Ed Miliband's beleaguered leadership of the Labour Party may not survive much longer but his forthright honesty in facing up to the inevitably gloomy economic backdrop to the 2015 General Election campaign should be of lasting benefit to the Labour Party.

His attempts this morning to breathe fresh life into his leadership have already been roundly mocked and his Radio 4 interview did sound rather desperate as he talked about his "inner belief' and dipped into the banal lexicon of American politics, tossing around phrases such as "Bring it on". If you look beyond that to the substance of what he said you can see the battle lines being drawn up for the next election. I don't think anything he said will unduly worry the Conservatives but the Liberal Democrats could have a real problem on their hands if Labour sticks to the Miliband line under a new leader.

His analysis of the most likely economic scenario as we go into 2015 is in line with most forecasts and his response to it is actually quite astute.

The choice in 2015 will be a grim one, rather as it was in 2010. The hopes of the Coalition Government that by 2015 the worst of the deficit cutting would have been done and that we would be seeing the first signs of the spring of economic recovery have been dashed by the Eurozone crisis. This is a far bigger blow for the Liberal Democrats than the Tories. The Lib Dems pinned their most fervent hopes on being able to detach themselves from the Tories in 2015, enabling them to say that the nasty job of cutting the deficit and setting the country back onto the road to recovery had been done. This would have given them a platform to boast about their part in securing that recovery and to set out a manifesto for the future that would offer the country undiluted Liberal Democracy. That hope has now gone.

The trap waiting for Labour
The next election will be highly polarised with the Tories arguing that the austerity programme needs to continue unabated and that they are the party to deliver it, especially if liberated from the (only mildly) restrictive confines of the Coalition Government. The trap for Labour would be to pretend that it can make all manner of promises about new spending which could not be delivered and which would merely remind the electorate of the economic disaster area that surrounded the previous Labour government. Ed Miliband has started to steer Labour away from that trap. If Labour can develop a coherent set of policies around a "fair austerity" theme then it could have the potential to win over many disillusioned Liberal Democrat voters.

It is hard to see the Liberal Democrats being able to counter the painful squeeze on their vote that an austerity election fought on these lines would exert. There is no obvious locus for them in a debate between Labour and Tory on these lines. To most people they are not a party with a strong, distinctive economic vision and are not going to be able to develop one while they are tied into the Coalition. One of the cleverest things that David Cameron did when forming the government was to give the Lib Dems the Financial Secretary to the Treasury knowing that this post would require a Liberal Democrat minister to take the lead in proposing and defending the deep cuts in public expenditure. The Lib Dems didn't help themselves by appointing David Laws to this post. His enthusiasm for swinging the public expenditure axe made George Osborne look positively restrained. Laws replacement Danny Alexander hasn't done much better as he has failed to develop a distinctive Lib Dem approach to the task, leaving his party with no option but to defend the Tory cuts at the next election.

The Tories also out manoeuvred the Lib Dems on tuition fees where they managed to saddle poor Vince Cable with the job of proposing the massive U-turn in Liberal Democrat policy on tuition fees. There is no escaping from taking responsibility for that despite attempts by some leading Liberal Democrats to argue retrospectively that the higher fees and the new system that supports them is fairer: that isn't what they told people at the last election.

This wouldn't be so bad for them if they were achieving some of their other cherished objectives such as political reform or a closer relationship with the European Union but these have all blown up in their faces.

Nick Clegg's rash charge into a referendum on the Alternative Vote was a disaster as it enabled the electorate to punish him for the betrayal over tuition fees. I don't hold out much hope for genuine reform of the House of Lords being achieved in this Parliament either.

Eurosceptic stance has boosted Cameron
Then there is Europe where Cameron has seized the first real opportunity that came his way to play the Eurosceptic card - and with some significant effect. The right of the Tory party, restless over what they were starting to see as too many concessions to their coalition partners, are now suddenly held in the palm of his hand. The wider electorate has also warmed to his Eurosceptic approach as most people fear being dragged too deep into the Euro crisis while we are still struggling with severe economic problems of our own. It has also given Cameron and Osborne a very convenient fig leaf to use as they will be able to shift some of the blame for the consequences of their draconian economic policies onto Europe while saying they are fighting the UK's corner for all they are worth.

Today might not mark the rival of Ed Miliband's leadership but he has made a good start on positioning Labour well for the next election.       

Vince Cable is back. After a torrid induction as a Cabinet minister leading to one of those insidious Westminster whispering campaigns about how he was vulnerable should there be a reshuffle in the near future, he came storming back this weekend with interviews in the Mail on Sunday and the Financial Times.

