Tory leadership plots thicken..

Good morning. Something's up. The Times (£) reports today that Theresa May was the victim of a dirty tricks operation at the weekend designed to scupper her nascent leadership campaign. Meanwhile the Independentclaims Philip Hammond was "slapped down" by Danny Alexander for airing his dirty laundry about defence cuts. Are these stories related? Let me suggest why they are, and why things might be about to get rather interesting - and fraught.

Suppose some senior ministers have concluded that the Coalition was a mistake and Dave isn't cutting it. Suppose too that several of them have been studying with great care the signs of discontent among backbenchers. Then consider the way the Home Secretary has been developing her profile, mixing uncharacteristically revealing interviews with sharp policy positions - attacking judges, toying with scrapping human rights laws.  That she has lost weight is deemed to be significant. MPs notice that every week they get an email from her aides inviting them to the "surgery" she holds for MPs at the far end of the tearoom every Wednesday at 12:30 after PMQs. In Downing Street they certainly have noticed that her relationship with the Prime Minister is more strained: Dave made her, but now she challenges him, openly. I suspect No10 thinks Sunday's MoS story came from Mrs May; she in turn blames others - perhaps Downing Street.

Mr Hammond too is showing an independent streak as one of the ringleaders of the National Union of Ministers against cuts. He is using his knowledge of the Treasury to score points against his old department, and his former boss George Osborne. Come to think of it, isn't it curious that his broadside against more defence cuts on Saturday was followed by Mrs May's tilt against the European Convention on Human Rights on Sunday? You could be forgiven for wondering if the two hadn't coordinated their efforts.

In fact, you might think that between them they have the makings of a natural leadership ticket, Mrs May as leader and Mr Hammond as her Chancellor. I know, I know, you will think me fanciful. But if had to bet, I would say that Mr Cameron is keeping a close eye on these two and asking himself if the danger to him comes not from the exuberance of Boris or the quixotic dreams of Adam Afriyie, but from the diligent, colourless, competent, steely loyalists around him who had once seemed to be so harmless. And if it were to emerge that Mr Hammond and Mrs May have been aligning their efforts in anticipation of a sudden unravelling, we should not be surprised. As I say, things could be about to get lively.

SIR DAVID UNDER FIRE

Sir David Nicholson makes the transition from the "man with no shame" to the "man with no answers" in today's Mail. His performance at the Health Select Committee yesterday did him few favours. Sir David insisted he had "no idea" of what had been happening in terms of neglect at Mid Staffordshire, but added that he was still the right man to lead the health service. Our leader argues that "Sir David must go" if justice is to be done. Writing for us, Conservative MP Steve Barclay asks why the chief executive has won such sustained political support:

"It is baffling that a close-knit group of former health ministers and front benchers from across the political spectrum appear to be acting as gatekeepers for those who are ultimately responsible for this unprecedented crisis of trust in the NHS."

UK DEFEATED AT ECOFIN

Well, that didn't go brilliantly. The UK lost the vote on the bankers' bonus ratio at the meeting of European finance ministers by the slender margin of 26 - 1, showing that referendum or not, British alliance building on the Continent continues unabated. The FT (£) reports that George Osborne will now hope to fall back on the relatively small wriggle room left by Germany and Italy, both of whom might be willing to back a system of calculating long-term pay which would push the limit up to 3:1. Intriguingly, the Sun reports that the British rescue operation was sabotaged by one leading European anti-capitalist who publicly backed the Chancellor while privately encouraging the EU plan. Who is this shadowy figure? Step forward, er, Dr Vince Cable.

BENEFITS POLICY IN "CRISIS"

IDS promised yesterday that while he would not tell the EU to "sod off", the choice words of James Duddridge, where migrant benefits were concerned, he would keep the message intact. Discussing the "crisis" which the benefits system finds itself in, he went on to lament "I have to sweep up after the lord mayor's show and deal with what has been left behind," the Guardian reports. The lord mayor's horses, in this instance, are clearly the Labour party. But, fear not. They are now veryresponsible where immigration is concerned. So much so that, as the FT(£) reports, Ed is going to be very tough indeed in a party political broadcast tonight in which he will propose a public sector English language test for migrants and a crackdown on recruiters only interested in foreign workers.

RETREAT TO VICTORY

Given Britain's martial history, all military cuts tend to touch on the symbolic, but yesterday's details of army reorganisation by Philip Hammond seemed particularly poignant. Particularly so was the news that the 7th Armoured Brigade, immortalised in popular memory as General Montgomery's Desert Rats, will be withdrawing from Germanyand will, in future, not have any tanks. Instead, it will be absorbed into an infantry unit. The Black Rats of the 4th Mechanised Brigade will also no longer be, well, mechanised, as they too lose their tanks. With more savings demanded from the MoD's budget in lieu of the welfare savings Mr Hammond would like, there is one big ticket item the Tories are unwilling to put on the table: Trident. As Mary Riddell notes, putting it in play might give Labour a way of differentiating their deficit reduction plan from that of the Coalition.

