There are two big mistakes each side can now make. The Government would be in grave error if it did not acknowledge that Ed Balls has the power to land very damaging blows, especially as the cuts begin to bite. The Opposition would be in equally grave error if it did not recognise that it is now much more vulnerable from its economic and financial regulatory record, which in combination are a spectacular disaster, because the new shadow chancellor was the co- architect and chief draughtsman of all of it. This will make exchanges a lot more robust and a good deal more bitter.
Beneath this there are murky undertones. The Tories are in bed with the City and the banks, few of whose acolytes vote for any other party, instinctively, culturally or out of self interest. Labour was seduced by a burgeoning money factory which it did not understand and because of this, the potential collapse of which put it in mortal fear. Thus neither party really has the punch to do what has to be done to neutralise the source of a potential further and widely predicted crisis.
Only the Lib Dems are gung ho to deal with the banks and understand the reality that the importance of these largely insolvent institutions, though significant, is much overplayed. When the Banking Commission reports it will bring all this to the fore. That could be a Lib Dem moment. Especially for Vince. If the Lib Dems can show that by being in the coalition they are driving banking reform, which the Tories on their own would fudge, it will play as well for them with voters as their outright opposition to the Iraq war.
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