumption in the growth trend, while there remains the risk of another cold snap.

Some observers have argued that having clamped down on spending in last year’s comprehensive spending review, Mr Osborne would use his March Budget to shift to a more pro-growth strategy.

Had this week's figures turned out positive, he could have done that from a position of strength - but to do so now would look more like a panic-induced U-turn.

Either way, if the next set of figures in April show the growth trend resuming, Mr Osborne will be off the hook and Mr Balls and Labour will be back at square one.

But if on the other hand they show another fall, then the UK will officially be back in recession and the dreaded "double-dip" will have become a reality.

Not only would that give Mr Balls the whip-hand in the economic debate, it would start to shatter the current consensus that the cuts are (a) necessary, and (b) Labour’s fault.

And the voters might then start to conclude that not only did we have the wrong kind of snow last month, but that we also have the wrong kind of government.

The tough task facing Brown's children

As Sir John Chilcott's Inquiry into the war in Iraq continued to chip away at Tony Blair's historical reputation this week, another of the former Prime Minister's closest allies took his leave of frontline politics.

Amid difficulties in his private life that will surely elicit widespread sympathy, Alan Johnson became the latest in a long line of key players from the Blair Years to depart the political stage.

Looked at in terms of Labour kremlinology, the erstwhile Shadow Chancellor's surprise resignation, and his replacement by Ed Balls, means the Brownite takeover of the party is now all but complete.

Mr Balls, Ed Miliband, Yvette Cooper and Douglas Alexander were all denied Cabinet promotion by Mr Blair – but they now occupy the four most senior roles on the Labour frontbench.

But in this lies the nub of Labour's problem as it seeks to come to terms with opposition and put itself back into credible contention for government.

For as time goes on, it is becoming clearer and clearer that the general election result last May was not just a repudiation of Gordon Brown personally, but of much of what he stood for politically.

There are increasing signs that, like 1979, 2010 could come to be seen as a watershed election, a moment in history which saw a paradigm shift away from the top-down, statist brand of politics with which Mr Brown was associated.

That is certainly the way the Coalition would like us to see it, which is why the proposed reforms to the National Health Service announced this week are so central to its overall political strategy.

The reforms are certainly not without risk for Prime Minister David Cameron. With the possible exception of Coronation Street, the NHS remains Britain's best-loved institution and politicians tinker with it at their peril.

Not the least of Mr Cameron's difficulties, as Alastair Campbell pointed out on Question Time on Thursday night, is that he has no electoral mandate for it.

But the voters tend to be rather less worried about private vs public arguments in public service provision than politicians - and political commentators for that matter – tend to be.

And as long as the service improves in time for the next election – as it may well do once the dust has settled – it could even turn into a vote-winner.

The risk for Labour, on this and other issues, is that it finds itself stranded on the wrong side of a political tide – much as it did in the early 1980s as Margaret Thatcher's free-market revolution forged ahead.

Of all the blows that the Coalition has landed on Mr Miliband since he became Labour leader, none was more telling than Mr Cameron's "I'd rather be a child of Thatcher than a son of Brown."

In truth, Ed Miliband was really only ever an adopted son. The true son of Gordon, the one who was by his side in all his most important decisions, was Mr Balls.

Sure, the combative new Shadow Chancellor will give as good as he gets, but it is already clear that the Coalition will exploit his closeness to the former Prime Minister to the limit.

On the surface, Balls for Johnson looks like a good exchange for Labour – a brilliant economist and pugnacious operator for a Mr Nice Guy who seemed out of his depth in the Treasury brief.

But the whole reason Mr Johnson was appointed to the role in the first place was precisely because he had no economic baggage.

The Coalition's key success since the election has been to pin the blame for the cuts on Labour's mismanagement of the economy and to fix this in the public's mind.

Mr Balls, of all people, is going to have his work cut out to reverse that perception.

Relief for Ed...but just what will David do next?

And so after all the hoo-ha, a relatively easy win for Labour and a creditable second place for the Liberal Democrats, with Nick Clegg's party staving off the post-tuition fees meltdown some had feared.

Both Mr Clegg and Labour's Ed Miliband went into Thursday's Oldham East and Saddleworth by-election on something of a hiding to nothing - but both appear to have got away with it.

