Britain's Cameron 'open to ideas' for RBS stake disposal

NEW YORK (Reuters) - Prime Minister David Cameron is "open to all ideas" for returning Royal Bank of Scotland to private ownership but its finances must improve first, he told reporters on the last day of a three-day visit to the United States.

Policy Exchange, the influential centre-right political think-tank, has urged the government to reprivatise both RBS and state-backed rival Lloyds Banking Group through a mass share distribution to the public.

Shares in Lloyds are nearing the price which the government regards as its break-even level, making it more likely it would simply dispose of its 39 percent stake on the open market.

But a public offer looks more of an option for the 81-percent the Treasury holds of RBS, giving it back to taxpayers who would take on remaining risk associated with the bank but profit from any future improvement in its situation.

"In terms of returning RBS to the private sector, involving people in owning this bank in a genuine way, I'm open to all ideas and proposals. But it seems to me the primary question is of getting this bank back into good health," Cameron said.

Britain pumped 45.5 billion pounds into RBS and 20.5 billion pounds into Lloyds to keep them afloat during the 2008 financial crisis. Since then, both banks have undertaken massive restructurings under new management and, bowing to pressure from MPs, focused on lending to UK households and businesses.

RBS has shed assets worth around 900 billion pounds ($1.4 trillion) from its bloated balance sheet. There are still hurdles to be overcome, however. The bank said on Tuesday it would need another 18 months to strengthen its capital position enough to satisfy regulators.

"There are connections between the ownership and the health but I think step one is continue the path to health and step two is to think about changing its ownership," Cameron said.

Shares in Lloyds closed on Wednesday at a two-year high of 59.4 pence, just below the 61 pence level which the government regards as its break-even. Shares in RBS closed at 307 pence, meaning taxpayers are sitting on a loss of 17.5 billion pounds.

($1 = 0.6568 British pounds)

(Reporting by Andrew Osborn, writing by Matt Scuffham, editing by Patrick Graham)

View the original article here

Britain's job market weaker than official data suggest - study

LONDON (Reuters) - A sharp rise in the number of people working less than they would like helps explain the apparent resilience of Britain's job market while the economy stagnates, according to a study published on Thursday.

British unemployment has risen from 5 percent in 2007 to just under 8 percent, well below the double-digit rates scaled during recession in the 1990s.

The study, co-authored by labour market economist and former Bank of England rate-setter David Blanchflower, shows nearly 10 percent of British workers wanted more hours than their employers would provide in 2012. In 2007, that figure stood at 5 percent, the same as the unemployment rate.

"The United States has suffered twice the increase in unemployment seen in Britain for half the drop in output," Blanchflower said. "The rise in underemployment in the UK is a big part of that puzzle."

The United States publishes a measure of underemployment which is seen as a useful indicator of slack in the economy.

Simon Kirby, UK economist at the National Institute of Economic and Social Research think-tank which published the study, urged Britain to do the same.

"Underemployment figures could be calculated easily from the existing Labour Force Survey," he said.

Britain's job market indicators may come under increasing scrutiny if the Bank follows the Federal Reserve in providing "forward guidance" on monetary policy.

The Fed has specified that rates will remain low until unemployment falls below a certain level. Chancellor George Osborne has asked the Bank to report back to him in August on the merits of adopting Fed-style guidance.

(Reporting by Christina Fincher; Editing by Ruth Pitchford)

View the original article here

Anti-EU party pressures Britain's PM Cameron in local vote

By Andrew Osborn

ASHFORD, England (Reuters) - Britain's ruling Conservatives are set to lose hundreds of seats in local polls on Thursday that will go some way to measuring the threat the surging anti-European Union UK Independence Party (UKIP) poses to their hopes of re-election in 2015.

Even in towns like Ashford in southeast England, which has returned a Conservative MP to the national parliament at every election since 1945, surveys suggest UKIP could win up to one fifth of the votes.

