John Rentoul: Clegg blows his liberal credentials

He's fallen out with his party over student fees, Europe and the NHS. Now the Lib Dem leader is buckling under the Budget

Nick Clegg may be the most interesting of the three main party leaders. David Cameron and Ed Miliband are known quantities. The Prime Minister is a pragmatic Conservative, quite adept at the centre-ground stuff but leaving no doubt where his centre of gravity lies. The Leader of the Opposition is a romantic leftie, who cannot decide if he has to be true to his instinct or betray it. But the Deputy Prime Minister is a puzzle.

Last week he stood in for Cameron at Prime Minister's Questions, the first time he has been allowed to do so for more than a year. He sounded sincerely anti-Labour from the moment Liz Kendall, the sensible MP for Leicester West, asked the first question. She noted that the American economy was growing and ours was not, and asked what had gone wrong. "What went wrong was the Labour government for 13 years," shouted Clegg.

We have to make allowances for the show-wrestling atmosphere of PMQs: it is all about scoring points rather than a co-operative search for truth. But it is also a lie-detector, revealing character, and what shone through was that Clegg enjoys being in government and does not feel much of an urge to appeal to Labour supporters, not even to the ones who used to vote Liberal Democrat.

That is the puzzle about him. He lost nearly half his party's supporters the moment he went into coalition with the Conservatives, yet his response to their defection was essentially, "More fool you for voting for us." What he actually said, in a post-election interview in The Independent was: "The Lib Dems never were and aren't a receptacle for left-wing dissatisfaction with the Labour Party. There is no future for that; there never was."

What kind of non-leftie is he, then? As a friend of mine said, "He's a moderniser if he's anything; but he may not be anything." He certainly has the mannerisms of a moderniser, in that he sounds emphatic about whatever policy he is defending, as if its merit were obvious. A bit like Tony Blair. That is what made Clegg so popular in the television debates in the election campaign: an impatience to sweep away the rotten old order and replace it with – well, we'll get back to you on the details, but it will be much better.

The details so far have all been policies that the Conservatives – or, rather, Cameron and George Osborne – wanted anyway. This week, we get to some more important details. Clegg has approached this Budget with a little cunning, advertising well in advance his supposedly distinctive Liberal Democrat policy of raising the point at which people start to pay income tax. The policy is unusually popular. Our ComRes poll today finds that 81 per cent support it. And Osborne is happy enough to agree to it because it is a tax cut.

So, tomorrow's meeting of the Quad, the informal meeting of Cameron, Osborne, Clegg and Danny Alexander, Lib Dem No 2 at the Treasury, will approve the rise that has already been decided. Funny how quickly this quartet has begun the transition from being an efficient part of the constitution to a dignified one, in Walter Bagehot's terminology. It happened to the monarchy, the Privy Council, the Cabinet and, in just 22 months, the Quad: they start as the location of decision-making but then become more and more the ceremonial endorsers of decisions made elsewhere.

This tax decision has already been made in phone calls between Quad members, nudged along by the focus groups and Clegg's public statements, the numbers decided by Osborne, consulting his Treasury advisers. The Lib Dems will get the credit, because they made a noise about it first.

Apart from "dotting the last i and crossing the last t", I am told, the main Budget decisions were made before Osborne went to America, with the numbers agreed in a conference call on Friday. The last-minutism of the Gordon Brown era has ended, partly because of the coalition, but partly because the numbers have to be put through the computers of the Office for Budget Responsibility, so that the effects of the Budget on its forecasts can then be written into the speech.

What we do not know is whether the reports that the 50p income tax rate will be cut are Lib Dem spin, or part of a trade-off. They could be spin – so that the Lib Dems can claim credit when Osborne keeps the 50p rate. Keeping the rate, on incomes over £150,000, is another popular policy, supported by 58 per cent in our poll today. Or they could mean that Osborne really intends to cut the rate, presumably next year or later rather than immediately, but to replace it with other, higher-yielding taxes on the rich. (Remember that Clegg described the 50p rate as a "shibboleth" in his Hugo Young lecture in November 2010, suggesting that he was open to other ways to skin a fat cat.)

Yet what will the Budget tell us about who Clegg is? Raising the income tax threshold and new taxes on the rich are not distinctive policies. Even Ed Balls supports them – though he rightly points out that a VAT cut would be a more effective stimulus.

When asked, Clegg becomes convincingly frustrated about the failure of people who are used to the two-party system to understand that he is a "liberal" and that the test of this week is whether or not it is a "liberal reform Budget". But what is liberalism any more? David Cameron and George Osborne are liberals, and they could argue that theirs would be a more liberal, modernising government if they had a majority of their own. They would say that they do not need the Lib Dem coalition partners to help them to face down the reactionaries on the Conservative back benches.

Clegg's problem is that, after being seen as selling out his party's core policies on student fees, Europe and the NHS reforms, his credibility as the guarantor of an alternative, distinctive liberalism is shot.

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