Cable's troubles started when it fell to him to justify in Parliament the Liberal Democrats' abrupt U-turn on higher education tuition fees. Then, just as that row was at its height, a rather pointless stunt by The Daily Telegraph induced him to say that the government was declaring war on the Murdoch empire. This came in the wake of his decision as Business Secretary to refer News International's bid for total control of BSkyB to Ofcom. These remarks resulted in the responsibility for dealing with the bid being passed to Jeremy Hunt on the grounds that the final decision had to be made on strictly legal grounds, unclouded by political views. Oh, how absurd that seems now.


If Cable hadn't referred the bid to Ofcom for further investigation then the BSkyB deal would have already been history and Murdoch could have sat smugly in his hugely enlarged castle while the storm raged outside. I doubt very much whether we would be where we are now with the intense scrutiny of his UK operation.

Casino banks back in his sights
Cable has made it clear that he feels entirely vindicated in his tough stance on Murdoch and News International and my guess is that most of the public agree with him. Sensing this, he has come out fighting on several fronts and has returned to one of his most popular causes - banking reform.

He has gently questioned why the Independent Commission on Banking under Sir John Vickers was so dismissive of his proposal for a complete separation of wholesale and retail banking. He has been clever in his approach, avoiding the blunt language that got in him to hot water over News International, but succinct enough to rattle a few cages and put down a clear marker for the debates to come in September when the ICB's final report comes out.

The debate on banking reform will be all the better for the participation of a reinvigorated Vince Cable.

Change can be painful but is sometimes very necessary. We all know that our political system is broken: electors are disconnected, cynical and untrusting of politicians and the systems and institutions in which they operate. All the parties at the last General Election apparently embraced reform. Now it seems that they are all rapidly finding reasons to run away from those commitments now they have seen the potential consequences. I can think of few things - apart from another major expenses scandal - more likely to turn voters aways from the major parties and from engaging in the political process than a conspiracy of inaction on reform among the political establishment.

A huge amount of broadcast time and newsprint has been expended since the end of last week analysing the election and referendum results and, in particular, what they mean for the Liberal Democrats. Quite alot of it has missed some key points, not least in the almost exclusive focus on the proposed NHS reforms as the issue that the Lib Dems can use to put some distance between them and the Conservatives. I'm not sure it will be that easy for the Lib Dems to claim credit for any changes to NHS policy, partially because Labour is already moving effectively to set the pace and partially because there are many  vocal Tory critics of Andrew Lansley's proposals too. For this reason I can see the breaking up of the major banks emerging as one of the key distinguishing issues between the Coalition partners.

The plans published yesterday by Liberal Democrat MP Stephen Williams - with help from corporate finance specialists Portman Capital - for a controlled giveaway of shares in the nationalised or part nationalised banks have at last stirred up the otherwise dormant debate about the government's exit strategy from ownership of banks. However, they are disappointing and fraught with potential problems.

My disappointment is partially the idea itself - a glorified giveaway - and partially its source, the Liberal Democrats.

The idea
A straight share giveaway would obviously just be a way of putting cash in people's pockets and might make them feel they had got a little something back from the banks for the huge pain they caused most of us but would achieve very little beyond that. This proposal is rather more complicated than that, however, as it seeks to put in place measures to ensure that the government recovers the £66bn it forked out on our behalf to rescue RBS and Lloyds. The trouble is the mechanisms needed to achieve this create complexities that most people will not understand. This will almost certainly lead them into the hands of financial advisers who will devise schemes for extracting cash from the shares for a fee. This already looks like a mis-selling scandal and regulatory disaster in the making.

There is a lot of naive talk around this scheme about creating a shareholding democracy, a rather barren political concept dragged up from the 1980s. It won't work. One of two things will happen. Either the scheme will be drawn up in such a way that it will be so hard to sell the shares that most people will just chuck the share certificates in the proverbial bottom draw and forget about them, or ways to sell them will be devised and the majority of shares will end up back in the hands of institutional investors. My money would be on the latter.

The missed opportunity
My real disappointment is in the Liberal Democrats for allowing this ill-formed idea to get this far with their name attached to it. It is a massive missed opportunity for them.

First, there is nothing I can see in it about addressing the structure of the banks in advance of implementing any exit strategy. Should these two institutions be broken up? Are they fit for purpose, by which I don't mean fit for a return to what they were before but fit for a new financial order where financial institutions are more responsive to the diverse needs of their customers and where they can't just shut up shop when the easy profits are no longer there? Neither of these questions seems to have been properly investigated.