CHILCOT TO QUESTION OFFICIAL IRAQ ACCOUNT

When the Chilcot Inquiry reports later this year it will "challenge previous accounts of what happened" when Britain was committed to war in Iraq, according to a senior source cited by the Independent. While that will mean a nervous wait for many in Westminster, David Miliband's conscience is obviously clear. On The Agenda last night he laid the blame squarely at Dubya's door. Meeting him was "the worst thing to ever happen to Tony Blair", he insisted.

ON THE ROAD TO NOWHERE

Dave's idea of selling off motorways and trunk roads to private investors has made little headway since being announced last summer. The FT (£) reports that ministers have delayed plans to implement the scheme until after the next general election. It's understandable as motorists are pushed already and would hate the scheme, but however bad the gridlock on the roads, the gridlock in the "growth agenda" is starting to look worse. Easy to announce, hard to implement, the transformational projects the Coalition have put their faith in do not look like arriving in time for the next election, if at all.

PACKING NO PUNCH

Making its now traditional biannual appearance is the news in theGuardian that legislation will be introduced this year to mandate plain cigarette packets. Just like in 2010. And in 2008.

NO HAPPY HOUR FOR HANCOCK

The Sun's campaign to axe beer tax has gained its first victim. Mike Hancock has been banned from the Leopold Tavern in Southsea by the landlord who is under the impression that the MP backs the beer duty escalator. Mr Hancock has told the paper that he does, in fact, want to scrap the rises.

SAM CAM GOES RED

Sporting a cropped red wig, Sam Cam has taken to the kitchen, baking cakes in support of Red Nose Day. Our interactive guide to the Downing Street bakehouse will help you tell your Bodum 1928 Chambord caferiere from your John Lewis cookwear, and is available here. Sadly, her cooking will not be available at one of the "sandwich lunches" which the Times (£) reports Dave is planning for disgruntled backbenchers - it will be sold to Downing Street officials instead.

"MAN UP" AND DROP THE PHRASE

Kwasi Kwarteng followed Harriet Harman's lead in telling the Tory leadership to "man up" earlier this week, and he has upset the Guardian. "Feminist theorists such as Niobe Way think such language is bad for men and women, denying young boys in particular a way of dealing with emotions post adolescence," it warns, adding sternly "doing the right thing, after all, is the most gender-neutral thing you can do".

TWEETS AND TWITS

Diane Abbott with a mixture of Labour in-fighting and old-school spelling:

HackneyAbbott: "Frank Field MP raising the alarm about millions of Rumanian & Bulgarians he claims are poised to swarm into UK #depressingscaremongering" 
TOP COMMENT 

In the Telegraph

Mary Riddell - How Labour can fire a missile the Tories' way in this cuts war

Rupert Darwall - This green energy mirage will cost the earth 

Julian Hendy - This failing system must change

Telegraph View - Justice will not be done unless Sir David quits

Best of the rest

Matthew Norman in The Independent - Tories sick of the Prime Minister reckon May Day is fast approaching

Seamus Milne in The Guardian - Women are now to the left of men. It's a historic shift

Quentin Letts - Unsung heros? No, pen-pushers like Gormless Gus are the bane of modern life!

David Wighton in The Times (£) - Britain is losing the battle to save the City

THE AGENDA

TODAY: Prime Minister to host an Afghan Investment conference. Also attended by Development Secretary Justine Greening and Development Minister Alan Duncan. Treasury and Business Department to launch a joint consultation on consumer credit.

09:45 am: The Bank of England Governor Sir Mervyn King and deputy governor designate Andrew Bailey give evidence to the Parliamentary Commission on Banking Standards.

12:00 pm: Prime Minister's Questions. House of Commons.

04:00 pm: Europe minister David Lidington gives evidence to Lords EU Committee on the European Court of Justice. Committee Room 1, House of Lords,.

Pressure mounts on Osborne to take radical action..

