A positive step, but don't forget the hacking

The Home Secretary's announcement last week on counter-terrorism powers was a step in the right direction. It was also another step in the right direction for the Liberal Democrats as a serious party of government.

Of course they had pledged to get rid of control orders. And they haven't. Control orders have been re-badged - but they still remain. But they have been softened - and the government should be applauded for finding a middle ground between protecting the fundamental liberty of living in peace and security and finding a more liberal way of dealing with the small number of terrorist suspects who it is not possible to deal with through the normal procedures of the criminal justice system.

Many will be disappointed. Liberty accused the Government of "bottling it" on control orders. Maybe. But the Government actually deserves real credit here for marking a step change since the Labour days of complacently trampling over civil liberties. There was never a need to detain suspects before charge for in excess of forty days. The previous control orders regime was excessively restrictive. And in doing so, they created a grievance that is felt as much on the streets of Afghanistan and Pakistan as it is in the UK.

The Home Secretary's announcement was an important step in Britain moving in a more liberal direction. During the same week, we also saw more politicians and celebrities come out and say that they believed their voicemails had been hacked into by the News of the World. During the same week that the Government made it harder for councils to spy on ordinary people. But the News of the World investigation has focussed too much on issues of personality and vanity around Andy Coulson. Guilty or not guilty of knowing what was going on under his editorship, I don't think the liberal argument against the phone hacking scandal has been vociferous enough. It is completely unacceptable for there to have been any phone hacking by a major tabloid newspaper. Celebrities are not fair game. It is not okay.

And, call me an "establishment" liberal, but I have far less confidence in a tabloid newspaper wielding that power than I do over the difficult decisions that sometimes have to be made to restrict the liberties of a terrorist suspect (where, let's be honest, there is often considerable inadmissible evidence) in favour of protecting the freedom of a majority to live in peace and security.

And this is precisely the kind of liberal journey that the Liberal Democrats need to - and, to their great credit, are going on - in Government. A brave week. More progress. The coalition has taken a significant step in moving Britain in a more liberal direction than Labour had ever thought possible.

Two Ed's better than one?

So, Ed Balls is the new Shadow Chancellor. There appear to be rather sad personal reasons behind Alan Johnson's hasty departure. But whatever the reasons, it allows Ed Miliband the opportunity for a bit of a re-launch and a bit of a re-think. He desperately needs one. His first hundred days, always scrutinised by the pundits, were uninspiring and very forgettable. The media is labelling Ed as a man with nothing to say - there were brutally funny cartoons of Ed surrounded by students waving placards. Tellingly, Ed's placard was blank.

And this has been the mark of Ed's first few month's as leader. Labour has struggled to define itself as the coalition has charged around with reforms on welfare, health and education and the sheer scale of the cuts outlined in October's comprehensive spending review. But it really is about the economy, stupid, and Labour's position on the deficit and on spending cuts was fatally weakened by Alan Johnson's nice guy approach - he was a nice guy, but failed to land any blows on George Osborne because it was clear he didn't really do the numbers.

Ed Balls will surely be different. He has one of the most formidable ecomomic brains in Parliament today. For too long in this Parliament, Labour has struggled to be a credible and effective opposition. Balls, like Brown in his wait for the Premiership, has waited a long time for this. He wanted to be Chancellor of course, and lost out to Alistair Darling. He wanted to be Shadow Chancellor and was disappointed to be appointed Shadow Home Secretary. Whilst Ed Miliband has placed Balls in his own office and under his own media team, we can expect Ed Balls to bring much greater clarity to Labour's attacks on the economy. Ed Miliband has a chance to beef up his Opposition with Ball's talent deployed where it can make a real difference.

The first task will be to figure out a strategy to blunt Tory attacks that Labour are "deficit deniers". Balls and Miliband will need to craft a more credible line than they have so far where Labour went wrong on the economy. Of course, the bank bail-outs triggered a huge rise in borrowing. But Labour will need to be more honest about the role it played in the banks getting to that stage in the first place. When it comes to the economy, it's all about trust - and the Tory line that Labour are in denial is one that is sticking and needs to be addressed.