Second, where are the imaginative solutions that you might have once expected from a party like the Liberal Democrats? Why no talk of mutuality? Where are the community banks the third party used to promote? These ideas briefly surfaced in the run up to the election campaign but now seem to have disappeared once again as the Liberal Democrats take on an old Tory policy and dust it down. 

One of the most interesting features of British politics since the General Election has been the almost total lack of coherent opposition to the Coalition government. Of course Labour politicians have shouted at it alot but it has rarely amounted to much more than knee-jerk opposition to everything that it says and does: you get no real sense of any alternative course of action.

This sad state of affairs is largely down to Labour's ludicrously cumbersome and extended leadership election process which has had the effect of paralysing the official opposition for over four months. Fortunately, this finally comes to an end at next week's Labour Party conference, after which we can expect real politics to resume.

This phoney war contributed to the rather empty feeling after Nick Clegg's speech to the Liberal Democrat conference yesterday which predictably lacked policy substance but also lacked any real passion. True, he managed a fair bit of vigour when attacking Labour for the appalling economic (and for liberals, civil liberties) legacy it left but we all know that the main  culprits in that department have all departed the political stage so it felt contrived. He couldn't attack the Conservatives as that would have looked foolish, even if his party tried to hand him some tools for that job earlier in the day by voting against the government's education policies. So without any political enemies in his sights, Clegg had little to offer beyond an extended rallying call to his troops to hold their nerve when the flak really starts flying when the spending review is unveiled.

Now, I know many Liberal Democrats will say this is a typical media misunderstanding of the new politics of co-operation and consensus and that we must learn to expect politicians to spend more time looking for where they agree rather than disagree but it does seem to be a world extraordinarily bereft of passion and belief. Labour's lazy negativity since the election has allowed this thesis of co-operation rather than confrontation to gather credibility and for the assertion that it is what the public wants to go almost unchallenged. I don't think it will hold for long once Labour has a new leader and once the public starts to feel the effects of the accelerated deficit reduction programme.

I think some of the Coalition supporters have mis-read the increasingly indecisive election results (at least in terms of the share of the popular vote) over the last 40 years as an expression of a public desire to see greater co-operation between parties and consensus. It isn't. Most people have voted for parties that offer something they believe in and which represent values that are very distinctive. The consequence of that diverse and divided electorate was finally realised in May when we woke up to a Parliament where none of the parties has a majority. Against a background of economic crisis, a stable government was essential and there was only really one serious option for achieving that, a point that Mr Clegg made well yesterday. The challenge of coalition politics is to forge a workable compromise from different policies and different political beliefs, not to pretend that such differences are not important or even that they no longer exist.

Starting next week, we will see who is right on this. Once Labour has a new leader, the phoney war will be over. It will obviously be a very close contest and whoever wins will have a very tough job rebuilding a party drained by 13 years of increasingly controversial government but they will almost instantly sharpen up Labour's attacks on the Coalition. They will also offer David Cameron a real target to shoot at when he stands up in front of the Conservative conference the following week. I expect by the time Parliament returns later in October it will feel much more like real politics has resumed. 

John Thurso, the Liberal Democrats' business spokesman and their representative on the key Treasury Select Committee, has joined the All Party Parliamentary Group on Insurance & Financial Services.
He has the rather strange job of 'shadowing' his Lib Dem colleague Vince Cable from the government benches where the Liberal Democrats now sit. At a meeting in the National Liberal Club last night, he made it clear that he sees his role as supporting Mr Cable while making sure that some of his party's key pledges on on better support for smaller businesses are still on the Coalition's agenda. In particular, he stressed the need for regional enterprise funds that are not dependent on the current banking sector for making judgements on the viability of business plans as at present. Mr Thurso also explained his enthusiasm for the creation of regional stock exchanges which he beleives could help small to medium sized firms expand by raising equity rather than become reliant on debt.
He also set out his view that part of the problem in the banking sector is the clash of cultures between investment banking and retail banking which is why he is a keen supporter of the separation of the two. His concern wasn't so much about so-called casino banking, a view he dismissed as rather superficial, but more the simple fact that the dominance of investment banking (especially in terms of profits) in some of the large banking groups has sidelined the retail side and diluted their expertise in the small business sector.
John Thurso is one of the more colourful members of the House of Commons - the first hereditary peer to sit as an MP, a successful businessman and probably the only MP to have appeared naked on television. The Wikipedia entry fills in some of the gaps.
The current list of members of the All Party Group  is here: APPGmembers 07:10.pdf

It was former Prime Minister Harold Wilson who first said that a week was a long time in politics. He was stating the obvious but has there ever been a week in British politics more packed with drama, the unexpected being trumped the next moment by the unimaginable? Not in my lifetime.