Liberal democrats

George Galloway’s victory last night is a reminder of a wider problem in British politics: the low regard in which all main political parties are held. By-elections can throw up quirky victories, usually ironed out in the general election. There won’t be an army of Galloway’s marching on parliament at the next election. It’s like Glasgow East: a classic Labour safe seat-cum-‘rotten borough’ taken for granted (and ignored) for so long that the ruling party’s apparatus had atrophied. Like John Mason in Glasgow East, Galloway won’t last long.    But the same phenomenon which took Galloway to victory last night, and humbled the main parties, is also at work in Scotland.

Why would anyone pay £250,000 to change Tory policy when the Liberal Democrats would do it for £2.50 and a hug? The brilliant Sunday Times investigation today makes you wonder whether businessmen don't actually realise that out that, in this coalition, it doesn't matter what you persuade David Cameron of. Policy is decided by horsetrading with the Lib Dems, who wield disproportionate power (for good or for ill). For example, Osborne was personally inclined to bring the top rate of tax down to 40p, but the Lib Dems told him they'd only allow this in exchange for their mansion tax. Cameron refused to do the deal, so 45p it was. The rise in capital gains tax was a Lib Dem demand, and would only be changed by Lib Dem agreement.

Four days after George Osborne signed its death warrant, there is still life in the 50p rate yet. The two main political interviews in today's papers — Ed Miliband in the Telegraph, Danny Alexander in the Times (£) — both focus heavily on the top rate's impending demise. The Labour leader, of course, is continuing to ask whether David Cameron and George Osborne will themselves benefit from the move to 45p, without actually managing to commit his party to a policy. The Chief Secretary to the Treasury is left defending a 45p rate, and does so by borrowing a recent Lib Dem slogan for the coalition as a whole: ‘This is a Budget for the millions, not the millionaires.

This Budget told us something interesting about the coalition: that there’s more juice left in it than some of us thought. Judging by recent coalition tensions, one might have expected the two parties to devote their time to blocking each other’s proposals. But, instead, they’ve struck a deal that suits both of their political priorities: the Liberal Democrats have got a sizeable increase in the personal allowance, the Tories a 2p cut in corporation tax and a reduction in the economically destructive 50p rate. Interestingly, close allies of the Deputy Prime Minister are now briefing that ‘differentiation’, pointing out where the Lib Dems disagree with the Tories, will be dialled down a notch.

The big Budget news tonight is that the personal allowance will rise to £9,205. This is a larger increase than expected and, intriguingly, will be paid for — in part — by a couple of billion more of spending cuts. So, the Lib Dems see considerable progress on their main budget priority, raising the income tax threshold to £10,000, but this will be partially funded by something Tory MPs have been calling for, more spending cuts. It also appears that the coalition will further increase the pace of its corporation tax cuts as well as introducing a new higher rate of stamp duty for £2 million plus houses. There’ll also be a slew of anti-avoidance measures to accompany the reduction in the 50p rate.

Nick Clegg’s assertive performance at PMQs today was a demonstration of the fact that he now feels more confident than he has since his failure in the AV referendum. The deputy Prime Minister doesn’t crouch defensively at the despatch box anymore, and he brushed off some rather good one-liners from Harriet Harman. She joked that the only thing the deputy Prime Minister stands up for these days is the PM entering the room.   Clegg and his team feel that things are looking up for them, that they are setting the agenda. Even the Lib Dem’s lowly poll rating isn’t dampening their mood.   So, what does this change mean for the coalition? Senior Tories claim to be delighted that Clegg is happier, claiming it makes him easier to deal with.

News that Nick Clegg has brilliantly outmanoeuvred Cameron over the British Bill of Rights will come as no surprise to CoffeeHousers — we told you so last March. The panel was stuffed full of ECHR enthusiasts, balanced by Tories most of whose competence lay in other legal areas. Perhaps Michael Pinto-Duschinsky, the most clued-up of the Tory appointees, didn’t realise this when he joined the panel. He has twigged now, and has quit (or was eased out, depending on whose version of events you believe); observing that the ‘Lib Dem tail is wagging the Conservative dog’. As was evident from the start.