Labour dreams of hung parliament as the ‘green shoots’ come back

Despite all the economic gloom, and unemployment breaking through 2 million, Cabinet Ministers are grasping at those infamous green shoots for a political recovery as well as an economic revival for the first time since the banking crash.

Some Ministers are privately becoming more convinced there will be a hung Parliament. They are discussing the strong possibility that Labour could still form the largest party after the next election and negotiate with Nick Clegg, the Liberal Democrats' leader, to hold on to power.

The Mole hears that senior Ministers are also looking at a change in the convention to allow a longer pause after the next election, before the new Parliament is formed, extending the period from less than six days to two weeks, which could give more time for Brown to negotiate staying in Number Ten.

There are real hopes that a political recovery could come on the back of an economic upturn. The Guardian ICM poll today is seen as evidence that it can be turned around. As I posted earlier today, the Tories still have a commanding 12-point lead, but the Cabinet are focusing on the finding that nine per cent of Tories might change their vote, if the economic recovery comes before polling day.

Shriti Vedera, a former Brown adviser who is now a minister in the Lords, made 'green shoots' a banned expression after being ridiculed for using it last month, but Vera Baird, a justice minister, spoke of green shoots on BBC Radio's World at One today, and there were signs for optimism around the Cabinet table on Tuesday.

One Cabinet minister today is carrying round a copy of the front page of the Financial Times in his pocket. Its headline says: 'RBS sees first signs for optimism'. "For God's sake, don't say anything about green shoots, but we are beginning to see things improving," he told friends.

David Cameron took on the unemployment figures at Prime Minister's Questions, but without real conviction, given the jobless total hit 3m under the Tories. Cameron accused Brown of being 'phoney' - a remark he was forced by the Speaker to withdraw - and one Cabinet Minister said it was the last thing to call Brown. "Brown may be many things, but he is not a phoney. Cameron knows that, and it didn't sound true," said the Minister.

Cabinet allies said Brown used PMQs to point up the divide between the Government and Cameron's Tory Party over the way out of recession. "He is out on a limb opposing public expenditure rising in a downturn. He wants to cut it," said Brown.

The Turner report on the banking system - published as Cameron and Brown fought each other to a draw - is another reason why Brown was allowed a satisified half-smile at the end of the session.

Lord Turner lets Brown off the hook. While there is ammunition for both Cameron and Brown to justify their counter-claims about the banking crisis, the chairman of the Financial Services Authority does not heap blame on Brown for weakening the regulatory regime that allowed the banking crisis to happen. Turner says 'light touch' was always 'a caricature'.

Brown can justly claim that Turner endorses the strategy which he will present to the world on April 2 at the London G20 summit for fixing the broken global banking system by more transparency in international banking, and much tougher regulatory regimes. It's not much to grasp at, but it's a lifeline for Brown.

THE MOLE: PMQs

FIRST POSTED MARCH 18, 2009