History shows Britons often use mid-term council elections to punish their favored party for perceived failings by temporarily forsaking it only to return when it really counts.

But polling data shows UKIP, which wants to radically tighten immigration rules into Britain, is luring Prime Minister David Cameron's traditional supporters away.

That trend risks splitting the center-right vote in 2015, making Cameron's task of beating the main opposition Labour party even harder.

The Conservatives, the senior partner in a two-party national coalition, trail Labour by up to 10 percentage points in opinion polls, but they are banking on an economic rebound by 2015 to lift Britain from its torpor.

If a national election were held today, Labour would win.

"I've been a Conservative all my life but I'm going to vote for UKIP," said Bill Newton, 76, a retired businessman, out shopping in Ashford's futuristic tented mall. "I want the Conservatives to get the message that they need to change."

More than 2,000 council seats in largely English rural counties and in one Welsh area are up for grabs on Thursday. One national parliamentary seat is also being contested in northern England where UKIP hopes to come second to Labour.

Heavy Conservative losses could renew pressure on Cameron's leadership ahead of a national election in 2015, and the vote is being seen as one of the last chances to test the political climate before that ballot.

UKIP WANTS END TO "OPEN DOOR" IMMIGRATION

Campaigning on a promise to take Britain out of the EU and to end "open-door" immigration, UKIP's policies appeal to many traditional Conservatives who feel Cameron has taken their own party in too liberal a direction.

But though UKIP has surged in the polls, it has no MPs in the national parliament and Thursday's election will indicate if its swelling poll support translates into votes. Full results of the council ballots will not be known until Friday.

"One local poll put our support at 60 percent," Norman Taylor, the UKIP candidate for Ashford Central, told Reuters in an interview. "I don't believe we'll get that, but we should get around 20 percent. From now on we're going to be a dominant force in politics."

The main reason for UKIP's growing popularity is its immigration policy, he said.

"Say NO to mass immigration," proclaim colorful leaflets being handed out to voters on the streets of Ashford.

Taylor, 74, said Ashford and its periphery, which has a population of about 80,000 and is close to the tunnel that links Britain to France, had been "particularly hard hit" by immigration.

An area the former government designated a growth zone, he said it had seen an influx of British migrant workers moving from London for lower housing costs coupled with the arrival of foreign immigrants, particularly from Eastern Europe.

"Everything here is crumbling in every way," he said. "Public services can't cope. They let everyone in and only then did they start to think about the infrastructure."

Taylor said his views and those of his party were not racist but reflected the concerns of many local blue collar workers.

"I've got nothing against them (immigrants). The only problem is we can't handle the numbers."

The background of some of the party's candidates has stirred controversy, however. Several have been suspended after it emerged they had once belonged to far-right groups and a photograph of one candidate making what looks like a Nazi salute has been plastered on newspaper front pages.

Nigel Farage, the party's leader, has said UKIP was unable to vet all of its some 1,700 candidates properly, saying a few undesirables had got through.

On Ashford's main shopping street there are mixed feelings about UKIP, especially from the town's large Nepali diaspora.

A British army battalion of Gurkha soldiers is based nearby and many ex-soldiers have settled in Ashford.

One retired Gurkha who declined to be named said he felt uneasy. "I'm not convinced by UKIP," he said, saying he feared its policies could stoke hostility towards his own community.

(Editing by Mike Collett-White)

View the original article here

Britain's Iron Lady to be buried with full pomp

LONDON (AP) — Britain's Iron Lady is being laid to rest with a level of pomp and protest reflecting her status as a commanding, polarizing political figure.

A coffin containing the body of former Prime Minister Margaret Thatcher was driven Wednesday from the Houses of Parliament to the church of St. Clement Danes for prayers ahead of the former leader's full funeral at St. Paul's Cathedral.

From there the coffin — draped in a Union flag and topped with white roses and a note from her children reading "beloved mother" — will be borne on a gun carriage drawn by six black horses to the cathedral, where 2,300 invited guests await.

