Liberal democrats

Now that Lords reform is entirely off the agenda, Nick Clegg faces the complicated task of negotiating a policy battle to keep his party happy. Pursuing AV and an elected House of Lords were core to Clegg's justification to his party for power, so he now has to find something significant to avoid 'going naked' to his conference in September. We'll find out more in the next hour about what the Lib Dems' intentions are for the boundary reforms, which they have linked with Lords reform, but Clegg will want other policy victories, not just battles, to show he is delivering. These are some of the likely policies the Lib Dems may now push for: More representation in the government Likely.

The conventional wisdom about the consequences of the failure of Lords reform is that the Liberal Democrats will wreak their revenge for the Conservatives' 'breach of contract' by scuppering the boundary changes. Over the past few months, the party has taken great pains to link the two reforms, and now that it is clear that the first will not go through, all focus is on the second. There is much that still needs to become clear about how this will work; the biggest question of all being how Lib Dem ministers can vote against the changes without being sacked. But don't expect the whole party to troop through the 'no' lobby on this issue.

In recent weeks, Downing Street has been repeatedly told by Tory MPs that if proposals for an elected element in the House of Lords were brought back to the Commons, the next rebellion would be even bigger than the 91 who voted against second reading. Downing Street, as the Telegraph reported this morning, has now accepted that Lords reform will have to be dropped and there is talk of a formal announcement to this effect as early as Monday. But, intriguingly, I understand that David Cameron does not intend to abandon efforts to get the boundary reforms through. This, as Isabel noted this morning, has the potential to cause a massive coalition row.

There are more rumblings this morning on the shape of the next comprehensive spending review, this time at grassroots level within the Liberal Democrats. The Times reports threats from former Lib Dem MP Evan Harris that any attempt to sign up to a traditional spending review will trigger an emergency motion at the party's autumn conference. The leadership is already well aware of this issue: I blogged last week that a senior party figure had told me that the £10 billion of welfare cuts that George Osborne has predicted are necessary over the next spending review period are 'just not going to happen'. Clegg and co know that the Lib Dem grassroots will not weather another round of welfare cuts when they already feel their MPs have had to bend over backwards for the first set.

One popular prediction swirling around Westminster this morning is that part of the Government's response to the GDP disaster will be to cut more money from the welfare budget. After all, George Osborne told MPs in his Budget statement that there would need to be a further package of £10 billion cuts in welfare spending over the period of the next spending review, and the IMF has made similar noises, too. But I understand that this is not going to happen because the Liberal Democrats will not let it go through. Sources are emphatic that those at the top - Nick Clegg, Danny Alexander et al - have blocked the £10 billion of cuts for this parliament. 'It's just not going to happen,' says one senior party figure.

Vince Cable’s decision to speculate publicly about a post Nick Clegg leadership race is a significant moment. To be sure, saying ‘I wouldn’t exclude it’ about running for the job is a long way from launching an actual challenge. But it is not the answer that a politician gives if they want to stop all speculation. There’s long been gossip at Westminster that Cable’s interest in the leadership has revived — and this interview appears to confirm that. It is worth remembering that Cable only didn’t run last time because he thought that the party wouldn’t pick another veteran as leader after the Ming Campbell disaster. So, there's unfulfilled ambition there.

James Forsyth’s Mail on Sunday column is my first read every Sunday, and it’s choc full of details as ever. Here is his account of the Liberal Democrat reaction to last week’s House of Lords defeat:   On Thursday morning, Nick Clegg and David Cameron agreed a new phase of the Coalition after what one No 10 insider called ‘the Coalition’s Cuban missile crisis’.  Tensions were so high amid the vote on Lords reform that some feared the Coalition would implode, but things have now begun to ease.  Both sides stress ‘this  isn’t back to the rose garden’, and what is needed is not  ‘an idealised romance but cold, hard purpose’.

Perhaps what most depressed the Liberal Democrats this week was the sense that the two main parties were rejecting the idea of coalition. One described to me how depressing he found it during the Lords reform debate to watch the Labour front bench revelling in every Tory intervention on Nick Clegg. At the top of the Lib Dems, there’s now a real worry that both Labour and the Tories would try and govern as a minority government after the next election if there’s another hung parliament rather than form a coalition. This would lock the Liberal Democrats out of power.  All of this makes Andrew Adonis’ comments in The Times today particularly striking.