Good morning. The advice keeps flooding in for George Osborne. We've already had pleas for fuel duty freezes, air passenger duty scrappage, new runways, welfare cuts and now today's Mail reports that Vince Cable is back on the mansion tax trail. At least Kwasi Kwarteng's advice at a Free Enterprise Group panel discussion yesterday was straight-forward. What the Chancellor needs to do is to "man up", he explained. Or perhaps Amber Rudd is right and what needs to happen is that the Tory backbenches "calm down". If only it was that easy. If the Coalition are going to stick with their ring fences in health, schools and aid, then meaningful cuts would have to come from welfare, a point Philip Hammond has been pushing. George's hands are bound where welfare is concerned because not only have the Lib Dems just blocked an attempt to find another £6.5bn of savings, as the Times (£) notes, but theIndependent also has Dave instructing "NIMBY" ministers to give up on the idea of benefits cuts at all.

Today's YouGov polling in the Sun tells a familiar story, with the Tories lagging Labour by nine points, stuck around 31pc. For as long as the economy remains in the doldrums, so will the polls. That's bad news for the Prime Minister as much as the Chancellor, and Paul Goodman writes on ConservativeHome this morning that the next leadership campaign is already under way. The situation is not helped by the fact that many of the growth initiatives the Chancellor has launched are yet to get off the ground. The FT's (£) forensic examination of the 'build to victory' campaign notes that neither garden cities (remember them?) nor public sector land release has got off the ground, despite the relative success of initiatives like NewBuy. The paper reports that the Chancellor's focus will now be on reviving stalled capital projects, with a possible extension of NewBuy to old homes. We do at least have one new policy to chew on in advance of the Budget, though. It is (drumroll) a tax break for amateur sports clubs, as we report. Crisis over.

Of course, it isn't only George feeling the heat, Steve Richards writes in the Independent that Ed Balls's failure to find the right words has put his position in jeopardy. The shadow chancellor will speak today on a report by Sir George Cox, former director general of the IoD, on overcoming short-termism in British business at an EEF conference (see the agenda for details), and will recommend that executive directors' pay be deferred for up to five years, according to the Independent. As I write inmy column, however, it is the Chancellor in need of new thinking:

"Senior Tories say attacking the Chancellor is a sign of weakness among the Prime Minister’s enemies. That, I fear, is delusional. Mr Osborne is a target because the only thing that matters is the economy, he is in charge, and he is running out of time and excuses faster than Britain is recovering."

FORMER HEALTH SECRETARIES BACK NICHOLSON

Despite real terms rises in spending for over a decade, Britain's health service still lags those of its European neighbours according to the Lancet. As we report, life expectancy for women is 14th of the 19 nations surveyed. The report is timely given that Jeremy Hunt will today claim that 30,000 Britons a year die too early thanks to the lack of comprehensive preventative care on the NHS. The Times (£) has him promising regular health checks for the middle aged. It sounds expensive. But when your budget's ring fenced, why worry?

While Mr Hunt plans his future, Sir David Nicholson will be attempting to save his. He appears at 9:30 in front of the Health Select Committee in the Grimond Room in Portcullis House. Five former health secretaries, ranging from Patricia Hewitt to Andrew Lansley, have backed Sir David in the Independent today. Their enthusiasm is not shared by Dr Sarah Wollaston, who writes for us:

"How can anyone be said to have 'command of the detail' yet overlook more than a thousand deaths at one of the hospitals for which they were responsible? When he faces the health select committee today, Sir David will have some explaining to do."

CONTRIBUTIONS WELCOME, BENEFITS TOURISTS NOT

Nick Clegg will tomorrow chair a committee attempting to find ways of limiting access to the benefits system to new immigrants from Romania and Bulgaria without breaching EU discrimination laws, the Guardianreports. The front-runner seems to be the introduction of a "contributory element" to benefit payments meaning only those with a record of tax contributions in the UK could claim. Of course, ending universality for immigrants would mean ending it for those born here, too. As the Mail asks, "why should a crackdown on migrants mean a crackdown on everyone in Britain?" As always, European law seems to have lent itself to some very unexpected consequences. The Times (£) backs the moves, however, arguing that "getting out what you put in is a basic and popular idea of fairness."

Labour's contribution to the immigration debate? A Yvette Cooper speech coming on Thursday and trailed in today's Guardian in which she promises tougher enforcement of the minimum wage "designed to create a fair framework that benefits domestic workers, prevents exploitation of foreign labour and reduces the demand for it." That's the problem with the immigration debate - marred by the language of reckless populism.

MPS BACK "SECRET COURTS"

Joined by several former Labour ministers, the Coalition comfortably won yesterday's vote on the Justice and Security Bill which provides for "closed material procedures" at judicial discretion. The Mail, whose line yesterday on the cost of the courts exceeding the cost of paying off claimants was rejected by Cabinet Office sources, today laments "ministers trampling on tradition of open justice". Lugging the Bill through the Commons certainly appears to have taken its toll on Ken Clarke's debating technique, as Simon Hoggart reports:

"Mr Clarke sounds as if he is in the pub, having a heated debate about whether that goal was offside. Sometimes when he disagrees with someone he doesn't have time to rebut what they say. Instead, he makes a noise I can only transcribe as 'Wurgghhh!' Which seems to be just as effective."