Queen Elizabeth II and her husband Prince Philip will be among the mourners, who include dignitaries from around the world, 11 prime ministers, former U.S. Secretary of State Henry Kissinger and former U.S. Vice President Dick Cheney.

Dozens of people camped out overnight near the 17th-century cathedral in hopes of catching a glimpse of Thatcher's flag-draped coffin and its military escort, and hundreds had arrived hours before the funeral was due to start.

"I came to commemorate the greatest hero of our modern age," said 25-year-old Anthony Boutall, clutching a blue rose. "She took a nation on its knees and breathed new life into it."

Flags on government buildings were lowered to half-staff across the country ahead of the service, but not all Britons were joining in the mourning.

Hundreds of political opponents said they would stage a silent protest by turning their backs as the coffin went by.

"Like anyone else she deserves a decent funeral, but not at the expense of the taxpayer," said protester Patricia Welsh, 69.

More than 700 soldiers, sailors and air force personnel will line the route to the cathedral and around 4,000 police officers will be on duty as part of a major security operation, stepped up after Monday's bombings at the Boston Marathon that killed three people and wounded more than 170.

Parliament's Big Ben bell will be silenced for the funeral service, which will include hymns and passages from the Bible read by Prime Minister David Cameron and the late premier's granddaughter, Amanda Thatcher.

The woman nicknamed the Iron Lady transformed Britain during her 11-year tenure from 1979 to 1990, privatizing state industries, deregulating the economy, and causing upheaval whose impact is still felt.

She died on April 8 at age 87.

Thatcher is being given a ceremonial funeral with military honors — not officially a state funeral, which requires a vote in Parliament. Still, the proceedings will feature the same level of pomp and honor afforded Princess Diana in 1997 and the Queen Mother Elizabeth in 2002.

That has raised the ire of some Britons, those who believe her legacy is a socially and economically divided nation.

Retired teacher Henry Page stood outside the cathedral Wednesday morning bearing a sign in protest at the funeral's reported $15 million cost — "Over 10 million pounds of our money for a Tory funeral!"

Prime Minister David Cameron insisted the ceremony was "a fitting tribute to a great prime minister respected around the world."

The dean of St. Paul's, David Ison, has acknowledged the funeral has divided opinion, but said the service itself would be a somber affair.

"There is no tribute," he said. "There is no eulogy, and that was Mrs. Thatcher's decision. It's not being triumphalist. It's not a celebration of her life and her achievements."

Some high profile guests sent their regrets: Former First Lady Nancy Reagan — whose husband Ronald had a close relationship with Thatcher — will not be able to attend; nor will former Soviet leader Mikhail Gorbachev, who shared key moments in history with the late prime minister. Germany's Angela Merkel was sending her foreign minister, while the American political power families the Clintons and the Bushes declined to attend.

Alicia Castro, Argentina's ambassador to the U.K., also declined. Thatcher went to war in 1982 to retake the Falkland Islands after Argentina invaded the remote British territory off the South American coast.

___

Associated Press writer Sylvia Hui contributed to this report.

View the original article here

Britain's Labour says welfare should be linked to contributions

By Natalie Huet

LONDON (Reuters) - Britain's opposition Labour Party is set to overhaul its welfare policies to link state help to individual contributions, countering charges by the governing Conservatives that it is soft on benefit scroungers.

Speaking on the BBC's Andrew Marr Show on Sunday, Labour deputy leader Harriet Harman said people in work should go to the top of social housing waiting lists and the unemployed should take up job offers or lose benefits after two years.

Labour's proposals, which mark a break from the principle that certain social benefits are universal, came days after the government started overhauling a welfare system that costs 200 billion pounds ($300 billion) a year.

A YouGov poll for The Sun on Sunday showed 67 percent of voters think the welfare system does not work and needs urgent reform. The issue is set to play a major part in the next election due in 2015.

Labour's welfare policies would be fairer and founded on ensuring a supply of well-paying jobs for all, providing stronger incentives to seek employment, Harman said.

