Margaret Thatcher's ghost still sets agenda in divided Britain

Inside Westminster

Thatcher’s inheritors: the Camerons in Cornwall (Getty Images)

Even after her funeral, Baronness Thatcher shapes the political debate – the ultimate tribute. The Conservatives agonise over whether to be “Thatcherite” or “Thatcher-lite”. David Cameron is stuck awkwardly in the middle, being pulled in both directions.

In a speech yesterday, Ed Miliband quickly disproved Mr Cameron’s claim that “we are all Thatcherites now”. That was true of New Labour, but the label does not fit Mr Miliband’s party. He argued that Britain should abandon the failed orthodoxies of the 1980s, saying it needs “a new economic settlement” just as much today as when Baroness Thatcher came to power in 1979. Mr Miliband was speaking at the Scottish Labour conference in Inverness, a reminder that another Thatcher legacy was a North-South divide both economically and politically.

It is still with us. A new study by Sheffield Hallam University found that the welfare cuts since the Coalition was formed in 2010 hit towns and cities in the North five times as hard as in the Conservatives’ heartlands in the South.

Sensible Tories fret about the party’s predicament in the North at the 2015 election. The rise of the UK Independence Party and likely transfer of 2010 Liberal Democrat voters to Labour could tip the balance in several Con-Lab Northern marginals in Labour’s favour.

Mr Cameron’s “40/40 strategy” to win a majority next time is based on holding 40 marginals and gaining another 40. On paper, 10 of the Tories’ most winnable 40 seats held by other parties are in the North. Another nine of the most vulnerable Tory-held seats are in the region. Although many town halls in the region are a Tory-free zone, Mr Cameron’s party cannot afford to write off the North.

Not that the Prime Minister would want to. He has had the most difficult task of the party leaders since Lady Thatcher’s death: being respectful and statesmanlike, which he is good at; embracing her to reassure traditional Conservatives he is “one of us”; and yet distancing himself a little because she remains a divisive figure for many of the voters to whom he must appeal in 2015.

Labour figures, including Tony Blair, are convinced that Mr Cameron has taken a right turn on the road to 2015 as he plays up issues such as immigration, welfare and Europe. Tory strategists insist that “the hard issues play well up North”. Welfare is potentially Labour’s Achilles heel and Tory MPs say the Government’s £26,000 annual cap on benefit payments for a family is loadsamoney to workers in the North struggling on incomes much lower than that.

Yet the Tories should mind their “skivers versus strivers” language (another way they “divide the country”, Mr Miliband argued yesterday). Not all Tories share George Osborne’s enthusiasm for tough language on welfare. Allies say that Iain Duncan Smith, the Work and Pensions Secretary, “hates it”, believing it can alienate people temporarily on benefits through no fault of their own.

The Cameroons deny the charge that the Prime Minister is drifting to the right, saying he remains wedded to the centre ground. “The reason we didn’t win outright in 2010 was because we didn’t detoxify the party enough,” one said. Back to Lady Thatcher again, the personification of “the nasty party”.

Labour cannot crow. It faces a similar problem in the South, the region to benefit most from the Thatcher revolution. Fifteen of Labour’s most winnable 40 seats are in London or the South. Mr Miliband needs to relieve what in the 1980s was branded “Labour’s southern discomfort”.

Although Labour is expected to regain control of some county councils in the North and Midlands in the May 2 elections, it is unlikely to make big gains in the South. Its performance there in parliamentary constituencies it needs to win in 2015 will be worth watching; I suspect the verdict may be “not great”.

Lady Thatcher won a mandate in 1979. If Mr Miliband wants to transform the country again, he will need one too. “One Nation Labour” is a neat slogan. Its value was enhanced when we were reminded how Lady Thatcher divided the country. But policies and leaders, not slogans, win elections (or lose them).

Labour does have policies but its overall picture remains fuzzy. Many of its own MPs believe it can’t hide behind a slogan for much longer. One lesson Labour could usefully learn from Lady Thatcher is that she told Tory candidates to boil down their doorstep message to 50 words. I have no idea what Labour’s would be.

The Tories are convinced that Labour’s task in the South may not be made easier if, as expected, Mr Miliband goes ahead with a plan to promise at the 2015 election to spend more than the Conservatives. The Tories are rubbing their hands with glee. Yesterday, after The Independent disclosed the plan, Tory HQ quickly dusted down its “lurch to the left” file.

So Labour accuses the Tories of “lurching to the right”, while the Tories claim Labour is “lurching to the left”. It might just leave a nice gap in the market for the man in the middle, Nick Clegg. No one is accusing him of lurching anywhere.

The Liberal Democrats may lose some seats in 2015 but could still hold the balance of power. In private, wise Tory and Labour heads nod towards another hung parliament.