At the Budget, Clegg will be back at Osborne's side - for his share of the credit

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"I would love to take everyone out of their first £10,000 of income tax, Nick…We cannot afford it,” David Cameron told Nick Clegg in the first of three TV debates between the party leaders at the 2010 election.

How times change. When George Osborne presents his pre-election Budget on Wednesday, he will say he can afford to raise the personal allowance beyond the £10,600 figure due to take effect next month. The Chancellor could even increase it as high as £11,000, some £1,000 higher than the Liberal Democrats’ flagship pledge at the 2010 election.

Mr Osborne won’t lose any sleep over ruthlessly stealing the policy from the Conservatives’ coalition partners.  A tax cut for 27m people is a nice headline with an election just seven weeks away. He may also reiterate the Tories’ plans to raise the allowance to £12,500 and increase the threshold for the 40p tax rate to £50,000 by 2020.

When the Chancellor made his December autumn statement, the other big setpiece in the Treasury calendar, it was billed as the last major economic event before the election. But Mr Osborne and Mr Clegg then agreed that a thin Budget would be a wasted opportunity, so Wednesday’s package will feel like a normal Budget after all.

Mr Osborne will have an estimated £5bn to play with due to lower inflation and higher tax receipts, with Office for Budget Responsibility (OBR) likely to raise its growth forecast and lower its borrowing estimate. The Chancellor might be tempted to ease austerity a little.  That could deprive Labour of the ammunition handed it by the OBR, which said the Chancellor’s planned cuts in the 2015-20 parliament would take public spending as a percentage of GDP to its lowest level since the depression-scarred 1930s.

 

The balancing act for Mr Osborne will be announcing some pre-election goodies without undermining the Tories’ central election message: that there remains a big job to do on the deficit, and only they can be trusted to finish it. But goodies there will be. In the last-minute negotiations before the Budget, the once-spendthrift Lib Dems claim they are ones insisting that any giveaways are fully funded.

Mr Clegg stayed away from Mr Osborne’s December statement to distance himself from the Tories. Although he doesn’t admit it, I suspect he knows it was a mistake. As the Deputy Prime Minister often tells his own party: you cannot be in government and opposition at the same time. So Mr Clegg will sit alongside Mr Osborne in the Commons on Wednesday.

Although the Lib Dem leader will be quick to trumpet the higher than expected allowance, he knows his party is unlikely to get the credit.  Opinion polls show that the public recognise it as a Lib Dem policy, and yet the party reaps no benefit. The problem is that voters see the Government as “Cameron and Osborne”, not “Cameron and Clegg” or “Conservatives and Lib Dems.”

Mr Clegg’s party has  been an equal partner on policy inside the Coalition, enjoying much more influence that their 57 MPs warrant, given that the Tories have 302. They have had some big wins on the tax allowance; the “pupil premium” for disadvantaged children; childcare; pensions and apprenticeships and have stopped the Tories from making deeper cuts to working age benefits.

However, the Lib Dems remain haunted by the Coalition’s decision to triple university tuition fees, which broke their 2010 pledge to scrap them. “We are remembered for the one thing we didn’t deliver, rather than all the things we did,” sighed one Clegg aide.  There is also immense frustration that the party is being written out of the media script. There are too many interesting new kids on the block –the Scottish National Party, Ukip and the Greens.

However, Lib Dem activists are in a surprisingly upbeat mood  at their spring conference in Liverpool this weekend. Their ground troops are confident they will do better in their 57 seats than the party’s dismal national poll ratings suggest.  No one knows how many seats they will hold. Estimates inside the party range from 20 to 40, the difference between disaster and triumph.

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In 1990, Margaret Thatcher described the Lib Dems as a dead parrot. Other parties hope that will come true on May 7 (PA)

In his speech on Sunday, Mr Clegg will tell his party to be proud of its achievements in government. He will reiterate his pitch that only the Lib Dems can ensure a “stronger economy and fairer society.” Some in his own ranks believe the party needs a more distinctive appeal and should not merely “split the difference” between the Tories and Labour. Mr Clegg is adamant the centre ground is the right place to be as Labour veers left and the Tories tack right.

Tim Farron, the former Lib Dem president and front-runner to succeed Mr Clegg as leader, said the party deserves only “two out of 10” for the way it has handled the politics of coalition. Clegg allies regard that as harsh but admit Mr Farron has a point about the challenge facing the smaller party in any coalition. David Laws, the Schools Minister in charge of the Lib Dem manifesto, told me yesterday: “There is a gap between the massive amount we have achieved in government and the public’s understanding of it. We have to think between now and election day how to get that over. We also need to think, if we are in coalition after the election, how you not only deliver good things but make sure the public knows it.”

In 1990, Margaret Thatcher described the Lib Dems as a dead parrot.  Other parties hope that will come true on May 7. But the Lib Dems are still alive and kicking; reports of their death have been greatly exaggerated.

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