Andrew Grice: Clegg can reap rewards from his canny tax plans

Inside Westminster

While David Cameron and George Osborne cut their teeth as special advisers to Cabinet ministers in the 1990s, there was a rule of thumb at Conservative HQ that the opinion poll ratings of any government move in line with people's optimism about the economy.

So the Prime Minister and Chancellor pinch themselves as the Tories move ahead in the polls when the public are gloomy about an economy set to slide back into recession, with this week's figures showing it shrank by 0.2 per cent in the final three months of this year.

"We are having a purple patch," one close Cameron aide told me, pleasantly surprised that the Tories appear to be defying political gravity. Some Downing Street insiders attribute the change to the European Union summit last month, where Mr Cameron's isolation was seen as splendid by most Tory backbenchers. These insiders sense that the see-saw occupied by the normally cautious Mr Osborne at one end and the bolder Cameron strategist Steve Hilton at the other has tipped in Mr Hilton's favour in recent weeks.

Mr Osborne and Mr Cameron agreed to be bold about pushing the Government's welfare reforms through the House of Lords, despite six recent defeats. The Chancellor's flagship proposal of a £26,000-a-year cap on benefit claims for a family is very popular in the country. It is a "heads we win, tails our opponents lose" policy. If it goes through, the Tories hope to get some credit. If it is blocked, then its opponents in the Lords, the Liberal Democrats and Labour risk public opprobrium. Labour has got itself in a bit of a pickle by supporting a benefits ceiling in principle but voting against this one.

Another politician showing more boldness since the turn of the year is Nick Clegg. He ruffled Tory feathers this week by taking the unusual step of making public the Lib Dems' demands for the March Budget. His call for the speeding up of plans to raise personal tax allowance to £10,000 a year is also a "win-win" move.

Some Tory MPs wondered why Mr Clegg set himself up for a fall. In fact, the Lib Dem leader had chosen his ground very carefully. He was not inviting a humiliating defeat by blurting out his Budget shopping list. Before Christmas, Mr Clegg and his advisers realised that the public know little or nothing about Lib Dem "wins" inside the Coalition.

Their "differentiation" from the Tories was on issues such as Europe, where Mr Cameron's party is more in tune with public opinion, or constitutional matters such as House of Lords or voting reform, which tend not to excite voters.

So Mr Clegg decided to "cut through" to the voters by alighting upon an issue with more saliency – tax. "I'm happy if we have a row with the Tories on tax every day of the week," quipped one Lib Dem strategist after the Clegg speech scored a rare media bullseye.

The long-planned address was well-timed, coming a day after the negative growth figures. Without breaking ranks with the Tories on deficit reduction, there was a hint of Keynesian economics to contrast with the fiscal conservatism of Cameron-Osborne.

"Fiscal liberalism supports taxes on unearned wealth, precisely to lighten taxes on the wages of the hardworking," Mr Clegg argued. In other words, low and middle income earners would help to get the economy moving if they had more to spend.

More far-sighted Tories acknowledge the Deputy Prime Minister is playing a clever game on tax. If he wins speedier tax cuts, it would be a boost for the Lib Dem brand. If Mr Osborne rejects the idea, and the higher taxes on the rich needed to pay for it, then the Tories' Achilles heel – that they are the party for the rich – will be more exposed.

Mr Clegg's clever speech worked on yet another level. His proposed tax cuts for the "squeezed middle" invaded the territory occupied by Ed Miliband – and highlighted the gulf between opposition and Government.

Unlike Mr Cameron and Mr Clegg, Mr Miliband has had an unhappy new year. Indeed, some pollsters believe the Tory lead has nothing to do with ministers. "The problem lies with Labour," said Peter Kellner, president of YouGov. Bad publicity and rows with trade unions have damaged the party, he said. "Voters don't like internecine battles, but they love decisive victories," he said.

Mr Miliband looks unlikely to secure one over the unions. Although some advisers urge him to turn the row to his advantage by curbing their powers in the party, the Labour leader does not want to "do a Blair", which may provoke the unions into funding left-wing candidates that take votes away from Labour at the next election. Some Labour folk say the unions have nowhere else to go, but Labour has nowhere else to go for its money.

For some Labour figures, Mr Clegg's move on the "squeezed middle" highlighted Mr Miliband's weakness – failing to turn his good ideas into solid policies. "There's obviously a problem and there's no point saying there isn't," said one Shadow Cabinet member. "It has to come from the top."