Tory MPs clamouring for a new relationship between Britain and Europe were given an amuse-bouche today when William Hague announced a review into the impact of the EU on everyday life. The Foreign Secretary told the House of Commons earlier that the review, which will report towards the end of 2014, 'will present the evidence and analysis', adding that it would be 'for political parties to decide on their own policy recommendations'. The Foreign Office is briefing that the audit was not about identifying powers to grasp back from the EU, but many in the Conservative party certainly hope it's the start of that process if nothing else.

The Lib Dem dove has been shot by a well-aimed Tory arrow tonight, and you can bet that more than a few of Nick Clegg’s allies will feel deeply betrayed. The Lib Dems walked on the coals of the tuition fee rises, and for what? The Tory leadership cannot really claim to be giving its full backing to Lords reform. Yes, William Hague was sent on the radio this morning – in theory to urge obedience over the reform. But when the Foreign Secretary started laughing you had the feeling that he did not quite take his mission very seriously. Every Tory MP knows that the whips have given mixed messages, and did not tell them that there was no way back if they rebelled. You can't send the majority of your backbenchers to Siberia.

Mark Harper is touring the broadcast studios at the moment making the case for the coalition’s Lords reform bill. Being Nick Clegg’s Conservative deputy is not an easy job. But there is something particularly disingenuous about one of the arguments that Harper is using.   Harper said On Sunday, as Conservative Home reported, that: ‘It’s been Conservative policy to have a mainly elected House of Lords since 1999. I stood on the last three elections on that manifesto and the Coalition Agreement does no more than ask both the Coalition parties to deliver what was in both of our manifestos’. What this ignores is that in 2007, Harper voted against a fully elected Lords, an 80% elected Lords, and a 60 percent elected Lords.

That the Liberal Democrats might try to scupper the boundary reforms if they don't get their way on Lords reform has been the talk of the tearooms in Westminster for months. But today the threat comes to the fore as Nick Clegg's departing head of strategy Richard Reeves warns the Independent that there will be 'consequences' if Tory MPs try to block reform of the upper chamber by voting down the Government's programme motion for debating the legislation. This is what he told the newspaper: 'There would be broader consequences for the Government's programme, particularly around political and parliamentary reform. The idea that a failure to deliver a government commitment on Lords reform would be consequence-free is for the birds.

Nick Clegg gave a rather sombre speech to the CentreForum summer reception last night. Addressing the guests from a pulpit in the vaulted cloisters of Westminster Abbey, as the rain poured down outside, the Deputy Prime Minister admitted he felt 'lobotomised' in government. It was actually a clumsy attempt to praise the work of the Lib Dem-aligned think tank in helping the party retain its brain by dreaming up new policies when the constraints of Coalition might otherwise prevent it, but it did not go down well with those listening. Andrew Neil tweeted that Lord Steel, who he was standing next to at the event, had rolled his eyes at Clegg's turn of phrase. Clegg also used some of his speech to attack the eurosceptic beast that his Coalition partners are currently feeding.

Labour's Opposition day debate tomorrow on Gove-levels might not reveal as much as the party hopes about where Liberal Democrat MPs stand on the Education Secretary's planned reforms. True, you won't see a Lib Dem lift so much as a finger in outright support of what Nick Clegg dubbed 'a two-tier system' created by scrapping GCSEs and replacing them with two sets of exams, but this might not be the forum for them to launch a rebellion. One key figure on the left of the party points out that 'it's not where the decision will be made', while another MP says Labour's motions are often so 'over-the-top' that they are unsupportable.

What are we to make the split between Danny Alexander and his predecessor as deputy Chancellor, David Laws, over the size of the state? Laws says today it should be 35 per cent of economic output, which is an excellent ambition. In an interview with BBC1’s Sunday Politics today, Danny says 40 per cent. A split? When asked, Alexander said: 'I think around 40 per cent is the right sort of range to be looking at. It's only in the last four or five years that we've seen the share of the state taken up by spending rising to nearly 50 per cent, as it did in Gordon Brown's years."  Well, in this case Danny is sticking to the Treasury’s forecast. By its (understated) figures, state spending is 46% of GDP now and will be 40.