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Today the prime minister spells out what, he says, is not true about his NHS reform.

It is not a revolution.
It is not opposed by doctors.
It is not privatisation by the back door.
It is not going to damage patient care.

Maybe - or maybe not. Each one of those claims is hotly debated.

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What's curious, though, is that David Cameron did not say why his reforms are needed - save, that is, for one mighty big claim. The PM says that without modernisation the NHS will be unaffordable. What he did not spell out is why.

The health service is being asked to find £20bn in efficiency savings over five years - a figure set by the last Labour government and without precedent. It's being asked to do so at a time when costs are increasing thanks in large part to the fact that people are living longer - the population aged over 85 is expected to more than double in the next two decades. What's more, no political party is proposing to increase health spending beyond the tiny - and disputed - real terms increase the coalition had budgeted for.

So, the government believes it must get more for less. Labour clearly believed that too. The question as to how they think they can do it is rarely spelt out.

The coalition hopes to cut the costs of bureaucracy by scrapping the quangos - Primary Care Trusts and Strategic Health Authorities - which supervise care. Their critics warn, though, that the costs of re-organisation may outweigh savings in the short term whilst private sector providers - once they have a significant slice of NHS business - may start to charge more not less than the NHS managers they replace. Only time will tell who is right.

Ministers believe that giving family doctors more decision-making powers will speed up the process of transferring treatments from expensive hospitals to cheaper alternatives provided closer to home in enhanced GP practices. Labour ordered the creation of more polyclinics to achieve the same goal. David Cameron used to attack what he called top-down bureaucratic decisions to close hospitals. Let's be clear though there is bound to be pressure for more hospital closures which will now be blamed instead on patient and doctor choices.

Finally the government thinks, but rarely says, that GPs will ration care - in other words decide what the NHS can and cannot afford. Those decisions are currently taken by unelected and unaccountable Primary Care Trusts or quangos like . In future they will be taken by large groups of GPs locally - with ministers again (they hope) getting less of the blame.

In other words, more for less must mean more closures and more rationing. That would be true however the NHS was run. The debate is whether the government's reforms will lead to more of it or less, and whether they will lead to decision making which is more or less in the interest of patients.

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The phone hacking scandal just got serious. Much more serious. And the reason is clear. Rupert Murdoch is in town and has told his company to clean up its act.

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One source at News International told me: "We have decided to root out and hunt down anyone connected with the practice of phone hacking. We are determined to end this."

This morning the company handed evidence to the police. A prosecution source told me that it is very significant information that goes "up the chain" at the company. They said they were hopeful of a further prosecution.

Tonight Downing Street moved to distance the prime minister from this scandal, insisting that he had had no conversations about the subject when he met James Murdoch and a senior company executive for dinner over Christmas. Mr Cameron will be relieved to learn that his soon-to-be-retiring director of communications Andy Coulson is not said to be named in the latest evidence.

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You need to cut the deficit to get growth. No, you need growth to cut the deficit. That was today's Parliamentary equivalent to the "which came first?" - the chicken or the egg - puzzle.

More illuminating I thought was what two heavyweights said in the TV studios. Former chancellor Ken Clarke told the Daily Politics today that the pain might go on for two or three years and accepted that there was a real danger of a jobless recovery.

Earlier, on ³ÉÈË¿ìÊÖ Breakfast, Ed Balls the shadow chancellor told the governor of the Bank of England "to have another look at the facts".

The logic of the Balls position is to postpone some or all of the spending cuts proposed by Alistair Darling, let alone George Osborne. That's consistent with his view that even the last Labour government was planning to go too far too fast in cutting the deficit. Yet, Ed Balls has just signed up to the Darling plan.

If the numbers continue to look bleak both sides are going to have to give us more than soundbites.

Update 16:02: The Ken Clarke quote in full is "I think we face a difficult two or three years before we're back to normality. We've got to get people to understand that."

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One statistic does not a political winter make. Nevertheless, today's news that the economy shrank rather than grew in the last quarter will change the political climate.

Up until now the coalition economic argument has gone largely unchallenged. Not any more. Today's stat, yesterday's warning by the outgoing CBI director general Sir Richard Lambert that the government lacked a vision for growth and the arrival of Ed Balls as shadow chancellor will ensure that the debate will now shift from being solely about the deficit and spending cuts to being about growth as well.

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George Osborne insists that it's wrong to blame the cuts for today's figure (after all, they've scarcely begun); it's wrong to blame the VAT rise (if anything the prospect of a rise should have boosted spending in the last quarter); and the only thing to blame is the weather. He says it would be wrong to change course. His problem is that even without the snow the figure was disappointing at best. The question he'll be asked increasingly from now on is where will the growth come from.

Ed Balls warns that the VAT rise and the speed and scale of the planned cuts will make growth less not more likely. He will publicly echo ministers' private concerns about the the collapse in the construction sector, the risks of a jobless recovery and the fears of a "lost generation". Given all this the question must arise - does he now feel vindicated in his former view that even Alistair Darling's planned spending cuts would have been too far and too fast? Remember that under Labour's pre-election plans cuts deeper than Margaret Thatcher would begin this April and employers' National Insurance contributions would rise. Ed Number Two said only last week that he now accepted that plan.

