James Forsyth

We are entering the end game of the spending review. The Department of Education settled this morning, according to both Tory and Lib Dem sources. Although there is confusion about whether the money for the pupil premium is coming from inside or outside the education budget – Clegg’s speech suggested outside but other Whitehall sources are not so sure. Liam Fox has told friends that he knows the final number for the defence budget and that it is a lot better than expected over the summer. Fox has played a blinder in terms of defending his budget but this has come at a huge personal cost for him. Even supporters say that they don’t think his relationship with Downing Street will ever fully recover.

The piece in the New York Times magazine this weekend on the Obama presidency illustrates how far he has fallen. A large chunk of it is devoted to whether or not he can win re-election, something that most of his supporters used to take for granted.  Significantly, the Obama White House itself is admitting that things could have been done better: “While proud of his record, Obama has already begun thinking about what went wrong — and what he needs to do to change course for the next two years. He has spent what one aide called “a lot of time talking about Obama 2.0” with his new interim chief of staff, Pete Rouse, and his deputy chief of staff, Jim Messina.

In the government’s grid for the week, Sir Philip Green’s report into how to make the public sector more efficient was meant to be the top story today. For an obvious — and tragic — reason it is not. Politically, the report was meant to help the government make its case that the cuts can be done without throwing Britain back into some Hobbesian state of nature. Indeed, Sir Philip suggests to Robert Peston that a very large chunk of the £83 billion cuts that are needed can be made through savings on the government’s £191bn  property and procurement costs. But as Pete notes, identifying government waste is far easier than actually dealing with it.

"You only get cut through when there’s a row," one Tory observed to me on Friday as we discussed the anger that had followed George Osborne’s announcement on child benefit. So in one way, the Tories are not unhappy with the fact that this story is still rumbling on. It is imprinting on the public mind that the Tories have hit the well-off. This is in advance of a spending review that is bound to hit hardest those people and regions that are most dependent on the state. Following the media coverage of the child benefit row, it will be much harder for Labour to make the charge that the cuts are socially divisive stick. It really does appear that "we are all in this together."   But there are two things that do worry the Tories about the row.

Charles Moore’s column in the Telegraph today is one of the best articles you’ll read this year. The nub of his argument is that: “Mr Cameron finds himself the heir both to Blair and to Thatcher. To Blair, because he has had to take his party away from its preferred territory and pay attention instead to what actual voters worry about. To Thatcher, because he confronts a crisis of the public finances even more severe than the one she faced. He also leads a coalition. So, unlike Mrs Thatcher, he wants to woo and to warn, please and prophesy at the same time. Can it be done, as she implied that it could not? It has to be.

Jonathan Powell, Tony Blair’s chief of staff, is the latest veteran of the Brown Blair era to have his say and he is even more vicious about Gordon Brown than Peter Mandelson was. In his memoirs, which are being serialised in The Guardian tomorrow, he says that Blair ‘felt physically threatened’ when Brown leaned over his desk and demanded a departure date in 2001. But the charge which is sure to most infuriate the Brownites is Powell’s allegation that in the aftermath of 9/11: "The only time I saw him [Brown] appear to cheer up during that period was when the war cabinet was told there was a specific terrorist threat to Tony's life.

The shadow Cabinet results threw up some surprises. The most unexpected failure was that of Peter Hain. As a key Ed Miliband backer, it was widely expected he would make it on. Diane Abbott not making the cut was widely expected, she’s not popular with her parliamentary colleagues. But few would have predicted how well Tessa Jowell, who finished 9th, and Caroline Flint, 10th, did. As predicted, Yvette Cooper topped the poll by a margin—getting 232 votes. John Healey, the housing minister, came in a strong second with 192 votes and Ed Balls was third. At the other end of the table, Liam Byrne secured 19th place with 100 votes Positive discrimination did the job that it was intended to. Eight women were elected.

Last night, one minister came up to me nervously and asked, ‘is this our 10p tax moment?’ He was talking, obviously, about the decision to take child benefit away from households with a higher rate taxpayer in them.   My answer was no. The comparisons with Brown’s removal of the 10p tax rate miss a crucial point: Brown tried to hide what he was doing. In his final Budget statement to the Commons, the abolition of the 10p rate wasn’t even mentioned. Instead Brown boasted about a 2p reduction in the basic rate, to huge cheers from the Labour benches.   By contrast, the Tories have been upfront about the fact that there are losers from this change.

Today was a reminder of the tax change that would give Tory re-election chances a massive boost, raising the threshold at which the higher rate kicks in. Indeed, electorally dealing with this is far more important than the abolition of the 50p rate and has been made more so by the decision to link the withdrawal of child benefit to the higher rate. During Gordon Brown’s time at the Treasury, the number of people paying the higher rate almost doubled - principally because of fiscal drag, Brown didn’t link the threshold to earnings. This means there are a whole slew of people paying higher rate tax who are comfortably off but are not members of the super rich by a long stretch.