Instead, it is Prime Minister David Cameron who may have the most difficult questions to answer after appearing to soft-pedal the party's campaign in the final week.

After their party's share of the vote was more than halved while the Lib Dems' went up, Tory backbenchers already unhappy about the direction of the government will want to know why their coalition partners were given such an easy ride.

For Mr Miliband, a result which saw Labour's majority increase from 103 to 3,558 will take the pressure off – for now.

After a decidedly lacklustre start to his leadership, Mr Miliband moved to sharpen up his press operation in the weeks before Christmas and this appears to have had pretty instantaneous results.

Victory in what was already a Labour-held seat should leave little room for complacency, however.

His appointment of the economically sub-literate Alan Johnson as Shadow Chancellor appears to be unravelling, while his own appearance on a Radio 2 show a couple of weeks back ended in embarrassment, with Middle England listeners quizzing him over his unconventional private life.

The by-election also saw a fleeting return to the political fray for elder brother David Miliband, one of 40 Labour MPs who travelled to the constituency on Thursday for some frantic last-minute door-knocking.

It concluded what to say the least has been an eventful week for the South Shields MP, with his surprise appointment as vice-chairman of Sunderland Football Club.

At the same time, reports emerged that he was being lined-up a possible new role as a TV presenter with the BBC.

Cynics might be tempted to pose the question: What next? An appearance on 'I'm a Celebrity, Get Me Out of Here' maybe?

In fairness to David, he has made clear his intention to continue as a constituency MP at least until the next election, while in an interview with this newspaper before Christmas, he signalled that he has still not given up hope of leading the Labour Party one day.

He has also appeared to set out his stall as a backbench 'Voice of the North' – although his new role at the Stadium of Light scarcely seems designed to endear him to all corners of the region!

But taken together, the two stories highlight the difficulties which can face politicians when they lose their main raison d'etre – climbing the greasy pole.

And while he is not about to join the 'Z-list' of those who are famous for being famous, Mr Miliband needs to give careful thought to what he does next if he is to remain a serious political player.

The prospect of him becoming a TV presenter inevitably drew comparisons with Michael Portillo – and not for the first time.

Mr Miliband's somewhat cack-handed attempts to unseat Gordon Brown in autumn 2008 echoed Mr Portillo's botched coup against John Major in the summer of 1995 when his supporters were caught installing phonelines for a leadership campaign HQ.

Mr Portillo was regarded by many in the Conservative Party as its natural leader, but partly through circumstance and partly through lack of judgement, he ultimately became its lost leader.

There are many still hoping that David Miliband, so long seen as the 'heir to Blair,' can avoid a similar fate.

One of them, possibly both, is going to end up a loser

Given that the British electorate as a whole only gets to vote once every 4-5 years, it is perhaps inevitable that by-elections tend to wield a somewhat disproportionate influence on our political process.

Usually they follow a fairly predictable pattern. The public – or the media – identifies which of the two main opposition parties is most likely to give the governing party a good kicking, and the 'protest vote' does the rest.

But we are in unchartered waters now. There are two governing parties, only one main opposition party, and the new-ish leader of that party is something of an unknown quantity to most voters.

All of which is what makes Thursday's Oldham and Saddleworth by-election possibly the most fascinating such encounter since the Darlington contest of 1983 which, to Labour's ultimate detriment, saved the leadership of Michael Foot.

On the face of it, it ought to be plan sailing for Labour. In a few short months, the Con-Lib coalition has slashed public spending, put up VAT, and scrapped much of the regional aid budget that was helping former industrial towns like Oldham to find a new role.

Not only that, but the seat was won by Labour in the general election last May, before MP Phil Woolas was disqualified from Parliament for having lied about his Lib Dem opponent on his election literature.

One of the many imponderables in this contest is whether the fate of Mr Woolas will help or hinder Labour's cause here.

The fact that he was actually quite a popular local MP might appear to favour the party, but some voters may feel he was too readily hung out to dry by the Labour establishment, and punish the party accordingly.

Inevitably given its status as a three-way marginal, 'Old and Sad' is being viewed as something of a mini-referendum – not just on the Coalition, but on Labour leader Ed Miliband.

If Labour cannot even win by-elections in seats it already holds, serious questions will start to be asked as to whether it can win anywhere else under Mr Miliband's leadership.