Balls used, like Gordon Brown, to warn of a double dip. It became fashionable to dismiss that prospect and to say that flat growth was more likely. A double dip is now back on the political agenda again.

Ever since the coalition was created David Cameron and George Osborne have seemed to float above events as Nick Clegg and Vince Cable were battered by chill political winds.

Today marks the day the political weather changes.

PS. Normally we're cautious about reading too much into what is only a first estimate of growth figures. They are due for revision. However, the ONS says today's numbers focus on the output side of the economy (services, construction and manufacturing) and don't include consumer spending, which is the area that would be most affected by the weather. This means that the second estimate, due in a month, could come in even worse.

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In Margaret Thatcher's day the head of the CBI promised "a bare-knuckled fight" with ministers.

I remember the speech but I can't say I recall the fight it was meant to presage. If it was ever launched she won it.

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Will Sir Richard Lambert's rather less dramatic criticisms of this government's approach to business be remembered or acted on?

In a parting shot - in his last week at the CBI - Sir Richard complains that:

• The government "has yet to set out its vision of what a successfully growing economy would look like"

• "Politics appears to have trumped economics" in a range of policies.

He fears that the government's cap on immigration could stop firms hiring the workers they need. He's worried by ministers plans to scrap the age at which people are forced to retire, ministers' unwillingness to expand London's airports, proposed anti bribery laws and much besides

• "It's hard to see anything much has happened" on government promises to cut Whitehall regulation

• Condemns the Business department and says it should become "less of a talking shop, more of an action orientated growth champion"

The speech's timing - on the eve of publication of what are likely to be sluggish growth statistics and just days after the return of Ed Balls to the economic stage - will ensure that it gains plenty of attention.

Labour's new shadow chancellor says he agrees with Sir Richard but also claims that the CBI's boss agrees with him. Really?

Sir Richard says "the tax and spending policies of the last government created a substantial structural deficit" and goes on to claim that "spending cuts and this month's VAT increase will fix the structural deficit over time".

On the deficit he says "that policy is strongly supported by business". There is, however, one line that Ed Balls can point to - "It's not enough to slam on the spending brakes. Measures that cut spending but killed demand would actually make matters worse".

The government has struggled to develop a growth agenda. It cancelled plans for a white paper on the subject. It published, instead, a list of problems rather than solutions.

The chancellor and the business secretary are seeing ministers from every department in turn to ask them what they're doing to help the economy grow. The fear in Whitehall is no longer a double dip recession but a jobless recovery.

Ministers feel that they have won the debate on the deficit. Sir Richard Lambert's speech is a reminder than they are not yet winning the debate about how to get the economy growing.

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That's what people warned David Cameron when he hired not just any former editor of a muck-raking tabloid, but one who'd resigned after his paper created a scandal all of its own.

Today some are saying "I told you so". Some are asking questions about David Cameron's judgement. The prime minister has, though, only one regret - that a man whose judgement he has come to depend on has felt it necessary to resign.

Andy Coulson's value to David Cameron was not only as a mere spin doctor, nor as just the link man to the powerful Murdoch Empire, but also as someone who connected him to those who read, rather than produced, tabloid newspapers.

The boy from Essex was willing to stand up and contradict the prime minister's other principal adviser Steve Hilton - king of the Notting Hill set of metropolitan, intellectual and wealthy friends.

Today's resignation was meant to separate David Cameron from the phone-hacking scandal.

It will also separate him from someone with an instinctive understanding of the world beyond Westminster.

If Andy Coulson's advice is not replaced that really could be an accident waiting to happen.

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Do you remember where you were when Peter Lilley was replaced by Francis Maude? What do you mean Peter who? It was a big moment. No really it was.

If you're still struggling to dredge it from the far reaches of your memory the year was 1998, there was a change in shadow chancellor involving two of the people who'd only just been running the country.

I test your memory in order to test myself on a question that's troubling me this morning - will the replacement of Alan with Labour's other Ed matter as much as we news boys have said it will? Or could it be that we're still addicted to reporting on Labour?

Last night we all recalled how Ed didn't get on with Ed when they worked for Gordon...and Ed (B not M that is) wasn't liked by Tony or, indeed, by Alastair who was - by chance - clashing on Question Time with "gorgeous George" before Tony gave evidence this morning.

No surnames needed and no detail explanation because, after all, we all know the plot of the nation's favourite political soap opera, don't we? But could these guys be the Messrs Lilley and Maude of today?

Perhaps but here's why - on reflection - I think we are right to be excited by this shadow cabinet reshuffle. The economy is the central issue of the day. Who is right and who is wrong about the deficit, tax and spending will not just define our political future but many people's personal futures.

The heavyweight clash between Ed Balls and George Osborne will pitch Labour's toughest, brightest, sharpest street fighter against the Tories answer to him. It will involve a clash of two dramatically different approaches to the economy - one which will be dubbed "deficit denying" and the other which will be portrayed as "growth denying". It follows an election which the Conservatives did not win and leads up to one which Labour has every chance of winning.

On this of all days when signs of "Labour addiction" are everywhere to see I'm making a note to myself to keep my eye firmly fixed on the future.