MAY TAKES ON ALL COMERS

Theresa May argues against violence towards women in a Sun op-ed today, but it's verbal violence towards home secretaries which will keep her busy this morning. Her most prominent row is with Lord Neuberger who has said that her legal aid reforms could "undermine the rule of law"by pricing justice out of the reach of many, her criticism of the judiciarywas "inappropriate, unhelpful and worrying", and that deporting terrorism suspects could mean withdrawing from the UN and ECHR (the latter of which was robustly defended by Ken Clarke yesterday). It isn't only judges who are upset, it's colleagues too. Mrs May's stance on visas for the boys (and girls) from Brazil has also drawn fire this morning. TheFT (£) notes that her plan to tighten the visa regime for Brazilian visitors flies in the face of the growth through trade agenda pushed by Mr Cameron and Mr Clegg on their visits to the country.

AUF WIEDERSEHEN, FRITZ

Philip Hammond will announce an acceleration of the withdrawal of the British Army from Germany today. The Guardian reports that a further 11,000 troops and their families will return home by 2016, generating a £1bn bill for new forces housing in the UK. The Defence Secretary will also announce the closure of several smaller bases in order to concentrate the army in several major regional hubs.

REFORMS ARRESTED

Plans to opt out of several EU justice measures could be blocked by Nick Clegg if the Conservatives do not agree to keep the European Arrest Warrant, we report. Theresa May has been pushing for the scrapping of the EAW, one of 130 measures under the axe.

CLEGG TAKES THE BLAIR ROUTE

An avowed atheist, Nick Clegg will send his eldest son Antonio to the Catholic London Oratory School, we report. Of course, Tony Blair did the same thing while in his "don't do God" phase. Perhaps, as with Mr Blair, this is the first step towards a Damascene conversion for Mr Clegg once he has left office.

TWEETS AND TWITS

Chris Heaton-Harris with a joke for the younger generation:

chhcalling: "New physics - The Gaga Law: (RAH)² (AH)³ + RO (MA + MAMA) + (GA)² + OOH(LA)² = Bad Romance." 

POLL WATCH

The Sun/YouGov: Con 31pc, Lab 40pc, Lib Dem 12pc, Ukip 12pc

TOP COMMENT 

In the Telegraph

Benedict Brogan - Osborne's in the crosshairs, and the trigger finger is twitching

Sarah Wollaston - Nicholson failed NHS patients: he must go

Philip Johnston - Why 'hi-viz' will make the police less visible

Telegraph View - A good balance between security and liberty

Best of the rest

Steve Richards in the Independent - As Osborne reels, why is Balls feeling the heat?

Rachel Sylvester in The Times (£) - Tories must see the conservative in Cameron

Polly Toynbee in The Guardian - Finally the Lib Dems have found the fire in their belly

Janan Ganesh in the FT (£) - Cameron is condemned to keep lurching to the right

THE AGENDA

TODAY: EU finance ministers to discuss banking bonus cap proposals at Ecofin meeting in Brussels. Justice Secretary Chris Grayling is to make an announcement by press release on legal aid.

09:00 am: Norman Lamb speech to Reform conference on social care. Conference opens at 09:00, Mr Lamb speaking at 09:30. Chartered Insurance Institute, 20 Aldermanbury.

09:30 am: Sir David Nicholson to give evidence to the Health Select Committee. Sir David will be quizzed on the report of the Mid Staffordshire NHS Foundation Trust public inquiry; Grimond Room, Portcullis House.

10:00 am: EEF National Manufacturing Conference, with speakers including Ed Balls and Lord Heseltine. Queen Elizabeth II Conference Centre, Broad Sanctuary.

12:30 pm: Philip Hammond oral statement on military bases. House of Commons.

03:00 pm: Evidence on the contamination of beef products given to the Environment, Food and Rural Affairs Committee.Grimond Room, Portcullis House.

05:00 pm: Lord Chief Justice gives evidence to the Joint Select Committee on parliamentary privilege. Lord Judge, Lord Chief Justice will be followed by Rt Hon Tom Brake MP, Deputy Leader of the House of Commons from 6pm Committee Room 2A, House of Lords.

06:30 pm: Royal reception for MPs and MEPs. Buckingham Palace, Buckingham Gate, London.

Confusion in the Tory ranks..