But for Lib Dem leader Nick Clegg, too, a defeat on Thursday would be seen as a significant blow.

His party's candidate, Elwyn Watkins, may well feel the seat is his by moral and indefeasible right having been on the wrong end of Mr Woolas's misdemeanours, but politics doesn't work like that.

Undoubtedly the leader with the least to lose and the most to gain here is Prime Minister David Cameron.

For one, the Conservative candidate Kashif Ali started the contest in third place. For another, the Tories have been accused of soft-pedalling their campaign in a bid to help their Lib Dem partners.

Perhaps realising he is in with an outside chance of a stunning victory Mr Cameron is now doing his best to dispel that impression, becoming the first premier to campaign in a by-election for 13 years.

Yet ironically a Tory win, in a seat where the Lib Dems began as the main challengers, might end up being more destabilising for the Coalition than a Labour triumph.

Mr Clegg would then face more tough questions from his own activists and MPs as to what exactly the Lib Dems are getting out of the Coalition.

A Tory victory would simply reinforce the idea that it is the Lib Dems who are taking all the political pain while Mr Cameron reaps the political dividends.

But whoever wins on Thursday, at least one and possibly both of Mr Cameron's fellow party leaders are going to be waking up to some difficult headlines on Friday morning.

And for either or both of them, that could set the tone for a tricky political year ahead.

Why 2011 is the Coalition's make-or-break year

Two weeks ago I concluded my review of the political year 2010 by posing a question which will, in my view, determine how the next 12 months in British politics ultimately pan out.

It was: can the Coalition government as a whole withstand the dramatic loss in popularity suffered by the Liberal Democrats since their decision to go into partnership with David Cameron’s Tories.

As Ricky Ponting can no doubt testify, a team is only as good as its weakest link, and with public support for the Lib Dems now barely registering in double figures, Nick Clegg’s party are clearly the weakest link in this government.

The big question for Mr Clegg is how much lower he can afford to allow that support to drop before continuing membership of the Coalition simply becomes politically unsustainable.

If any further proof were needed of the Coalition’s inherent instability, then the Vince Cable affair in the run-up to Christmas surely provided it.

There were several ironies about this episode, not least that a newspaper which shared Dr Cable’s hostility to Rupert Murdoch’s takeover of BSkyB managed to shoot itself so comprehensively in the foot.

But surely the biggest irony of all is that, for all the humiliation he heaped upon himself, Dr Cable turned out to be correct in his estimation that he was, in effect, unsackable.

Whatever you think of the methods used to ‘entrap’ him, any other minister who displayed such appalling naivety and lack of judgement would surely have been out of the door.

But because Mr Cameron dare not weaken the Lib Dem element of the Coalition for fear that the whole edifice will collapse, he survived - thought not without having his wings severely clipped.

So much for the events of the week before Christmas. What of the year ahead?

Well, since this is traditionally the time of year for crystal ball gazing, I’ll make a prediction. If the Coalition gets through the next 12 months, it will more than likely achieve its ambition of serving a full five-year parliamentary term.

Why is 2011 likely to prove the Coalition’s make-or-break year? Well, for starters, it is likely to become significantly more unpopular as the cuts bite, unemployment continues to rise, and the full implications of some of its more radical experiments become clear.

I have in mind here Andrew Lansley’s NHS reforms and Michael Gove’s de-municipalisation of schools, neither of which can claim much of a popular mandate.

But the biggest single threat to the Coalition’s survival is the time-bomb that is due to detonate underneath it on Thursday 5 May – the referendum on the alternative voting system.

If, as many now expect, the referendum is lost, it will remove the Lib Dems’ main incentive for having entered the partnership in the first place.

For Labour leader Ed Miliband, too, this will be a critical 12 months, as he seeks to demonstrate to a sceptical public why he, and not his elder brother, is the right man for the job.

At least he now has a clearer opposition strategy, seeking to brand this a Conservative-led government supported by reluctant Liberal Democrats rather than the marriage of true minds Messrs Clegg and Cameron would like to portray.

Yet for all that, Mr Miliband is probably no more keen to bring the government down right now than Dr Cable: his party is broke, he hasn’t had time to overhaul the policies that lost it the last election, and the public doesn’t really know him.

If the Coalition does manage to survive the year, it might simply be because none of the three main parties really wants to have another election just yet.