PS Sadly I cannot be at today's gripping examination of the past - the Iraq Inquiry - but my colleagues James Landale and Laura Kuenssberg are there. One thought on the opening exchanges. What is emerging before our eyes is a clash of cultures between a politician who believes governing is, in the end, about one man's judgement and the Whitehall classes who believe it should be about official papers, formal consideration of the evidence and collective decision making.

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Labour has lost a shadow chancellor who spoke fluent human and gained one who speaks fluent economics and practises raw political aggression too.

Alan Johnson was picked for the job because the former postman who rose to be his union's leader and then a cabinet minister could connect with the working class voters Labour had lost touch with and yet was a Blairite who worried about government spending too much. That is why he will be sorely missed.

In his place comes Ed Balls - the obvious choice for the job given his economic training, his experience as a Treasury adviser and minister and his passion for the fight. Yet those are exactly the reasons Ed Miliband snubbed him for it the first time round.

The Tories will portray the new shadow chancellor as the "son of Brown", responsible for failing to regulate the banks and for spending too much public money. They will highlight his publicly stated opposition to the deficit reduction plans of the last Labour government and they will delight in trying to drive a wedge between two Eds who once worked together under Gordon Brown but did not always get on.

As Alan Johnson leaves the political stage Ed Balls is thrust into the spotlight. He will love it. Whatever they say his opponents fear him. They will hope, however, that Labour's leader will fear him even more.

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David Cameron is faced with choosing defeat in the courts or defeat in Parliament on the issue of prisoner voting. He may end up defeated in both paying a high price electorally and in compensation to prisoners.

Ministers have now abandoned the one policy which lawyers tell them is safe from legal challenge - giving the vote to prisoners serving four years or fewer. They have not, however, agreed on a new policy to put in its place.

It is not a question of simply picking a number that's less than four or that's as low as possible - ie one - since government lawyers would have to prove in court that Parliament had not acted in an arbitrary way. Four years is, apparently, the start of what are technically "serious offences" even, though, to most people many of the crimes below that level - violence, sexual assault, drugs - will seem all too serious.

One group in government is arguing that the public will object more to paying prisoners cash than they will to giving them the vote so it's time for ministers to bite their lips and follow their legal advice. Another camp argues that it's time to find some more lawyers with different advice.

For the moment what they've agreed to do is to stand aside and allow Messrs Straw and Davis to rally Parliament in opposition to the Strasbourg court ruling and to delay a vote on the government's proposals - whatever they turn out to be - until the end of the year.

The question is - does a policy exist which will satisfy the courts and Parliament or will David Cameron have to decide which to pick a fight with?

Update 11:00: Proof of the pickle the government finds itself in comes from the lawyers representing 550 prisoners suing over the breach of their human rights. Sean Humber, a partner of Leigh Day & Co says this morning that all prisoners must be given the right to vote.

"It seems doubtful that the Government's previous proposals, allowing prisoners with a sentence of less than four years the vote, would have complied with ECtHR judgements. However, it seems even clearer that the Government's current proposals will not comply with these judgements.
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The Government's continuing prevarication is likely to be unlawful and costly. The European Court of Human Rights' judgments are clear that all prisoners should be given the vote. Any attempt to limit the right to vote to certain prisoners, while excluding others, is likely to be unlawful and almost inevitably lead to further legal challenge and claims for compensation."

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Ministers are preparing to abandon plans to give the right to vote to thousands of prisoners serving sentences of four years or less.

The government now hopes to limit the right to vote to a much smaller group and is prepared to take the risk of being sued by prisoners who may be granted significant sums in compensation.

The prime minister recently told MPs that the idea of giving prisoners the vote made him feel "physically ill" but warned them that unless the government did do they faced paying prisoners more than £160m in compensation.

This followed a ruling by the European Court of Human Rights in Strasbourg, which ordered the government to change the law. John Hirst, a prisoner convicted of manslaughter, successfully argued that his human rights had been violated by the removal of his right to vote.

I understand that Mr Cameron now accepts that the Commons is unlikely to vote for a proposal which could involve granting the vote to upto 28,000 prisoners, including 6000 jailed for violent crime, more than 1,700 sex offenders, more than 4,000 burglars and 4,300 imprisoned for drug offences (the exact number is not yet known).

I understand that ministers now hope that they will be able to give the vote only to those prisoners sentenced to serve a year or less. They are aware, however, that this policy will be tested in the courts and that they might lose again.

Even this concession may not persuade many MPs who want to make a stand against the Strasbourg court. The Commons will have the opportunity to defy the court's ruling in a couple of weeks' time when the Commons debates a motion tabled by the Conservative David Davis and Labour's Jack Straw

The prime minister met the executive of the Conservative backbench 1922 committee on Tuesday and was left in no doubt about the strength of feeling on this issue.

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Michael Gove - friend, ally and trusted adviser to David Cameron - has urged people to vote Liberal Democrat in May's council elections. The education secretary is, I believe, the first senior Tory to do so.

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Now, lest everyone gets over-excited, Gove was advising the voters of Hull - hardly a Tory stronghold. Nevertheless, his words could and, no doubt, will be applied to many, many other places.

Defending his plans to cut Educational Maintenance Allowances in the Commons this afternoon Gove praised councils that helped students with travel costs:

"In Hull, Liberal Democrat-controlled Hull, any student in receipt of EMA also gets a travel grant to cope with the full cost..."