Good morning. The Tories look messy and sound confused this morning. It is difficult to discern a clear message from the centre that makes sense of what Mr Cameron plans in the aftermath of Eastleigh. Nick Robinson on Today has described various measures being considered to make it more difficult for other EU nationals to claim benefits here, and what's striking about them is the idea that we might become more European not less by adopting restrictions to entitlements that are more common across the Channel. A crackdown on non-UK residents who do not pay for NHS treatment will be announced before the Queen's Speech in May, as will "across the board" cuts to benefits for migrants, with local families also prioritised for council housing lists. But there is no indication about the Prime Minister thinks of the suggestions made yesterday by Chris Grayling and Theresa May: does he want to repeal the Human Rights Act? Or withdraw from the European Convention on Human Rights?

These are bombshells by any measure, lobbed into the debate by two ministers who have the ear and admiration of No10. Are they really acting independently? Were they encouraged to strike? And who thought it was a good idea to open a front on human rights on the day the Government needs Lib Dem votes in a tricky debate on secret courts in the Commons? Mark Field had it right yesterday when he talked of "incoherence". Mr Cameron said yesterday there would be no lurch to the right, yet his ministers seem to be lurching all over the place. Their ideas may be genius, but the impression given is of an uncoordinated response to a political challenge (particularly as the Romanian foreign minister has been assured that all is business as usual). Isn't politicians playing politics precisely what the voters of Eastleigh complained about?

The problems with the message don't end there. The Free Enterprise Group of Conservative MPs will give a presentation at the Institute of Economic Affairs at 9:30 this morning in which they will call on George Osborne to cut business taxes, notably capital gains tax for long term investors. Priti Patel writes for us that the Chancellor needs to "wake up" to the fact that high tax rates are strangling growth. Pressure is also mounting from elsewhere - Lord Forsyth, Nick de Bois, and Mark Field all criticised the current economic strategy at the weekend, Andrew Mitchell predicted that the Budget would bring internal dissent "to a head", while the National Union of Ministers now has two additional members in messrs Hammond and Cable. As the FT (£) notes, monetary policy is unlikely to ride to the rescue as the Bank of England's hands are tied by the inflation outlook. Every indication is that the Budget will plot a "steady as she goes" course. Every indication is that it will also leave some very unhappy backbenchers.

Finally, there's the Conservative press problem. The knives are out from both sides of the divide today. In the Guardian, John Harris suggests that conservatism and metropolitanism stand in ideological opposition, meaning any reform project attempting to fuse them is doomed to failure. Tim Montgomerie in the Times (£) calls for some TLC for the party Right. Tom Newton Dunn in the Sun foresees a Katie Price led revolution given public disgust with political manoeuvring. Our ownJames Kirkup captures the mood best of all. Haven't we all rather fallen out of love with Mr Cameron, he asks:

"David Cameron’s leadership of the Conservatives rests on a simple proposition to his party: follow me, because I am more popular than you; I understand the voters better than you; I get them, and they get me...But what if Eastleigh is actually about something bigger and more fundamental than policies and promises. What if it is about trust?"

VINCE, PRINCE OF DIVISION While the Conservative party experiences one of its periodic bouts of inner turmoil, it must be reassured to learn that at least one of its allies remains unwavering in his usual stance. Vince Cable did his usual turn in the name of Coalition solidarity yesterday. On the Sunday Politics he managed to criticise his party for its response to the Lord Rennard accusations, outed himself as one of the NUM's cuts refuseniks, criticised the lack of capital investment spending and demanded that Trident be cut in order to protect the welfare budget. Not bad for a morning's work. Interestingly, Vince also criticised the ring-fencing of departmental budgets, another sign that the Lib Dems would be prepared to deal on budget protection in areas which rile the Tory backbenches. The problem is, Dave won't budge.

Tory ire, meanwhile was directed elsewhere. Chris Grayling accused Margaret Hodge of using the Public Accounts Committee for "political grandstanding" and using her position as chairwoman as a "political instrument". But as Labour's Ian Lucas pointed out (see Tweets and Twits), what's the point of the PAC if it doesn't ask awkward questions at inconvenient times?

COST OF SECRET COURTS WOULD EXCEED SETTLING CASES

According to the Government's own report, paying off terrorism suspects who bring claims for wrongful detainment or torture against the state would cost £8m less than setting up secret courts in which to hear the cases, the Mail reports. The Commons votes on the Justice and Security Bill today with a large cross-party rebellion anticipated. One hundred senior Lib Dems have written to the paper to express their disapproval, although the party leadership backs the plans. Still, one member of the usual Coalition awkward squad is on-side. Dr Liam Fox has written a piece for ConservativeHome in which he describes the Bill as necessary to solve the "absolute car crash" currently under-way in the civil courts.