"Work should pay. Secondly, there should be an obligation to take work," she said. "There should be support through a contributory principle, for people putting in to the system as well as taking out."

Under welfare caps and cuts coming into effect this month, households will not be able to claim more than 26,000 pounds each year in welfare. This comes as the government tries to eliminate its underlying budget deficit by the 2016-17 fiscal year, from 6.8 percent of gross domestic product in the current financial year.

Labour's move came after Chancellor George Osborne on Thursday upped the temperature of the debate on welfare by saying a man jailed for life for killing six of his children in a fire was the "vile product" of the benefits system.

In a letter to The Sun, Prime Minister David Cameron said the welfare system had "lost its way" and had become a "lifestyle choice for some".

"We are putting fairness back at the heart of Britain. We are building a country for those who work hard and want to get on. And we are saying to each and every hardworking person in our country: we are on your side," Cameron wrote.

Labour led the Conservatives in a YouGov poll of voter intention in the Sunday Times, by 40 percent to 30 percent. ($1 = 0.6514 British pounds)

(Editing by Jason Webb)

View the original article here

Britain's Cameron to meet EU leaders to push reform plan

By Peter Griffiths

LONDON (Reuters) - Prime Minister David Cameron hopes to overcome opposition to his plan to claw back power from Brussels when he meets the leaders of Germany, France and Spain this week for talks on Britain's future in the European Union.

Cameron infuriated European allies in January when he said he would try to renegotiate terms of Britain's EU membership and ask voters in a referendum if they wanted to stay in the bloc.

France and Germany accused him of treating the EU like an "a la carte menu" from which he could pick powers. The opposition Labour Party said Britain risked sleepwalking towards EU exit.

Facing hostility to his policy across the continent, Cameron faces an uphill battle when he meets Spanish Prime Minister Mariano Rajoy in Madrid on Monday. He flies to Paris later that day to meet French President Francois Hollande before going to Germany on Friday for talks with Chancellor Angela Merkel.

Cameron will argue the euro zone crisis means it is inevitable that the EU will undergo big changes and reform its treaties, allowing Britain to forge a new role.

"This is not about cherry-picking, but to argue as some do that you can't have a flexible Europe is wrong," he said in a statement. "We can have a flexible Europe where we don't all have to do the same things in the same way at the same time."

Cameron will press the case for an EU in which countries have different roles. He will point to the fact that not all members, including Britain, signed up to the euro currency. London also stayed out of the border-free Schengen zone.

'RIPE FOR REFORM'

Cameron must come from behind in the polls, win re-election in 2015 and persuade EU leaders to allow him to reclaim powers from Brussels before British voters would have their say in a referendum on Europe.

The scale of his task was made clear in January when European politicians denounced his setpiece speech on Europe as unrealistic and divisive.

Seeking to take the initiative, Cameron will frame his case for reform as part of a wider appeal for the EU to become leaner and more competitive.

He will seek to win support in Europe with a call to reduce the bloc's spending and red tape.

"This organisation is ripe for reform," he said. "We need a Europe that is more open, that is more competitive, that is more flexible."

Cameron faces a dilemma over Europe. He believes Britain is stronger inside the bloc. However vocal anti-EU parliamentarians in his Conservative Party, who see Brussels as a threat to British sovereignty, want him to take a tougher line with the EU or leave altogether.

Pressure on Cameron over Europe has grown because the UK Independence Party, which wants Britain to exit the EU, has poached voters from his Conservatives. Disagreement over Europe plagued the last two Conservative governments under former prime ministers Margaret Thatcher and John Major.

(Editing by Jason Webb)

View the original article here

Britain's "Bond girl" queen wins honorary film award

LONDON (Reuters) - The Queen was awarded one of Britain's most prestigious entertainment honours on Thursday for her support for the film and television industry.

