Ed Miliband is walking a tricky tightrope over the spending cuts | Andrew Rawnsley

The Labour leader has to achieve a careful balance between the politics of protest and the politics of credibility

A surprising thing happened last week: David Cameron paid a compliment to Ed Miliband. And not once, but twice. The first plaudit was for the Labour leader's speech to the Commons during the debate on Libya, a speech which the prime minister praised as "extremely powerful". I suppose Mr Cameron would appreciate Mr Miliband's contribution because the Labour leader made arguments similar to the prime minister's own in favour of military intervention. It was nevertheless a deserved compliment. This was Ed Miliband's best parliamentary speech since he became leader: well-constructed, thoughtful, authoritative and affecting in its invocation of his family history: "Two Jewish parents whose lives were changed for ever by the darkness of the Holocaust, yet who found security in Britain." The inclusion of this line in the peroration strengthened the speech with the power of the personal. Mr Miliband can sound like a clever student lisping a recital from an academic textbook; this speech was effective because it successfully combined head with heart. He will be more effective as a leader if he can find that voice more often.

The second compliment from the prime minister was an unintended one and it came when Ed Miliband replied to George Osborne on budget day. The instant response to the chancellor is the toughest gig for the leader of the opposition in the parliamentary calendar. When the chancellor gets up, he does so bristling with figures and flourishes which he and his aides have had weeks to play with. The rabbits that George Osborne pulled from his topper were rather scrawny bunnies. "The Budget for Potholes"? Not one for the memoirs. But the chancellor still managed to engineer a crowd-pleasing cut to fuel duty which won him the approval of Conservative MPs and garnered much more positive headlines than might have been expected in grim circumstances. Credit for the politically canny raid on the windfall profits of oil companies belongs to his Lib Dem deputy, Danny Alexander, who first suggested this idea during internal discussions at the Treasury at the beginning of the year.

How could Ed Miliband make a sensible instant response to the ruses in the budget? He couldn't. So the Labour leader rightly and relentlessly focused on the big picture of stuttering growth, inflationary dangers and rising unemployment. Wind was put in his sails by the chancellor's own fiscal invigilator, the Office of Budget Responsibility, and its downward revision of this year's growth forecast from 2.1% to 1.7%. "It's the same old Tories," cried Mr Miliband, belting out an old Labour number to cheers from those behind him. "It's hurting, but it isn't working." You could tell he was finding the target when the prime minister and the chancellor paid him the great compliment of trying to put him off by barracking him from the government frontbench.

The day after the budget, a senior Tory remarked to me: "I think our side and you guys in the media are collectively underrating Miliband."

That is worth pondering. The Labour leader is regularly turning in competent – and sometimes better than competent – performances in the Commons. Labour is presenting a united face. This is a contrast with the Tories after their ejection in 1997 when they descended to Sicilian levels of feuding. Labour is not tearing itself apart as it did after the party lost office in 1951 or during the Bennite lunacy which followed the 1979 defeat.

The performance of Labour frontbenchers is patchy. Rather too many of them appear to be incapable of saying anything mildly arresting and then they wonder despairingly why they never get a hearing in the media. One member of the Labour frontbench observes: "We are far too risk-averse." On the positive side, there are both young sparks and older lags on their frontbench who are mastering the arts of opposition and giving ministers a run for their money.

Labour's poll rating has made a decent recovery from the terrible 29% vote share last May. The headline scores do not tell us anything reliable about how the parties will perform at the next election, but it is better for morale to be ahead than to be behind. Labour's historic, core brand – its reputation as the compassionate party – remains intact.

All these are reasons for Labour to be encouraged. Yet among some senior Labour people, there are also profound anxieties that there is still something not quite right, a crucial ingredient that is missing. They differ in their diagnoses of exactly what that missing something is, but it can be summed up by one word: credibility. This starts with the big economic argument between them and the coalition. On the spending cuts, Labour and the government have fought each other to something resembling a stalemate. The case that Mr Miliband made in response to the budget – that the coalition is cutting too deep, too fast and too recklessly – already resonates with many voters and will probably gain more adherents over the next 12 months or so. In the lives of the majority of people, this year's most important economic event will not be the budget. It will be when they receive a redundancy notice from a public sector employer. Or in April when they open their first pay packet of the next tax year and discover that they are even worse off than they were in March. Mr Miliband has reason to hope that his tropes about "the squeezed middle" and "a crisis in living standards" will have increasing traction on voters whose disposable income is being crunched by the combination of rising prices, higher taxes and stagnant wages.

That is the good news for him. The bad news is that the polling continues to indicate that most voters agree with ministers when they contend that they are trying to deal with an awful legacy bequeathed to them by Gordon Brown. The mood of the voters is encapsulated by one member of the shadow cabinet: "The Tories and the Lib Dems are making a bad job of clearing up Labour's mess."

When asked to take some responsibility, Ed Miliband and Ed Balls fall back on their lines that the credit crunch wasn't really Labour's fault and Britain went into the recession in better financial shape than some other countries. There are several problems with this. One is that the argument has already been lost. A critical mass of voters has arrived at the firm view that Labour did leave the public finances in a bad way. Another weakness is that it leaves the two Eds trapped in a defensive posture, trying to justify the record of the last government and still sounding like the "sons of Brown". On top of that, it makes them cheerleaders not for the successes of the New Labour years, the achievements that won three elections in a row; it leaves them boxed in attempting to justify the fag-end years of the last government which preceded its ejection from office. Ten months on from the last election, it is too late for Labour to waste time trying to persuade swing voters to feel stupid for rejecting Labour in 2010.

At this stage of the parliament, Labour has two essential tasks: to give voice to anger with the government while at the same time rebuilding its own credibility. Doing the first is important to show those who are hit by the cuts that their grievances are being articulated in Parliament and beyond by the principal party of opposition. But Labour has to be very calibrated about how it tackles exploiting hostility to the spending squeeze. The other imperative, remaking Labour's credibility as an alternative government, will not be served if the party looks like a fiscally irresponsible outfit which has learnt nothing from its past mistakes and is in hock to sectional interests. That tension, the pull between pursuing the politics of protest and the politics of credibility, was on display when Mr Miliband took part in yesterday's mass, anti-cuts protest organised by the TUC.

Some of the most voluble trade union leaders don't accept there is a need for any spending cuts at all, not a position the Labour leader can afford to be associated with and not the position he has taken. He tried to finesse his dilemma by addressing the rally in Hyde Park, but not joining the march. His speech to the rally framed the government as a return to Thatcherism. This may be appealing to the nostalgic, but I'm not sure it is wise for the Labour leader crudely to brand the coalition as identical to the Tory governments of the 1980s and 1990s, a regular refrain in his speeches. For one thing, Labour leaders using similar rhetoric against Margaret Thatcher were crushed by her three times before going down to a fourth defeat at the hands of John Major.

So long as they avoid a double dip recession, we can already compose the Conservative script at the next election: we cleared up Labour's mess and put Britain back on track while Ed Miliband did nothing except deny there was a problem and shout from the sidelines. He is now quite accomplished at attacking the government. To become a plausible and attractive alternative prime minister, Ed Miliband will have to grow into something more than being a good heckler.


Andrew Rawnsley

The GuardianTramp

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