Then, in response to interruptions, he continued:

"Well, they won't if a Labour council takes power, I suspect. But if they're wise enough to vote Liberal Democrat at the next local elections in Hull..."

Cue lots of ooh-ing and ahh-ing and a knowing smile from the minister:

"... or for the Conservatives in any seat where we are well-placed to defeat Labour, then they will have a council that is fulfilling its statutory duty".

At present, the Liberal Democrats run Hull city council, Labour are the opposition and the Tories have just 2 out of 59 seats (those 2 are not up for election this May). Tory voters in Hull have just been invited to vote tactically.

First Hull, next the rest of the UK?

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David Davis and Jack Straw have got their way. The Commons will get the chance to vote - probably in the middle of February - for a motion to defy the European Court of Human Rights on prisoner voting.

Their motion states that:

"This House... is of the opinion that A) legislative decisions of this nature should be a matter for democratically elected lawmakers and B) that on the merits of the issue the current policy... is confirmed."

I wouldn't want to be a Tory MP trying to convince backbenchers why they should not vote for that.

Straw is carrying around a speech by the former Law Lord - Lord Hoffmann in which he criticised the European Court of Human Rights.

"It has been unable to resist the temptation to aggrandise its jurisdiction and to impose uniform rules on Member States. It considers itself the equivalent of the Supreme Court of the United States, laying down a federal law of Europe."

He went on to say that:

"[I]t lacks constitutional legitimacy...this is not an expression of populist Euroscepticism. Whatever one may say about the wisdom or even correctness of decisions of the Court of Justice in Luxembourg, no one can criticise their legitimacy in laying down uniform rules for the European Union in those areas which fall within the scope of the Treaty. But the Convention does not give the Strasbourg court equivalent legitimacy."

Incidentally, the government is keen to point out that Straw's own consultation paper on this issue (when he was justice secretary) proposed enfranchising prisoners for all elections not just Westminster and European elections and granted no judicial discretion to disenfranchise individual prisoners as part of their sentence.

Update, 1616: A reminder of what David Cameron's stated views are on prisoner voting:

"It makes me physically ill even to contemplate having to give the vote to anyone who is in prison. Frankly, when people commit a crime and go to prison, they should lose their rights, including the right to vote. But we are in a situation that I am afraid we have to deal with. This is potentially costing us £160 million, so we have to come forward with proposals, because I do not want us to spend that money; it is not right. So, painful as it is, we have to sort out yet another problem that was just left to us by the last government."

Update, 1718: The prime minister welcomes the plan for the Commons to hold a debate on whether prisoners should be given the vote as demanded by the European Court of Human Rights and believes that it "could be helpful", I'm told. David Cameron is said to want as few prisoners as possible to be given the vote and is still seeking legal advice as to whether it will be possible to successfully defend a policy of giving the vote to prisoners who are serving one year or less (rather than as currently planned four years or less).

Ministers are also examining whether there could be a legal presumption against prisoners getting the vote with judges able to grant voting rights at their discretion.

One possibility is that ministers could try to use a vote in the Commons to strengthen their negotiating position with the Strasbourg court.

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A former home secretary and a former shadow home secretary will join forces today to try to trigger a vote in the Commons to block government plans to give thousands of prisoners the vote and to defy a ruling by the European Court of Human Rights (ECHR).

Labour's Jack Straw and the Conservative David Davis will seek to table a Parliamentary motion today which would call on the government to abandon plans to change the law to give any prisoner serving less than four years a vote in Westminster and European elections.

The government says that if it does not change the law it will face hundreds of compensation claims costing well over a hundred million pounds.

Straw and Davis will make a Dragons’ Den-style pitch to the new Commons Backbench Business Committee at 1300 GMT today to ask for time to debate a motion which could be voted on by MPs as early as next week.

The two men are making use of new Commons rules which give backbenchers control of parts of the Parliamentary timetable. They will argue that the Commons should be given the chance to stand up to the ECHR and defy what they see as an illegitimate challenge to a democratically elected Parliament.

The move could pose a real problem for the coalition. Many Tory MPs have threatened to rebel on the issue. They are angry not only at the idea of giving the vote to prisoners but at the power of the ECHR.

The Conservative manifesto promised to amend the Human Rights Act - a plan which has since been put on the backburner. Labour has said that it may vote with Tory rebels so a Parliamentary defeat for the government cannot be ruled out. The Liberal Democrats have consistently argued for a change in the law.

The government's proposals could involve giving the vote to many thousands of offenders in England and Wales. More than 28,000 prisoners have sentences of under four years including almost 6,000 jailed for violent crime, over 1,700 sex offenders, more than 4,000 burglars and 4,300 imprisoned for drug offences.

The precise number of prisoners eligible to vote may be lower since a small number of those serving four-year sentences may be concurrently in jail for longer terms and will still, therefore, be barred.

This argument was triggered by the legal victory of a prisoner called John Hirst who had been convicted of manslaughter and argued that the voting ban was incompatible with the Human Rights Act. Last year the European Court of Human Rights set the government a deadline for a change in the law of August 2011.