HEALTH TOURISTS COULD NECESSITATE ID CARDS

They're back. ID cards are one of those Westminster enthusiasms that refuse to die, and today's Mail reports that Frank Field and Nicholas Soames have both written to Jeremy Hunt calling for "entitlement cards" to prove that a person is eligible for free NHS treatment. Given that one of the policies on which Dave based his early leadership of the Conservatives was his opposition in principle to ID cards, it won't happen. One for the post-ECHR pile.

ALL HOT AIR

Tim Farron had a busy day yesterday. Having described Phillip Hammond's idea that welfare, rather than the armed forces, should be cut as "morally wrong" and "economically stupid", he pledged to join a revolt on a decarbonisation target for the power sector. Mr Farron will join a cross-party alliance in a Commons vote on the topic later this month, the Guardian reports. Onerous, nannying legislation forcing up the cost of electricity? It's ideas like that which win by-elections.

MITCHELL FOR EUROPE

There's a sense that Dave owes Thrasher given the manner of his leaving the Chief Whip's Office. Given that, it is not surprising to see Mr Mitchell, who shared a pub lunch with the Camerons near Chequers over the weekend, lined up as Britain's next European commissioner once Baroness Ashton finishes in her role as Foreign Affairs Envoy next year. Speaking on the Sunday Politics, Mr Mitchell wouldn't deny he had been offered the job.  

MID STAFFS REPORT "NEUTERED"

Civil servants protected Sir David Nicholson by "neuter[ing]" the Francis report, according to one of the academics whose work helped uncover the scandal at Mid Staffordshire NHS Trust. Professor Brian Jarman tells us that the final version of the report was "muted" as a result of the involvement of officials at te Department of Health. Sir David faces MPs on the Health Select Committee tomorrow.

GOVERNMENT TO SEE "WHAT WORKS"

A new body based on the National Institute of Clinical Excellence will review policy initiatives in local economic growth, crime reduction, early intervention and elderly health, the Independent reports. The What Works network will analyse policy effectiveness at home and abroad in an attempt to "crowd source" initiatives. Evidence based policy making? It will never catch on.

TWEETS AND TWITS

Ian Lucas appears underwhelmed by Chris Grayling:

@IanCLucas: "Grayling grandstands on HRA then criticises Margaret Hodge for doing her job. PAC exists to make the executive squirm." 

TOP COMMENT 

In the Telegraph

James Kirkup - Are we losing faith in David Cameron?

Boris Johnson - This cap on bankers' bonuses is like a dead cat - pure distraction

James Holland - We forget the RAF's heritage at our peril

Telegraph View - The policies are there but the message is lost

Best of the rest

Tim Montgomerie in The Times (£) - Cameron must find some TLC for the Right

Melanie Phillips in the Daily Mail - I know where the political common ground is, Dave. The question is: do you?

John Harris in The Guardian - No mainstream party truly understands conservatism

Tom Newton Dunn in The Sun - Rise of fruitcakes shows voters hate cynical Cameron & Co

THE AGENDA

09:30 am: Conservative MPs from the Free Enterprise Group present their ideas on how to tackle rising living costs and foster growth. Institute of Economic Affairs, 2 Lord North Street, Westminster.

Tory collapse, UKIP surge..

Good morning. If it hadn't have been for "the Conservatives splitting the Ukip vote", Nigel Farage reflected in the early hours, his party might have won. While the Lib Dems held Eastleigh relatively comfortably, it is the third place finish of the Conservatives which will cause real worry in the Tory party. David Davis set the bar low earlier this week - beating Ukip but losing to the Lib Dems would not be a disaster - and the Tory campaign has failed to clear that obstacle. In brief:

• Result: Lib Dems 13,342 (32pc), Ukip 11,571 (28pc), Conservatives 10,559 (25pc), Labour 4,088 (10pc)
• Swing: Lib Dem (-14.5pc), Ukip (+24.2pc), Conservative (-14pc), Labour (+0.2pc)
• Lib Dem majority of 1,771 (4.3pc), down from 3,864 (7.2pc) in 2010.
• Turnout 52.8pc
• If the result was projected forward into a general election, parliament would be: Labour 355, Conservatives 208, Lib Dem 41, Ukip 17, Others 29. An overall Labour majority of 60.

As Nigel Farage points out, there's a long way to go to the general election. He must also acknowledge that the Ukip vote is, in part, shaped by protest, a "plague on all your houses" mood that is gripping voters and benefiting the party. They are the new Lib Dems,the repository of our frustrations with the parties of power. Tory high command is clinging on to that explanation to avoid confronting some painful truths. The issues Conservatives will be considering this morning will include complaints about their organisation - the knives are being sharpened for Sayeeda Warsi by those who want to avoid blaming Grant Shapps. Expect calls for Lynton Crosby to be given greater powers. Tories might also conclude that David Cameron's Europespeech has made no difference at all, and the policy needs tightening with a referendum sooner than he proposes.

