George Osborne said in October 2005:

“The allegations are completely untrue and dredging up a photo from when I was 22 years old is pretty desperate stuff.

This is merely part of a smear campaign to divert attention from the issues that matter in this leadership contest and I am confident people will not be distracted by this rubbish.

Twelve years ago a friend of mine went out with a woman called Natalie and they had a child together.

I met them together occasionally in the autumn of 1993, and it soon became clear that my friend had started to use drugs.

He became more and more addicted and I saw his life fall apart.

With his other friends I tried to persuade him to seek treatment.

Eventually he did and after a long time in rehabilitation he has now recovered and put his life back together.

I am very proud of the battle he has fought and won. 

That is, and always has been, the sum total of my connection with this woman.

It was a stark lesson to me at a young age of the destruction which drugs bring to so many people’s lives. 

Ever since then I have believed that tough, realistic policies to tackle the evil of drugs should be one of the top priorities of any government.

I now want to respect the privacy of my friend who is now happily recovered and working full-time abroad, and the privacy of his young child.

For the sake of that child I think we should leave them alone.”

He’s up in the House at 15:30. First one to shout “Louise” gets a spanking…

Though both the IMF and the Treasury are quick to stress that deficit reduction is the right thing to do, it’s not going to be as pleasant as the Chancellor will have us believe. Ronald Reagan asked to be judged on whether you were richer at the end of his medicine or before, but George will probably want to avoid that particular campaign slogan, given the IMF warn that British households will apparently be £1,500 worse off each year of the slowing recovery.

It’s still steady as we go though, unless the UK experiences “a prolonged period of weak growth and high unemployment”, when an additional plan could be called for. Not the one Labour drone on about though, with a slow down in cuts, but Plan A+, with added tax-cuts to complement the state trimming…

Which isn’t the worst idea Guido has ever heard…

Not good, but not the contraction or complete stagnation that some commentators were predicting and Labour were praying for.

No doubt Balls will be warming up in Millbank right about now anyway. Except on VAT, his solution isn’t the correct one. Ignore the cries for a Plan B, what is needed Plan A+: Cut VAT as suggested by IMF, raise income tax threshold to £10k immediately, and actually start cutting the size of the state, rather than slowing down the rate of its expansion.

It’s going to be a long day of bickering…

It’s not just Clegg that is distancing himself from the decision to hire Andy Coulson. Former News of the World Political Editor Ian Kirby has an emotional diary for this week’s Speccie. Along with an insiders account of the paper being shut down, there was an intriguing snippet from last week’s Speccie party:

“The Mayor of London is having his photograph taken next to George Osborne. ‘I warned you about Coulson!’ Boris had shouted at him earlier. ‘But you wouldn’t listen.’ It was not clear he was joking.”

Boris has ability to smile as he kills, and it’s noticeable how quiet Osborne has been this week. The Chancellor brokered Coulson’s appointment in 2007 and pushed for him to be taken into Government. It’s the sort of thing that would come up in a future leadership election…

Osborne must be getting used to his regular jaunts to Switzerland, but something tells Guido, despite the juicy details, that this weekend’s trip won’t be splashed across the papers. Once again George is heading off for a mini-break with his old friend Mandy, to the über-secretive Bilderberg Group annual get together.

Rubbing shoulders with the great and good from the financial and political worlds, Guido was a little surprised to see one of the new intake making the list. What could possibly have secured the enigmatic Rory “not a spook” Stewart an invite?

Last night’s Channel Four News pointed the finger of blame at Steve Hilton for the messy week that the Prime Minster is having. The list of things for Miliband to pick up on at PMQs is endless, but not everyone is having the same nightmare. Next door at No.11 Osborne couldn’t have asked for much more in the last couple of days. The day after a handful of dubious academics criticised him, the thousand-economists-strong IMF patted him on the head. Balls and the rest of the B-team have been unable to spin very much, and the sharpest critics have been those calling for harder and faster cuts. To cap it all off Moody’s have said Britain’s AAA credit rating could be under threat if there “slippage in the government’s fiscal plans”. In other words if the B-team get their way.

It’s noticeable that all of the u-turns have stuck to Cameron, despite Osborne being in the nerve centre too. The forests, the books, the prisons etcetera, are small change compared to Osborne’s overall deficit reduction strategy. A Chancellor getting his own way while keeping his powder dry? We’ve been down this road before…

Theoretically Hague is meant to be leading the No2AV charge for the Tories, yet he has been virtually invisible so far due to Libya et al. Instead Osborne has given the Yes campaign two barrels in not one, but two, identical interviews this morning. He told the Mail:

“The ERS, which is actually running some of the referendum ballots, and is being paid to do that by the taxpayer, stands to benefit if AV comes in… that organisation, the Electoral Reform Society – part of it is a company that makes money – is funding the Yes campaign. That stinks frankly and is exactly the sort of dodgy, behind the scenes shenanigans that people don’t like about politics.”

He told the Sun it was “dodgy” and they have a new poll that shows the more people know about AV the less they like it. When asked the referendum question 44% said No – with 37% backing Yes. But this grows to 45% and 33% once the system is explained. The bookies prices reflect this with with the latest odds for Yes at 44% (+6%) versus no 60% (-1%). It seems Yes’s attempt to become the anti-politics vote is falling flat.

The budget debate has been rather tetchy and laden with low blows and bitchiness. Excellent.

After Jess Norman had to withdraw the suggestion that the Shadow Chancellor must have been hallucinogenic drugs when he wrecked the economy, Ed Balls, (or Edgar according to Ben Brogan) saw an open goal. “I have never been on hallucinogenic drugs, would any of the front bench like to intervene…” Osborne giggled.

Is Balls really to lecture one other people’s university days activities though?

Winners:

• Job providing corporations.
• Internet Service Providers.
• Business start-ups in northern cities.
• Sheffield and the “Nick Clegg Memorial Enterprise Zone”.
• Motorists.
• Scientists.
• Local councillors and their £100m to spend on potholes.
• Charities – 10% death tax cut if money is given away.

Losers:

• Smokers.
• Private jet users.
• Tax avoiders.
• Councils and their frozen tax.
• Nondoms.
• Tree huggers – green belt planning permission up for auction.
• Sleepy Ken Clarke.
• George Osborne’s throat.
• Whoever came up with last year’s growth figures.
• Ed Miliband’s press team who sent the speech out before Red Ed had floundered through it with whole sections changed.