Actor and director Kenneth Branagh presented the 86-year-old monarch with an honorary BAFTA award - Britain's equivalent of Hollywood's Oscars - for her patronage of many of the country's entertainment organisations since coming to the throne in 1952.

The queen personally demonstrated her support for the film industry last year when she starred with actor Daniel Craig in a James Bond spoof as part of the opening ceremony for the London Olympic Games.

The short sequence, seen by a worldwide television audience, showed the queen meeting Craig at Buckingham Palace before leaving to board a helicopter.

After the scene's transmission, the queen appeared to leap from a helicopter hovering over the event and parachute into the stadium - a role performed for her by a stunt artist.

The unexpected entrance had made the queen "the most memorable Bond girl yet", said John Willis, chairman of the British Academy of Film and Television Arts, which made the award.

Presenting the award event at her Windsor Castle residence near London, Branagh said to laughter that there were more roles on offer if the queen was available.

"Several of my colleagues here tonight want you to know that should you wish to venture further into the world of British film, that they have a number of scripts with them this evening with some marvellous parts for you," Branagh said.

The queen and her family are enjoying a surge of support in Britain, boosted by the wedding of her grandson Prince William to Kate Middleton in 2011 and her own diamond jubilee celebrations last year.

The expected arrival of a baby for William and Kate in July is likely to further increase interest in the royals.

(Reporting by Tim Castle; Editing by Robin Pomeroy)

View the original article here

Britain's PM Cameron unveils sweeping immigration crackdown

By Andrew Osborn

LONDON (Reuters) - Prime Minister David Cameron will unveil a sweeping immigration crackdown on Monday aimed at discouraging migrants from Romania and Bulgaria from moving to Britain when EU restrictions on their right to travel and work there expire next year.

Under his plans, access to Britain's National Health Service will be curbed, new migrants will have to wait up to five years for social housing, fines for employers who hire illegal workers will be doubled, and landlords who let to illegal immigrants could face fines too.

The lifting of European Union freedom of movement restrictions on Romanians and Bulgarians has triggered warnings in the right-leaning press of "hordes" of welfare-hungry migrants descending on Britain at a time when the economy is stagnant and public resources are being squeezed.

Cameron's initiative reflects a change in the political mainstream after years of politicians shying away from the issue. All three main parties now talk tough on immigration after polls showed it had become one of voters' main worries ahead of a 2015 election and a once derided anti-immigration party surged in the polls.

In a speech that may stir controversy in Romania and Bulgaria, Cameron will say he wants to stop Britain's welfare system being "a soft touch" for migrants, saying that access to core public services is something newcomers should earn rather than automatically receive.

"Net migration needs to come down radically from hundreds of thousands a year to just tens of thousands," he will say, outlining measures that will apply to other EU nationals too.

The UK Independence Party or UKIP, has thrived in the polls after campaigning against "open-door" immigration, humiliating Cameron's ruling Conservative party in a vote for a parliamentary seat three weeks ago.

Cameron is expected to say: "While I have always believed in the benefits of immigration I have also always believed that immigration has to be properly controlled.

"As I have long argued, under the last government this simply wasn't the case. Immigration was far too high and badly out of control."

"SOMETHING FOR NOTHING CULTURE"

He will announce new measures to make it more difficult for nationals from the European Economic Area (EEA), which includes Romania and Bulgaria, to claim welfare benefits after six months. They will take effect in early 2014.

He will also promise to close a loophole that allows some people who have no right to work in Britain to claim benefits and subject newcomers to a much harder test to see if they are eligible for income-related benefits.

"Ending the something for nothing culture needs to apply to immigration as well as welfare. We're going to give migrants from the EEA a very clear message. Just like British citizens, there is no absolute right to unemployment benefit," he will say.

Under the plans, newcomers would also have to wait for up to five years before they could join a waiting list for social housing, and face "stricter charging" to use the health service or be obliged to have private health insurance.

"We should be clear that what we have is a free National Health Service, not a free International Health Service," Cameron will say.

