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Lodestone Communications

As Team GB goes for gold – and the UK focuses on winners and losers – press attention is turning back to politics and the condition of the Coalition. Like a fragile cracked vase, the Coalition is in a state of unstable equilibrium. It has the appearance of solidity, until some outside stress shatters the illusion of stability. Another large crack in the Coalition has just appeared, the largest so far. No-one can foresee how long the Coalition will hold together. Has some pressure been released in the system so allowing another extended period of outward calm, or is this the penultimate crack, creating a fatal flaw? Given the external economic turbulence, it is difficult to see external political pressure easing off. Paradoxically the one source of strength is the unpopularity of the separate parties in the polls. David Cameron and Nick Clegg will both fear the result of an immediate election more than the difficulty of putting up with the uncomfortable situation for as long as possible.

The decision by Nick Clegg to sink the boundary changes tilts the electoral tables firmly in Labour’s favour. The Tories now are going to have to come to terms with an almost impossible climb – a lead of 11% in the popular vote- to gain an overall majority. Clegg’s action can also be interpreted as an act of political bridge-building towards Labour in the event of another hung parliament.

Ed Miliband has done well to survive the mauling he has been given in the last year and is now ahead in the polls, a 9% lead is an average. This is not spectacular at this stage of a parliament, and can evaporate very quickly, but it is has inspired hope. Even before this strategic bombshell by Nick Clegg on opposing boundary changes, Labour were already starting to believe they had a fighting, if not realistic, chance of being in government after the next election. The news that there may not be any boundary changes has been greeted by Labour strategists with incredulity- they cannot believe their luck.

The failure of the Coalition to restart growth in the economy is also going to have very serious political consequences. If there is no sign of an economic turnaround the pressure on the Coalition to change policy will become intense. The popularity of the Chancellor George Osborne within his own party, has been badly damaged by his handling of the political turmoil after the budget, and his political judgement is questioned by both the Left and Right of the political spectrum.

David Cameron can still command the Commons as Prime Minister with his confidence and poise, but his judgement is also openly questioned after the charging of Andy Coulson in the phone hacking scandal, and his failure to predict the damage to his own reputation when he set up the Levenson Inquiry. The Tory Right is starting to become openly hostile to the Coalition and to the modernising project as a whole.

The Tory modernisers are trying to re-group. They want Tory modernisation to be seen as an economic project – supporting new, creative businesses – not just a social project which is led by the obsessions of so-called metropolitan liberals. Downing Street advisers agree with the Tory Right that more deregulation is needed and are trying to push this agenda. The modernisers know that Coalition is the only game in town and are looking to strengthen it as we head for the second half of this parliament.

A reshuffle is expected in early September 2012; but much of the movement will be in the junior ministerial ranks, where the leadership will want to promote new loyalist MPs – hotly tipped are Nadhim Zahawi MP, Matthew Hancock MP, Claire Perry MP, Margot James MP, Liz Truss MP, Sajid Javid MP and Nick Boles MP. At Cabinet level, Caroline Spelman (DEFRA), Baroness Sayeeda Warsi (Party Chairwoman), Cheryl Gillan (Wales) and Kenneth Clarke (Justice) are all vulnerable although Cameron will be reluctant to make major changes at the top table. Expect Maria Miller MP, the current Disabilities Minister, to reach Cabinet as Welsh Secretary. Nick Herbert MP could take Kenneth Clarke’s position, Grant Shapps MP or Chris Grayling MP could take the Party Chairman position, and Greg Clark MP could take DEFRA. Other rumours – such as moving Iain Duncan Smith or Michael Gove – are outlandish. But until the reshuffle is made, wild speculation will continue.

Over the past six months, there has been a brain drain with a stream of departures from Downing Street. Departing advisers Steve Hilton, James O’Shaugnessy and Sean Werth have publicly complained about the civil service capture of Downing Street and its impact on halting a more radical agenda. Many Special Advisers believe Number 10 needs boosting-up. There are calls for better policy ideas, and the need for a hard hitting political strategist, who can deliver “bread-and- butter” messages on the issues that matter to the public.

All the political parties are now thinking about how they can capture some of the success of Team GB at the Olympics. Politicians like to be associated with winners and whoever can borrow some of the starlight will benefit. Currently Boris Johnson is getting the biggest bounce from the Games and that creates more problems for Cameron inside his own party. However the biggest strategic issue is that of the boundary changes and how this tilts the game away from a Conservative majority. One senior Labour MP close to the Leader said, ‘Clegg has handed it to us on a plate.’ The Tories will have to engineer a complete political earthquake to turn the current 9% Labour lead, into an 11% Conservative one by the time of the next election, whenever it may be.