Inside Westminster: U-turns abound, as Osborne the political magpie steals Labour’s and Lib Dems’ best tunes

The Chancellor must resist the temptation to crow and claim victory over Ed Balls

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When George Osborne announced a surprise U-turn by capping payday loan charges, it looked as if he wanted to head off a looming defeat in a House of Lords vote. Yet a Treasury insider quipped: “There were two other reasons – Ed and Miliband.”

The Labour leader had targeted payday lenders in his highly effective campaign on the “cost of living crisis”. So Mr Osborne was doing what governments do when they are outflanked by the opposition – steal their best tunes.

There has been no cause for celebration in what has been a messy week for the Government. It also was made a surprise retreat on plain packaging for cigarettes – even though David Cameron hates nothing more than a “U-turn” headline, which smacks of weakness.

There was also a last-minute scramble to announce curbs on state benefits for Romanians and Bulgarians when they win the right to work in the UK from 1 January, an important date in the diary since the Coalition was formed. “They are like headless chickens in there,” one senior Tory reported after a recent visit to Downing Street.

Yesterday ministers were in a pickle over energy prices, two months after Mr Miliband pledged to freeze them if Labour wins the election. At the time, Mr Osborne accused the Labour leader of repeating “essentially the argument Karl Marx made in Das Kapital”.

Now the Conservatives have discovered the virtues of intervening in the market, too. First the payday loans cap, then energy companies suggested the Government was seeking something very similar to a price freeze in negotiations about switching some green and social levies from energy bills to general taxation.

The job of steadying this wobbly ship will fall to the Chancellor on Thursday when he delivers his Autumn Statement, the second most important event in his calendar after the Budget.

He will want the “big picture” on the economy to dominate but may struggle to shift the spotlight away from energy bills and the “cost-of-living” ground on which Labour wants to fight.

“If we try to match every Labour gimmick, we will lose the election,” one minister said. “We have to show we have a long-term plan for the economy and we are sticking to it.” All very well in theory. But in practice, the Tories look as though they cannot resist gimmicks of their own.

Mr Osborne will argue that his Plan A is working and point to its three unchanged elements – cutting the deficit, ensuring growth and helping business, and doing what he can to help hard-working people cope with living costs.

The good news for the Chancellor is that there will finally be some good news: the Office for Budget Responsibility will for the first time revise its projections for growth upwards, rather than downwards.

The bad news is that Mr Osborne will have a difficult balancing act. He must resist the temptation to crow and claim victory over his adversary Ed Balls.

He needs to play a longer game in his party’s interests. Triumphalism about the return to growth would not impress the public, who don’t “feel good” about the economy yet. More importantly, if voters feel the battle on the deficit is won, they might give Labour another chance.

There are signs that Mr Cameron has had to rein in Mr Osborne. “The job is not done; the past is now,” said one Cameroon. So the Chancellor will emphasise that there are more cuts to come after the 2015 election, notably as a result of his proposed cap on welfare spending. Message to voters: Labour would not finish the job – only the Tories can.

Mr Osborne’s problem is that Tory MPs are looking for Christmas pressies. Many in marginal seats are worried that Ukip will take enough votes off them to hand their seat to Labour. They want the Chancellor to start distributing the goodies now, rather than after 2015.

When he held his traditional “listening” meetings with Tory backbenchers ahead of the Autumn Statement, top of their wish-list was to keep down business rates (another issue on which Mr Miliband got in first). Tory MPs want to see a cut in fuel duty as well as a coherent response to Labour on energy prices.

But Mr Osborne will not have much money to spare. He has already got to fund the sweeteners announced at the Tory and Liberal Democrat conferences – a tax break for married couples and free school meals for all five to seven-year-olds, which between them will cost more than £1bn. A Santa Claus statement would undermine his “job not done” message.

Some Tories are chomping at the bit for tax cuts for “our people” – middle-income earners dragged into the 40p tax rate, who do not feel rich. These MPs will probably be disappointed. Mr Osborne judges that big tax cuts for this group would play badly with the hard-working people on the basic tax rate, who saw his reduction in the 50p top rate on incomes over £150,000 as proof that the Tories are “the party of the rich”.

Instead, the Chancellor is increasingly attracted by the Liberal Democrats’ signature policy of increasing the personal allowance, already due to rise to £10,000 a year in April, to take lower-paid people out of the tax net.

So attracted, in fact, that he is tempted to portray it as all his own work. Some Tories wonder whether, before the 2015 election, he might even go further than the £10,500 threshold sought by Nick Clegg.

Mr Osborne may gain a reputation as something of a political magpie, stealing a policy from Labour here and the Liberal Democrats there. He won’t lose sleep over that if it helps the Tories’ prospects  in 2015.

Tory backbenchers have a succession plan? Maybe

Conservative MPs cannot stop obsessing about how long David Cameron should remain leader of their party. It’s a sign of how little love there is for him among his backbench troops.

A small hardcore of critics has still not given up hope of ousting the Prime Minister by forcing a confidence vote if the Tories come third behind Ukip and Labour in next May’s European elections. Under party rules such a vote would require a request from 46 Tory MPs. If Mr Cameron lost, he could not stand in the ensuring leadership election.

But there wouldn’t be a leadership contest, according to the latest wicked whispers in Toryland. Their plan is to avoid the distraction of a full-scale campaign, taking weeks, by repeating what the Tories did in 2003: when Iain Duncan Smith was dumped, Michael Howard was elected unopposed.

It seems mad to even talk about it when Mr Cameron is seen by voters as more popular than his party and as a better prime minister than Mr Miliband. Yet one critic told me darkly: “If the party panics, nothing is impossible.”

So who would be crowned Tory leader this time? “Theresa May,” my mole replied without a millisecond of hesitation.

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