They will want to study too the impact the campaign and the Rennard affair will have on relationships at the top of the Coalition: Nick Clegg will be relieved, but furious with his treatment - actual and imagined - by the Tories,which will make the work of the Coalition harder: what impact will it have on Budget negotiations for example? First and foremost though is the matter of Mr Cameron's position. The result has moved us a significant step further towards a move against him before 2015.Others are needed too: a bad Budget, a dire result in May, no sign of economic recovery and the party's place in the polls stuck below 30pc.The threat of Ukip will heighten the desire of MPs in marginal seats to save themselves. If Mr Cameron is seen to be an albatross, anything could happen. But is it him? Or have we learned this morning that voters have had enough of all of them?

It shouldn't be lost amidst the Tory howls that Labour made no impression at all on the polling. Ed Miliband's ability to win voters in the south must also be in severe question after his party polled less than a third of the Lib Dem total and mustered only a 0.2pc swing.

Michael Gove has been sent out to do press duties this morning on behalf of the Conservatives. His line on BBC Breakfast was that Ukip's surge was a result of their status as "the obvious protest vehicle...[voters] wanted to register their hurt". He added on Today that voters "some people mentioned migration, but more mentioned the economy" on the doorsteps. "There's a sense that the establishment has let people down [but] there's also an acceptance that David Cameron's economic strategy is the right one," he explained. His line is a variant on Grant Shapps's thought overnight that "governments in mid-term regardless get a drubbing," which neatly ignores the fact that the Lib Dems are also in government. 

Over on ITV's Daybreak, Nigel Farage rejected the protest vote categorisation, claiming that "if people who have not voted for 20 or 30 years go out to the ballot box in a by-election and vote, that by definition cannot be a protest vote." He added that the Tories couldn't win in working class areas because they were led by "as one of their own MPs said, a bunch of posh boys who don't know the price of milk." Catty.

As for the Lib Dems, there's a sense of relief. Nick Clegg has said the party is now "on track for 2015", while Tim Farron has hailed a result which "completely change[d] the narrative of this parliament." The secret to Lib Dem strength in areas where they have sitting MPs has always been organisation on the ground. One of the reason the Tories were so keen on busing in MPs and staff from Westminster is that their local organisation countrywide has been neglected in favour of a belief that Mr Cameron's relative popularity will carry the day. Perhaps the real lesson of Eastleigh is that the footsoldiers, rather than the generals, can still win the battle.

VAN ROMPUY: BRITAIN ALONE

A British attempt to renegotiate British membership of the EU is unlikely to find a single supporter amongst leaders who "neither particularly like...nor particularly fear" David Cameron's plans to repatriate powers, according to Herman Van Rompuy. The Guardian reports that Mr Van Rompuy continued cryptically: "how to encourage a friend to change, if your eyes are searching for your coat?" Well, quite. It appears that Britiain is increasingly receptive to Mr Van Rompuy's measured disdain. A new poll of polls in today's Independent shows that since Dave's Europe speech, support for the "in" camp has climbed eight points to an average of 39pc.

Yesterday, Dave was in Riga where he met with other leaders from countries in the Northern Future Forum. He also praised Latvia's "attractive-sounding" flat rate tax system. A hint for George? Well, Fraser Nelson argues in his column for us, the Chancellor can move mountains if he can combine radical ideas, dull presentation and a willingness to escape the Treasury view:

"Soon after he was elected, Osborne met a fellow (non-European) finance minister and discussed the impending cuts: in total, just under 4pc of state spending. He asked his guest: what to do? Should I make these cuts up-front, or spread them out over years? He was advised to act quickly, and get it over with. 'But everyone in the Treasury says I should spread them out,' he replied glumly. His guest left with the impression that Osborne was a prisoner of his officials."  

TORIES AND LABOUR DRAGGED INTO GROPING ROW

No mention at PMQs and only a very modest disavowal of Nick Clegg's handling of the affair yesterday from Dave, it seems that the claims about Lord Rennard have put the whole of Westminster on edge. No wonder, claims whistleblower Alison Smith in the Independent, there will be complaints being made behind the scenes about senior figures in both other main parties.

Whatever the truth of that claim, the Lib Dem handling of the allegations comes under further scrutiny today. We report that former chief whip Paul Burstow was asked 21 times about the action he took when he received a complaint from Ms Smith during an interview on LBC. On 21 occasions he refused to answer. The Times (£) reports that six women have now contacted the police with information about alleged sexual misconduct by Lord Rennard. But what difference is this making on the doorsteps? In Eastleigh it, like so many Westminster stories, failed to excite the electorate at all, according to Michael Deacon.

