Andrew Grice: Bruised and battered, Clegg will struggle to sell Coalition relaunch

Inside Westminster

Two years on from the Coalition launch, Nick Clegg's local election losses will hurt his party much more than David Cameron's Tories (PA)

Yesterday's election results make it a very unhappy anniversary for the Coalition, formed after the general election, held two years ago tomorrow. They are already creating tensions inside the Coalition, with immediate demands by Conservative MPs for a lurch to the traditional right-wing policies they feel have been sacrificed on the altar of coalition.

Conversely, Nick Clegg faces pressure to distance the Liberal Democrats further from the Tories, amid fears that his party's roots are being poisoned by the Coalition. The Lib Dems' town hall losses will hurt them much harder than the Tories' defeats hurt David Cameron's.

The two biggest parties are used to the pendulum swinging against them locally when they enjoy national power. The mid-term blues are a new and bruising experience for a third party which has built its parliamentary gains on a now crumbling local authority base.

It will not be easy for Mr Clegg to give much comfort to the internal critics wondering whether the party would have approved a coalition with the Tories if they had known the pain of defeat it is experiencing this weekend. Probably not. But Mr Clegg's room for manoeuvre is limited.

Since the turn of the year, he has adopted a strategy of "differentiation", claiming credit for Lib Dem measures such as the rise in tax thresholds, while distancing his party from things it would not have done, like cutting the 50p top rate of income tax. His critics will not detect much payback at the ballot box.

The Lib Dems did better in areas where they have MPs and where they were up against the Tories, where the "differentiation" may have helped. But Mr Clegg's party was exposed in the North; where there were no Tory councillors to vote against, the only way to kick the Government was to put the boot into the Lib Dems.

It will be hard for Mr Clegg to "differentiate" further, as more public divisions with the Tories would risk the Government looking even more shambolic than it has since last month's Budget. Instead, as revealed here two weeks ago, Mr Cameron and Mr Clegg will make a joint post-election appearance designed to show the Coalition has not run out of steam or lost sight of its core purpose: reducing the deficit left by Labour. After fighting each other in the elections, the two leaders acknowledge they need what their aides call "a proalition period".

The worry for Mr Cameron is that the Tories' performance in Thursday's contests was almost certainly made worse because of the "omnishambles" of the past six weeks – a botched Budget; a "cash for access" Tory funding row; a needless petrol pump panic; a double-dip recession and fresh evidence of an unhealthy relationship between the Tories and Rupert Murdoch.

Most of the wounds were self-inflicted, which makes the pain worse. What was always Mr Cameron's potential Achilles heel – that he looks "out of touch" with ordinary voters and looks after his rich friends – has been highlighted almost daily. After looking the part as Prime Minister from day one, his administration suddenly looks incompetent: the biggest danger of all.

Some Cameron allies insist the travails are just a blip that will pass. "Stuff happens; sometimes a lot happens at once," one said yesterday. But the council election results have added to a sense of gloom in Downing Street. In Whitehall, too, there is a growing sense that something fundamental has changed, and that it won't be easy to change it back.

Some lessons can be learnt. There is a need for a better early warning system inside Number 10 so that trouble can be headed off.

Although communications strategy for the Budget was disastrous, it would be a mistake to shoot the spin doctor messengers. One Downing Street insider said: "It is not about communications. It is worse than that. People don't know what we stand for but the problem is not about selling, it's about substance."

Mr Cameron's troubles are far from over. In the Coalition relaunch with Mr Clegg on Tuesday and the Queen's Speech the following day, he will try to put the spotlight on what the Government is doing to help hard-pressed families. But the Prime Minister knows that it could be easily overshadowed by more explosive revelations at the Leveson Inquiry about his close links with Rupert Murdoch's empire.

Labour can afford to give itself a pat on the back, notably for doing much better in the South than it did in last year's local elections, a necessary pre-condition for general election victory. But Ed Miliband knows a long road lies ahead.

Local results are bad indicators of general elections and the 30 per cent turnout is more a sign that voters are sullen about mainstream politicians than angry with the Coalition, or flocking to the alternative. Many people would have voted differently if choosing a government.

There is a danger that some Labour figures draw the wrong conclusions from the party's progress in the past year. In an age of long-term austerity, Labour cannot afford to remain a virtual policy-free or cuts-free zone if it is to regain power nationally.

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