Ministers said legislation would be passed before MPs summer break but rebels suspect that they are waiting until after May's elections to introduce it. Davis and Straw are moving to ensure that that vote is held sooner rather than later

Straw was first home secretary and then Lord Chancellor in the last Labour government which launched a consultation on granting votes to prisoners but never acted on it. Davis was shadow home secretary when the Conservatives said they would oppose any such move.

The Commons Backbench Business Committee controls the subject for debate on 35 days a year although the timing of any debate is up to the government. Straw and Davis will be competing with other proposals on the reform of Parliament and consumer credit regulation.

The Committee is meant to choose a motion which has widespread cross party support and which the government and opposition do not plan to debate in their allotted time. The committee's decision will be off camera and will be known later this afternoon.

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that he hadn't taken a bet in years. Maybe not with his own money but he's proving to be quite a gambler when it comes to using taxpayers'. A man once attacked for his political caution has not just created the first peacetime coalition since World War II committed to the biggest austerity programme in decades. He is now embarking on the most ambitious proposals to reform public services seen in years.

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This morning he argued that he had no choice since "doing nothing could end in tears" - producing a financial "crunch" in two or three years' time. David Cameron insists that "modernisation" is not just about value for money but also about better service given the fact that survival rates for cancer and heart disease are lower here than in other European countries. He had, he said, learnt from previous PMs - for which read "Tony Blair" - who had wasted their early years in office.

Much debate on this government's NHS reforms has focused on the complex detail - abolishing Primary Care Trusts (which few people have heard of, fewer understand and fewer still care about) and giving the £80bn they spend to GPs. Some have focused on whether the Tories have misled people by promising no "top down reorganization of the NHS" while appearing to do just that. (although this article by an editor at the British Medical Journal backs the government's claim that the reforms were well trailed before the election and are an evolution of changes made by the last Tory and Labour governments.)

More important, in my view, is the philosophy - or ideology if you prefer - underlying these proposals. David Cameron made clear his view that "Choice, competition and diversity drives up standards." That is his gamble. He is counting on groups of GPs to drive down management costs and - often in partnership with private companies - to drive a harder bargain with hospitals. He believes that increased patient choice will lead to higher standards.

His critics claim that costs will actually increase as the newly created NHS bodies want their own buildings, logos and well-paid management and as the system has to keep up with new more complex accounting procedures.

All this happens at a time of an unprecedented squeeze in the NHS finances. The budget may be increasing in real terms (just) but to do so the NHS has to find £20bn in efficiency savings. Compare this with Margaret Thatcher's period in office. She was attacked for cutting the NHS but its budget increased on average by 4.3% in real terms year by year.

Now her successor's taking a gamble she never dared to take.

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Ed Miliband could not have been clearer this morning. He believes that Gordon Brown got his presentation badly wrong but his economic policy fundamentally right.

The Labour leader said that his predecessor should have acknowledged before the election that his plan involved spending cuts and added that it was a mistake to promise "no more boom and bust".

However, he stated that Labour had not spent too much in government - spelling out his answer to me at his last news conference.

His argument is that Britain's borrowing was manageable before the crash and only became unsustainable thanks to it - as happened all over the world. America has not got a deficit, he said, because Gordon Brown spent too much. No one can argue with that.

What some do argue is that the last Labour government had built its policy on unsustainable foundations - assuming that the City would continue to pour tax into the government's coffers while continuing to increase government spending significantly year on year.

The crash slashed tax revenues permanently while spending continued. Although there would have been a huge deficit regardless of policies prior to the crash, say the critics, it would have required a less painful correction if tax and spending plans had not been on an unsustainable path.

Ed Miliband has decided that apologising for spending too much is not the way to deal with what Gordon Brown saw as Labour's "spending problem" when he was in opposition.

Brown believed that voters feared big tax rises under Labour because they did not believe the party could control spending. He set out to prove that they were wrong and in so doing earned the title "The Iron Chancellor".

His protégé will now have to find his own way to counter Tory charges that he is addicted to tax and spend.

One last thought about today's interview - put aside the policy and focus on the presentation. Ed Miliband came across as clear, confident and completely at ease with the questions he faced. Perhaps that will quieten some of his internal critics.

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It was billed as the moment Ed Miliband would recognise and criticise the last Labour government for being in denial about the deficit and the need for spending cuts. The speech fell some way short of that. Here's the relevant extract:

"Why was the last Labour government too slow in the language that we used, after the financial crisis had created a big deficit, to acknowledge what our own plans implied, that there would eventually have to be cuts? Part of the answer is that we hadn't shown other ways of delivering social justice."

I suspect that Blairites will regard Ed as being, in his own words, "too slow in the language" he has used. Gordon Brown wasn't just slow to say the word "cuts". He denied the need for cuts and attacked David Cameron as "Mr 10 per cent" while his own chancellor drew up plans to raise VAT and to cut spending not "eventually" but, as Alistair Darling has himself acknowledged, immediately after the election at a rate deeper and faster than Mrs Thatcher had.

My sense is that Ed Miliband's speech is made up of the things he instinctively believes and those bits of political positioning he's been advised to adopt. His own views are interesting. At one point he argues:

"We can't build economic efficiency or social justice simply in the way we have tried before. It won't be enough to rely on a deregulated market economy providing the tax revenues for redistribution. New Labour's critical insight in the 1990s and 2000s was that we needed to be stewards of a successful market economy to make possible social justice through redistribution. The critical insight of Labour in my generation is that both wealth creation and social justice need to be built into the way our economy works."