A CLASSIC MISTAKE

The FT (£) reports that George Osborne is "scrambling" to water down the EU's new regulation limiting banking bonuses to a 1:1 ration with salary, rising to 2:1 with the approval of a super-majority of shareholders. One particular concern is that British domiciled banks, like HSBC, will be forced to implement the ratio limit to their global operations. In contrast, competitors headquartered outside the EU, like J.P. Morgan, would only need to apply it to their European operations, giving them a competitive advantage. Boris was also unsettled by the agreement, lamenting that "this is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire."

Europe isn't Downing Street's only banking headache. Despite a headline loss, RBS's underlying business model looks more robust than it has at any point since the crisis. Stephen Hester suggested yesterday that the Government might sell off its stake within two years. As we report, he was soon told in no uncertain terms that this wouldn't be the case - there's no exit plan at the minute. 

ALL CHANGE, BUT NOT AT THE TOP

A new contract system drawn up by a consortium of 20 hospitals in the south-west could be vital to allowing the NHS to achieve its savings target of £20bn by 2015, the FT (£) suggests. Staff conditions will be altered to include lower sick pay, shorter holidays and local pay rates for some consultants. While these are on trial in the court of medical opinion, the court of media opion continues to weigh the case of chief executive Sir David Nicholson. As the Mirror reports, he will continue in his job despite the Mid Staffordshire scandal, having received the backing of the NHS board. However, as we note, public anger is still strong, and he has become something of a lightening conductor for it. There has not exactly been a rush of senior politicians wishing to back him, and the Tories (including a Cabinet minister) who want to see him go may still get their way.

DON'T MENTION THE WAR!

William Hague has written to the Cabinet directing them not to discuss the legality of the Iraq war ahead of its 10th anniversary, the Guardianreports. Mr Hague argues that until Sir John Chilcot's public inquiry publishes its findings, any judgement would be premature. Predictably, the Lib Dems have no intention of complying. Nick Clegg is expected to make a speech on the war before the 19th of March anniversary date.

MAY'S DAY

Yesterday's immigration figures were a triumph for Theresa May. Both gross and net immigration fell, as the FT (£) reports, with a fall in net immigration of 34pc, down to 163,000 a year from 247,000. As Thomas Pascoe notes on Telegraph Blogs, for the first time, the Coalition target of a net figure is starting to look achievable. The crackdown on bogus student visa applications has had a dramatic effect of the number of new arrivals. Ukip are planning on making immigration the main plank of their northern campaigning in the year ahead. But on this measure, at least, the Coalition are already delivering.

DOCTORS 4 TAXES

Having seen the Institute of Licencing be rather rude about his minimum alcohol price plan yesterday, Dave will be grateful to receive the support of a group who believe he should go further today. The Alcohol Health Alliance, consisting of 70 medical colleges and campaign groups, wants to see a floor price of 50p per unit, greater than the 45p Dave is suggesting, we report. 

LET THEM EAT BURGERS

The middle classes can feast easy on their fillet steaks only because the poor are prepared to eat burgers, Mary Creagh has explained in an interview with The House. Without demand for the "cheaper cuts", the price of fillet steak would soar, she argued. As we report, Ms Creagh dabbled with vegetarianism when she was younger but was forced the abandon the experiment owing to a hatred of carrots, which explains some of the interest in the price of steak.

TWEETS AND TWITS 

Chuka Umunna over-shares: 

@ChukaUmunna: "First time I had to run off a TV set live on air tonight with a stomach bug- dodgy chicken kiev! Returned to complete the job" 

TOP COMMENT 

In the Telegraph 

Fraser Nelson - Act radical, sound dull - how Osborne can save the economy

Jeremy Warner - We can't afforf to make profit a dirty word

Graham Ruddick - Business rates freeze should be the cunning plan to save high street

Telegraph View - An idiotic plan to curb banker bonuses

Best of the rest

Philip Collins in The Times (£) - Together the prudent can beat the profligate

Samuel Brittan in the FT (£) - Revealed: a not-so-secret sterling devaluation plan

Simon Jenkins in The Guardian - On history, Karl Marx would agree with Gove, and so do I

Sean O'Grady in The Independent - Negative rates? All the more reason to save

THE AGENDA 

TODAY: Plaid Cymru Spring Conference. Welsh nationalist party Plaid Cymru hold their annual conference. Beaumaris Leisure Centre, Beaumaris, Anglesey.

09:30 am: Bank of England releases its lending to individuals study for January.