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Lodestone Communications

Eastleigh is a political disaster for the Conservative Party and has plunged backbenchers (especially those in marginal seats) into despair. The fractious relationships at the top of both Coalition parties threaten both Clegg and Cameron and – by definition – the ability of the Coalition to function effectively and stay the course.

Second place for the Conservatives would have been disappointing but explicable within the modernisers’ playbook. Coming third, behind UKIP, is devastating. The fact that the UKIP and Conservative candidates, combined, won 53% of the vote to the Liberal Democrats’ 32% will reinforce growing calls for some kind of pact with UKIP – something heavily backed by Conservative Vice Chair Michael Fabricant (who also ran this campaign). It is worth noting that the Liberal Democrat victory was built on postal voting. This was part of their overall strategy of keeping the campaign short and persuading people to vote early in order to make the most of their incumbent advantage, and to avoid using too much of their very limited resources. The bulk of Liberal Democrat postal votes were therefore cast prior to the Rennard scandal breaking and coincided with the worst moments in the Conservative campaign – at a point when the party was locked in a dispute with the BBC and appeared to be gagging its candidate.

The political fallout for Cameron is particularly tricky in the run-up to the Budget. Many on the economic Right of the party will use Eastleigh as both the diagnosis and the moral high-ground from which to lobby Cameron and Osborne hard for radical tax-cuts. The narrative – that with a Thatcherite economic policy the Conservative Party can regain ground lost to Farage – will be difficult for the modernisers to resist. They have no positive, unifying counter-argument and are badly wounded politically by the loss of the UK triple A rating. Their argument, that Maria Hutchings lost in Eastleigh because she was opposed to gay marriage and too anti-immigration, does not ring true given the strength of the UKIP showing. The modernisers’ case is that ‘Cameron is still a strong asset, polling above the Party.’ They concede that there is a challenge in communicating authenticity – expect moves to try to shift the ‘PR man’ perception that many fear has become attached to him. The perception of Boris as more easily accessible for voters – and as someone seen as authentic – makes him a continuing threat. His ‘Heineken Tory’ reputation (and track record as a winner) make him the obvious locus of anti-Cameron plotting. Number 10 will be watching him even more closely than usual.

Aside from the few openly anti-Cameron activist MPs, backbenchers are, for the moment, focusing their anger on Osborne. If he fails to deliver a budget that satisfies Conservative demands for a demand-led stimulus via tax cuts – or at least lays out a clear momentum towards them – then the calls for him to go (already more vocal and open than ever before within the party) will reach a climax. There remains no political will on the Cameron’s part to resolve the growing tension between his Chancellor and his party – he believes Osborne to be indispensable. Cameron is stuck between a rock and a hard place – it is possible that he will have to choose between his closest ally and his leadership. History (Coulson, Lansley etc) suggests that the Prime Minister will struggle to sacrifice his friend. It is likely that, if there is a move against Cameron, it will come in the wake of the local elections in the Spring.

The Liberal Democrats have won the battle for Eastleigh but it has minimal implications for the 2015 war. The dynamics of a by-election have always suited the Liberal Democrats when compared to general election campaigns. The hyper local nature of the event allows the smaller party to throw everything at winning in a way that their limited resources prohibit them from doing at a national level. Senior Liberal Democrats are very concerned about their fundraising and lack of resources –

rightly suspecting that they will be massively outspent in 2015 by both other parties. We can expect fresh noises-off about the possibility of state funding.

Winning in Eastleigh does provide Clegg with a much needed boon – and has led him and his strategists to hope (wrongly) that the Conservatives will abandon their 20 Liberal Democrat target seats. However, the ongoing fallout from the Lord Rennard scandal looks set to dog Clegg in the coming weeks and has sparked early positioning for a leadership battle. Cable and Fallon are almost certain to be candidates should Clegg fall – and some on the ‘Orange Book’ economically liberal wing of the party are hoping Ed Davey could prove a unity candidate. Some Liberal Democrat MPs and senior activists are talking about a scenario where Clegg steps down as Leader – to be replaced by Cable – but remains as DPM. This would allow coalition continuity whilst also ensuring that Clegg’s replacement is not damaged by association with Cameron.

For Labour – their current poll rating of 42%, and a 13 point lead over the Conservatives – will blunt any criticism of coming in 4th place in Eastleigh. More important is the upwelling of internal concern that Labour is still failing to articulate a plausible economic strategy. This seeming lethargy is justified by the Leadership as a necessary tactical communications stance at this stage of the Parliament. However, it also masks the inability of the Labour hierarchy to have a coherent internal debate on the legacy of 13 years in power, and articulate an overarching political vision. This tension is usually reported as centring around the competing personalities of Ed Miliband, Ed Balls and Douglas Alexander. This will need resolution if Labour are to go on and win the next General Election, which may be sooner than 2015.

UKIP are understandably thrilled with their performance in Eastleigh. Their recent record in by- elections provides their case for being a genuine national party with some credence. There was some criticism levelled at Farage for not standing himself but this may in fact have been strategically wise – Diane James’ success has demonstrated that UKIP are not a ‘one man band’. UKIP will struggle at national elections, when voters are less inclined to protest, but look set for a clear (and for Cameron, humiliating) victory at the 2014 European elections.

For the Government and the governing parties, Cameron and Clegg both face growing and real internal threats to their authority in their respective parties. For Cameron it is probably survivable – provided either Osborne can use the budget to quieten criticism from the Right or Cameron finds a way to demonstrate his independence from his Chancellor. For Clegg, in the short-term his leadership rests on his account of the Rennard scandal and his role in the drama. In the longer-term it is becoming difficult to imagine how he can continue as the face of the Liberal Democrats into 2015. The Coalition is soldiering on, but with economic news looking gloomy and no obvious prospect of a surge of optimism, it is arguably entering a new more vulnerable phase.