By this he says he means a high wage economy, the introduction of a Living Wage and respect for communities so that their concerns about government targets, out-of-town supermarkets and post office closures are not simply ignored in the name of efficiency. What he does not say is how this rebalanced economy - something which, incidentally, I have heard both George Osborne and Vince Cable call for - can be created. Watching how his thinking develops will be fascinating.

What is clear already, however, is that Ed Miliband believes that his old mentor got his language, but not his fiscal policy, wrong. Why, you may ask, does this debate about the past matter? The answer is to ask yourself whether other issues of the past mattered - the Winter of Discontent or Tory sleaze and divisions on Europe. The crisis of 2008 and the cuts that have followed it have the potential, as the Labour leader himself points out, to reshape politics as dramatically as the IMF crisis of 1976 or the ERM crisis of 1992. Labour were out of power for four terms after their crisis and the Tories for three terms after theirs. The electorate will, at the next election be asked to judge whether to blame Labour for the current crisis or the coalition for its harsh reaction to it.

Ed Miliband needs not only to provide a credible alternative to the coalition's policy of cuts and "Maoist" public service reforms. He needs to explain what social democratic politics looks like in an era without easy money to spend. To do so he may need to develop an account of Labour's period in office that addresses more than just a failure to regulate the banks and a slowness of language.

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Let's not waste too much energy trying to impose a single national party political narrative on the varied, local motivations of thousands of by-election voters in Oldham and Saddleworth.

We don't know why people voted as they did. Besides, by-elections this early in a Parliament matter as much for their ability to change the political weather as they do for their revelations about the public mood.

Labour - and more importantly Ed Miliband - will be mightily relieved. Despite the widespread internal and external doubts about their leader's performance he has secured his first, vital victory comfortably overcoming an awkward hurdle - the fact that this by-election was caused by a court throwing out the sitting Labour MP for lying about his opponent. Any other result would have fuelled the narrative "Miliband in crisis". For now that story is stilled.

The Liberal Democrats - and in particular Nick Clegg - will be relieved that their result was not significantly worse. Many Lib Dem activists will recall times when they would have romped home in a seat like this in a by-election caused by Labour's abuse of their man.

However, in the face of unprecedented national hostility they will comfort themselves with the fact they not only held but marginally increased their share of the vote. A rout would have fuelled the narrative emblazoned on the cover of this week's Spectator - "The Strange Death of Liberal England".

The proof or further confounding of that claim will now have to wait for May's local, Scottish Parliament and Welsh Assembly elections and the Barnsley by-election.

So, what of the Tories? It was a poor result but one that will neither have surprised nor upset the party's leadership. Indeed, in some ways it will come as a relief for them too. David Cameron feared that the greatest threat to his coalition was a Lib Dem collapse, leading to a crisis of confidence in Nick Clegg and possibly even a coup attempt.

This morning the prime minister has a different lesser problem. A significant faction in his party will now add Oldham East and Saddleworth to their list of Cameron betrayals. That is the narrative that has been fuelled by this by-election. The alternatives - a crisis for Clegg or Miliband - could have been game changers. This result will not be.

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Was it a shot across the bows, a deft bit of spin or the start of a campaign to build support for a change in the law?

That was the question I've been asking myself since David Cameron declared yesterday that he was seriously considering the case for tougher trade union laws - in particular a new participation threshold for any strike ballot. In Prime Ministers Questions yesterday the PM said:

"I know there is a strong case being made, not least by my colleague the Mayor of London, for this sort of change. I am very happy to look at the arguments for it because I want to ensure we have a fair body of union law in this country.
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"I think the laws put in place in the 1980s are working well. We don't currently have proposals to amend them but I am very happy to look at this argument because I don't want to see a wave of irresponsible strikes, not least where they are not supported by the majority taking part.''

Boris Johnson has proposed that any ballot in which fewer than half of those eligible to vote bother to do so should be ruled invalid. He has London's tube drivers in his sights. They have gone on strike more under his mayorship than under Ken Livingstone.

He fears that in the lead up to the Boris v Ken re-match next April the unions may be inclined to strike even more. Many - but not all - of the strikes on the Underground have had a lower than 50% participation rate. So, Boris wants a new law to help him and to help London avoid the only other alternatives - buying off the unions or outright confrontation with them.

The CBI has proposed a different way forward - a threshold for triggering a strike set at 40% of the unionised workforce voting in favour. John Cridland, the CBI's deputy director general, has said that:

"When a legitimate strike threatens to disrupt the services on which the public depends, it is only right that it should require a higher bar of support."

They also say union members should hear both sides of the argument before voting in a strike ballot with both employers and unions allowed to send short statements with the ballot papers.

The problem with these new ballot thresholds is that unions will ask "why should they apply to us and not to politicians?" Boris Johnson would not be mayor, there would be no London Assembly members and the Labour MP John McDonnell has calculated that just 38 MPs would have been able to take up their seats.