A further task will be for Labour to ensure that two Ed's really are better than one. There is great potential here for Ed Balls to undermine and overshadow Ed Miliband who has, thus far, been uninspiring. Ed Balls ran a superb leadership campaign over the summer - he has softened his image and shows great capacity for re-inventing himself. He reminds me of Michael Portillo, the Thatcherite villain of the left, who came back as Shadow Chancellor under William Hague's leadership and took the party in a bold direction, reversing - for example - Tory opposition to the minimum wage. Ed Balls has the capacity to make the same kind of break with Labour's past and, in doing so, escape the Brownite villain status that still hangs round his neck.

He's been waiting for this for so long - you have to expect Ed Balls to make the most of his chance. And if he does well and Miliband continues to falter, he may just have an eye on the leadership too.

Change that works for you?

The Lib Dems began 2011 with a dreadful poll. Just one poll admittedly, but it was the worst poll rating for the party since it was formed. Just 8% in a YouGov tracker poll for 2011. Another snapshot poll put them at 11%.

Whichever way you look at it, the Lib Dems are facing probably their most testing year since they were formed in 1988. They campaigned in the 2010 General Election with the slogan "Change that Works for You". Well, the country certainly got change. 2010 brought about the most dramatic change in British politics since the Second World War. A full coalition government; not the half-way house of the Lib-Lab pact in the 1970s.

Doing things radically differently in politics opens politicians open to huge political risk. That risk is harder to manage if the risk has, essentially, never been tried before. Britain's unfair electoral system delivers governments that make the public unused to parties working in partnership together. And with that lack of understanding comes the risk that the junior partner is seen as an annex to a larger party, irrelevant in its own status and purpose.

I don't think it is overdramatic to say that in 2011, the Liberal Democrats face a battle for survival. It is one they may well emerge from successfully, but the battle is there nonetheless. Nick Clegg took a gamble - and it's not yet clear whether the "Change that Works for You" that Nick Clegg has delivered for his own party will indeed be a change that works for the Lib Dems. Has he delivered his party into a fatal bear hug from David Cameron, in which the Conservatives can simply swallow up the Liberal Democrats? Would it matter if Cameron does swallow up the Lib Dems - can the Conservative Party safeguard the values that the Liberal Democrats have fought for since their formation in 1988 and in their various iterations before that? I believe it does matter that the Lib Dems survive.

I am in favour of the Lib Dems being serious partners in full coalition government. Nick Clegg promised on his first day as leader that he would be driven by a desire for "ambition and change". He has delivered both of those. Under his leadership, the party has grown in ambition and seriousness. The 2010 manifesto - notwithstanding a foolish promise on tuition fees - was the party's most credible manifesto promoted by a credible leader (gone were the wooly press conferences of the Charles Kennedy era when he struggled through a hangover to explain a local income tax).

Joining the coalition government was a necessary step in proving the value of three party politics in Britain. But the trouble with it is that three party politics does not exist yet. Britain still has a voting system that delivers two strong parties and leaves the smaller parties with a share of Westminster seats that barely does justice to their national support (how is it right that a party with 25% of the vote receives less than 10% of the seats in Parliament?). Clegg has gambled that he can create three party politics and win the voting reforms needed to make the Lib Dems more relevant and more powerful in the long term, by adopting a strategy which risks making the Lib Dems more irrelevant in the short term.

There are ways in which the risk can be managed. Supporting tuition fees was the right thing to do; it was wrong to have courted the student vote so transparently when it appears Lib Dem Ministers were always more open-minded than they suggested on the campaign trail. But they can't afford many more compromises - the decision on control orders, for example, needs to decide against them as a result of Lib Dem influence. It is, alongside tuition fees, one of the totemic Lib Dem policies that they need to be seen to deliver on in government. Otherwise, Lib Dem Ministers really are just window-dressing. Nick Clegg cannot afford another defeat on a core Lib Dem policy. Noone will vote for more pluralist voting systems if the coalition governments they produce are seen to be indistinguishable from a government where one party was in power.

But Clegg should also be given credit for what the Lib Dems have achieved, and tell that story more effectively. Many parts of the Lib Dem manifesto got into the Coalition Agreement and are now being implemented. But who knows how much of it? 65% of it is, and that should be part of the core narrative of the Lib Dems in government - otherwise they will keep being bashed for the compromises they will inevitably have to make rather than taking credit for steering the Tories in a more liberal direction in many cases.

In short, 2011 needs to be the year that the Lib Dems make this change work for them. Bold in standing up for core Lib Dem beliefs. Bold in telling a proud story of Lib Dems delivering and influencing change as a credible part of government.