His initiative has already been criticized by David Walker, the Bishop of Dudley, who told The Observer newspaper that politicians were exaggerating the immigration problem and considering "disproportionate" measures.

Last Friday, Nick Clegg, the deputy prime minister and leader of the Liberal Democrat party, the junior member of Cameron's coalition, said Britain was considering obliging visitors from "high-risk" countries to hand over a returnable cash bond to deter them from overstaying their visas.

He also abandoned a promise to amnesty illegal immigrants after ten years.

Nigel Farage, the leader of UKIP, said on Saturday that the unexpected success of his own party had shifted the debate on immigration.

"If UKIP had not taken on this immigration debate, the others would not be talking about it at all," he told his party conference.

(Editing by Robin Pomeroy)

View the original article here

Factbox - Britain's new financial supervision system

LONDON (Reuters) - The Financial Services Authority (FSA) will be scrapped on March 31 to reform a supervisory system that failed to spot the financial crisis coming, forcing Britain to bail out banks.

The new system gives regulators stronger powers to intervene early to stop the mis-selling of financial products seen over the past two decades.

The main elements are:

* Financial Policy Committee:

- Based at the Bank of England and chaired by the central bank's governor, its job is to spot system wide risks, such as property bubbles, before they destabilise the financial system.

- Sets overall tone for regulation and has powers to direct supervisors to raise capital levels at banks generally or in specific sectors like property to cool activity.

* Prudential Regulation Authority:

- New subsidiary of the Bank of England with its own chief executive, Andrew Bailey, and based in a separate building.

- Remit to make sure banks, insurers and building societies hold enough capital and abide by rules to curb bonuses.

* Financial Conduct Authority (FCA):

- A new body employing about 2,800 staff and headed by Martin Wheatley, based in the former FSA's building in London's Canary Wharf docklands.

- Ensuring all financial institutions and markets behave according to the rules and don't rip off consumers. It conducts enforcement cases with tougher powers and much higher fines.

- New power to ban products and warn the public early if it thinks a firm is not behaving. New power to appoint someone to report on a firm with the firm footing the bill.

- Remit to ensure there is enough competition in financial services, a new departure for a UK financial regulator. The FCA will be responsible for supervising consumer credit from 2014, widening its scope substantially.

(Reporting by Huw Jones; Editing by Elaine Hardcastle)

View the original article here

Battling a scandal, Britain's deputy PM under pressure in vote

LONDON (Reuters) - Fewer than 100,000 residents of an English town that hardly anyone outside Britain has heard of will vote on Thursday in an election that could help determine the political fate of the country's deputy prime minister and, ultimately, its government.

The poll to choose a member of parliament for Eastleigh may prove make-or-break for Nick Clegg's leadership of the Liberal Democrats, the junior member of Britain's two-party coalition.

"Most by-elections are events of only fleeting interest. Some are sufficiently dramatic to linger a while in the memory. Only a few truly matter. Eastleigh could be one of these," Peter Kellner, the president of YouGov, the pollster, said.

On Wednesday, during last-minute campaigning in Eastleigh, Clegg predicted his party was "on the cusp of a great victory".

If he is right, the pressure he is facing, from the media and from within his own party, may ease. But if his Conservative coalition partners pip the Liberal Democrats, or the UK Independence Party pulls off a surprise victory, his leadership may be challenged ahead of a party conference next week.

Many Liberal Democrat supporters have become disenchanted with their party's alliance with the Conservatives, arguing it has betrayed core values on the altar of political expediency. Much of that criticism has been directed at Clegg.

"If the Tories do win, then we may well look back in years to come as the contest that marked the beginning of the end of the current coalition," said YouGov's Kellner.

NOT REFLECTIVE OF NATIONAL TREND

The Eastleigh vote does not reflect national sentiment - the opposition Labour party leads in the polls nationally with the Liberal Democrats trailing in third or fourth place.