An alternative route would be for the government to ban Transport workers, firefighters, NHS staff and even employees of the gas and water industries from striking - an idea which Conservative and former shadow home secretary David Davis has backed. Imagine, though, what the courts would make of that if it were challenged under the Human Rights Act.

Back to my initial question, though - is David Cameron serious about any of this? There's no doubt that his statement yesterday and his were seen as an ideal way to distract from the bankers - who may prove to be the coalition's Achilles heel - and focus instead on the unions, which they hope will be Labour's. It was also intended as a direct message to union members who they hope will restrain their leaders.

Finally, however, I am told by several well placed sources that the prime minister wants to toughen the law but believes he must follow rather than lead public opinion which he believes will not long tolerate strikes which cause them real inconvenience.

Tonight's meeting of the London Fire Authority will offer an interesting point to the way ahead. After a six year dispute over shift patterns the Tory run authority is threatening to sack over 5,000 firefighters and to offer to re-hire them on new terms and conditions. Some see this dispute as evidence of over mighty trade unions, others as an example of bullying employers. Were the authority to go ahead it might provide the Tories with a model of how to handle other disputes - such as those on the Underground.

PS Looking forward to the battle of their Lordships’ sleeping bags - James Landale has more on an upcoming battle over the voting reform referendum here.

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Proof of Eric Illsley's attitude to "expenses" came in .

"In all the 22 years I have been a member of the House it has been regarded as an allowance," he argued.

"It was never set against expenses and members did not, in the majority of instances have to prove any expenditure in order to claim the allowance.
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"It is therefore misleading in my view to refer to the ACA (additional costs allowance) as expenses.
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"MPs were encouraged to claim the allowance at maximum levels with a minimum of receipts. It cannot be right, years after the event to maintain that MPs should not have claimed this money after being encouraged to do so by the Fees Office and successive Governments who repeatedly urged MPs to forego pay rises.
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"Indeed the advice given to MPs for many years was to divide the allowance by twelve and claim that amount each month as it "was easier for the Fees Office".

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From ballot box to courtroom dock and almost certainly to jail - in less than a year.

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That is the story of Eric Illsley who looks odds-on to soon be the former MP for Barnsley Central. Amid all the talk of public outrage at MPs' expenses claims he was re-elected last May with a majority of 11,000 despite the allegations which he has now owned up to.

If he is imprisoned for more than a year he will be automatically expelled from Parliament. If he is not, MPs can - and look certain to - move to have him thrown out anyway.

Like his former Labour colleague David Chaytor - who was sent to prison by the same judge who will sentence Eric Illsley - he was both liked and respected in the Commons. He was proud of his campaigning on behalf of miners.

So, why did he - why did they - defraud the public? Only they can answer that but - after many many months of talking to MPs about their expenses - let me hazard a guess.

Most believed they had a system of allowances NOT expenses. They were encouraged by their whips and Commons officials to claim as much as they could to top up a salary held down by governments wary of public disapproval. Some found it easy to assemble receipts for many thousands of pounds - to cover large mortgages or the cleaning of moats.

Some found it harder - and claimed for everything from the sink plug to a fancy flat-screen TV.

A few simply invented their claims.

Today one of those who was found out is facing up to the prospect of a spell in prison.

No-one will ever know how many Eric Illsleys there really were.

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William Hague once described it as like a "ticking bomb" which it was his job to make sure did not explode. He was talking about Europe - the issue which destroyed the Thatcher and Major governments and which David Cameron told his party not to "obsess" about.

Tonight - when the Commons debates Europe - the bomb will not explode but the issue is once again obsessing some Tories. The irony is that it is the government which raised the issue again. They promised the electorate and their party a "referendum lock" to ensure that the government could not give away powers to the EU without asking the people for their permission. The problem is, to quote one Tory cabinet minister, "it's alienated Eurosceptics and alarmed Europhiles".

Eurosceptics are concerned that it will be a minister who decides whether a transfer of power to Europe is sufficient to trigger a referendum. Last night the Europe minister, David Lidington, told a meeting of around 50 worried Tory MPs that ministers' "wriggle room" would be heavily constrained - . What's more he said that ministers' judgements will be open to judicial review - in other words a court could be asked to determine whether they had behaved reasonably. That, though, made matters worse for many Eurosceptics.

A growing number of Tory MPs - led by Bill Cash and Bernard Jenkin - object to the increased power of judges and fear that the hard-won sovereignty of Parliament is being eroded - not just by the EU but also by the Human Rights Act and the creation of the Supreme Court. Thus, they regard relying on judges as even worse than banking on ministers and believe that the government's bill will undermine and not reinforce sovereignty.

In truth there is no longer a single coherent group that can be referred to as the Eurosceptics. Almost all Conservative MPs would describe themselves in that way including David Cameron, William Hague and George Osborne. There is a fight going on between veterans like Bill Cash and younger MPs like Douglas Carswell to lead the Eurosceptics. Nevertheless, since the election, a total of 45 Tory MPs have rebelled on one or other vote on Europe. Those MPs have been dismayed by the abandonment of Tory promises to repatriate powers from Europe, by the increase in the EU budget and Britain's role in the EU's bail-out of Ireland.

So, will the government be defeated tonight? That looks very unlikely. Defeat would require a full turnout of all other parties prepared to vote en bloc against the government and a rebellion of 43 Conservatives. However, Labour do not plan to back Bill Cash's amendments and will probably abstain. What's more, I have spoken to a number of Tory MPs who rebelled in the biggest Eurosceptic rebellion so far - in October when 37 Tory MPs voted against the increase in the EU budget - who do not plan to rebel tonight. They believe that today's proposal are not ideal and can be improved but are certainly better than the status quo.

This bill was meant to woo the sceptics. Instead the bomb is ticking a bit louder.

Update 13:40: The government is making a concession on the EU Bill which may reassure several of the Conservative MPs who are considering rebelling this evening. The government is re-writing the bill's explanatory notes to make it clear that parliamentary sovereignty does not depend on common law - in other words on a judge's interpretation not Parliament's will. Ministers see it as a technical point but some potential rebels see it as crucial

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It's official. There was no money left when Labour left office* but that had absolutely nothing to do with the party spending too much. That, at least, is the clear, unambiguous, unequivocal view of their leader.

Reading Ed Miliband's recent speeches I had assumed that that was the case but I wanted to be sure. So at his news conference this morning I asked Mr Miliband whether the deficit had anything whatsoever to do with the Labour government spending too much. His answer is not a news story as such but it is of huge long-term significance. (Incidentally, I posted earlier on what he had to say about bankers' bonuses.)

Labour's Blairite wing - led by the former PM himself and ably supported by commentators like John Rentoul of the Independent and Phil Collins of the Times - have argued that Labour needs to admit that it did too little to keep spending under control. In his book, A Journey, Blair recalled that he had "an interesting debate, not quite a contretemps" with Gordon Brown during the 2005 election over spending.

"My view was that we had reached the limit of spending. Even with the economy still growing I could sense that enough was enough."

He went on to criticise the way Brown had failed to tackle the deficit:

"If governments don't tackle deficits, the bill is footed by taxpayers, who fear big deficits now mean big taxes in the future, the prospect of which reduces confidence, investment and purchasing power. This then increases the risk of a prolonged slump. In my view, we should have taken a New Labour way out of the economic crisis: kept direct tax rates competitive, had a gradual rise in VAT and other indirect taxes to close the deficit, and used the crisis to push further and faster on reform."

Douglas Alexander has said recently that the party under Gordon Brown appeared to be in denial about the need for cuts - a criticism, admittedly, of presentation rather than policy. However, what links him and the Blairite critics is a political doubt about whether Labour can re-establish its economic credibility without admitting there was a spending problem.

Today Ed Miliband gave his answer. The last government was borrowing at acceptable levels - about 2% of national income - until the financial crisis hit, he said. That crisis and it alone caused the problem. He also pointed out - perfectly fairly - that at that time the Tories said they wanted to match Labour's spending and not cut it.

Labour's leader says the coalition are deceiving people about the past in order to justify mistaken policies for the future. He has taken one very important decision about the future. The party, under his leadership, will not argue that they could offer what Blair called in his book "smaller, more strategic government".

* , the former chief secretary to the Treasury's letter to his successor.

Update 22:02: Ed Miliband will make clear in the next few days that he agrees with those who say that Gordon Brown appeared to be in denial about the deficit. He will insist, though, that this was a presentational and not a policy failure. He will make clear that this does not justify what he calls the coalition's "deceit" that the deficit was caused by too much government spending.

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The new political year produces a timely reminder of a new political truism. Opposition politicians love to bash the banks while ministers struggle to do very much about the way they behave.

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This morning Ed Miliband called on the chancellor to repeat Alistair Darling's bankers' bonus tax, despite the fact that the former chancellor recently told a financial services conference that his tax was a "one-off", as intended, and did not work:

"I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and... will find all sorts of imaginative ways of avoiding it in the future."

The shadow chancellor Alan Johnson's reply to that is that he and his leader are proposing "a two-way bet" - in other words even if the bonus tax doesn't stop banks paying big bonuses (which it didn't last year) it will, at least, raise some much-needed cash and (he, not surprisingly, didn't add) make a good headline too. Indeed, Johnson got good headlines lastÌýyear when he said the banks should be taxed around £7.5bn more over the course of this Parliament.

Yesterday the prime minister was very very careful to downplay what government could and should do about bankers - warning of scapegoating one industry, stressing that it wasn't right to micro-manage the banks and the importance of a successful banking sector - while still insisting,

"I want to see socially responsible banks behaving responsibly, lower bonus pools than last year's, responsible levels of remuneration, proper agreements on lending to businesses large and small and being good citizens in the community."

Both Cameron and Miliband agree that the government should use its stake in RBS to keep bonuses in that bank down but both were utterly vague about what that means.

Ministers don't expect RBS to announce their bonuses until late February - after other banks do. If other banks hold back so will RBS. If they don't, the board - including the taxpayers' representatives on it - will be told that RBS bankers will be poached by other banks if they are paid too little. Ministers will be told, in other words, that they can choose between assuaging the public's anger and crippling RBS, or ensuring RBS can one day be sold back into the private sector at a profit but disappointing voters who want to see bonuses slashed.

That was true last year when Labour was in government and Tory and Lib Dem politicians surfed the wave of public anger about the banks. Now it's Ed Miliband's turn.

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