Most opinion polls show Clegg's party the narrow favorite to win, with the Conservatives running a close second and UKIP third. But its lead in the polls - 5 percent - is within the margin of error and a last-minute swing in favor of the Conservatives could rob it of victory.

The election comes at a time when Clegg's leadership of his leftist party, without whom the rightist Conservatives cannot govern or pass legislation, also faces specific pressures.

A sex scandal that has ensnared Chris Rennard, his party's former chief executive, has raised difficult questions for Clegg about what he knew about the imbroglio and when and how he dealt with it, amid accusations of a cover-up.

Rennard strongly denies the accusations, which center on allegations of sexual misconduct towards female party workers, while Clegg says he was only previously aware of "non-specific" and "anonymous" allegations which could not be acted upon.

The circumstances surrounding the Eastleigh vote, which comes almost two and a half years before a general election, are embarrassing for Clegg's party.

The seat, one of 650 in Britain's lower house of parliament, was won by the Liberal Democrats in 2010. But the victor, Chris Huhne, who went on to become energy minister, had to resign on February 4 after a lawsuit over a speeding offence.

Huhne pleaded guilty to perverting the course of justice and now faces jail.

(Editing by Louise Ireland)

View the original article here

Battling a scandal, Britain's deputy PM under pressure in vote

LONDON (Reuters) - Fewer than 100,000 residents of an English town that hardly anyone outside Britain has heard of will vote on Thursday in an election that could help determine the political fate of the country's deputy prime minister and, ultimately, its government.

The poll to choose a member of parliament for Eastleigh may prove make-or-break for Nick Clegg's leadership of the Liberal Democrats, the junior member of Britain's two-party coalition.

"Most by-elections are events of only fleeting interest. Some are sufficiently dramatic to linger a while in the memory. Only a few truly matter. Eastleigh could be one of these," Peter Kellner, the president of YouGov, the pollster, said.

On Wednesday, during last-minute campaigning in Eastleigh, Clegg predicted his party was "on the cusp of a great victory".

If he is right, the pressure he is facing, from the media and from within his own party, may ease. But if his Conservative coalition partners pip the Liberal Democrats, or the UK Independence Party pulls off a surprise victory, his leadership may be challenged ahead of a party conference next week.

Many Liberal Democrat supporters have become disenchanted with their party's alliance with the Conservatives, arguing it has betrayed core values on the altar of political expediency. Much of that criticism has been directed at Clegg.

"If the Tories do win, then we may well look back in years to come as the contest that marked the beginning of the end of the current coalition," said YouGov's Kellner.

NOT REFLECTIVE OF NATIONAL TREND

The Eastleigh vote does not reflect national sentiment - the opposition Labour party leads in the polls nationally with the Liberal Democrats trailing in third or fourth place.

Most opinion polls show Clegg's party the narrow favorite to win, with the Conservatives running a close second and UKIP third. But its lead in the polls - 5 percent - is within the margin of error and a last-minute swing in favor of the Conservatives could rob it of victory.

The election comes at a time when Clegg's leadership of his leftist party, without whom the rightist Conservatives cannot govern or pass legislation, also faces specific pressures.

A sex scandal that has ensnared Chris Rennard, his party's former chief executive, has raised difficult questions for Clegg about what he knew about the imbroglio and when and how he dealt with it, amid accusations of a cover-up.

Rennard strongly denies the accusations, which center on allegations of sexual misconduct towards female party workers, while Clegg says he was only previously aware of "non-specific" and "anonymous" allegations which could not be acted upon.

The circumstances surrounding the Eastleigh vote, which comes almost two and a half years before a general election, are embarrassing for Clegg's party.

The seat, one of 650 in Britain's lower house of parliament, was won by the Liberal Democrats in 2010. But the victor, Chris Huhne, who went on to become energy minister, had to resign on February 4 after a lawsuit over a speeding offence.

Huhne pleaded guilty to perverting the course of justice and now faces jail.

(Editing by Louise Ireland)

View the original article here