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Since the middle of December, Labour have led in every national opinion poll bar one tie, by a margin extending to a high of seven points last week. They also won the Oldham-East & Saddleworth by-election, increasing their majority by over 3000. So having advised a bet on Labour to win the next General Election back in September at 2.24, I'm rather miffed that the market has barely moved in response. As the dust settles on a dramatic week in Westminster, the time has come to press up.

This has nothing to do with Andy Coulson, whose departure might affect David Cameron's spin operation, but will barely resonate outside Westminster. By far the more significant development concerns Alan Johnson's resignation, and his replacement by Ed Balls as Shadow Chancellor. Formerly Gordon Brown's right-hand man at the Treasury, Balls is a pugnacious character with enemies across the political divide, from Tories to former Cabinet colleagues. Most of them will consider Balls' return to be a disaster for Labour, reminding voters of the Brown legacy and potentially destablising Ed Miliband's leadership. On the other hand, as one of the most respected economic voices in Parliament, Balls is the perfect fit for what was a gaping hole in Labour's armoury.

Inevitably, the media are drawing parallels between the explosive Blair/Brown relationship, with Balls playing the role of his former mentor.That might make for an amusing narrative, but I rather doubt it tells us anything about his or Labour's political prospects. When it comes to the next election, Balls will be defined by his performance in opposition, not by ancient history recorded in memoirs most people will never read.

Ultimately, that election will be determined by perceptions of the government's radical economic strategy. Britons are bracing themselves for a brutal period, with job losses, inflation and massive cuts to public services in the pipeline. House prices are predicted to fall, interest rates to rise. Public opinion is moving steadily against the cuts, which probably explains Labour's growing lead. Indeed, given Miliband's low personal ratings and a double-digit Tory lead on economic competance, the current polls surely reflect unease with the coalition rather than any particular love for Labour.

If that economic competance rating were to reverse as voters blamed the government for their worsening prospects, it is easy to envisage a large Labour lead opening up. Until now, they've failed miserably to defend against Tory charges that the economic problems are Labour's fault. In Balls, they now have someone whose economic expertise is widely recognised, and who will simply never accept that accusation. He's already offered more in fighting talk after two days in the job than his colleagues managed in eight months.

Moreover, nobody is better positioned to capitalise on failure than Balls, as the most prominent politician to have gone out on a limb in opposing the cuts strategy on economic, (rather than social), grounds. In a well-publicised speech at Reuters during the Labour leadership contest, Balls argued that the cuts would derail the recovery, and that even Labour's plan to halve the deficit in four years was too austere. At the time, his views were backed by various commentators, including the FT columnist Martin Wolf and even London's Tory Mayor, Boris Johnson.

This does seem to be the ideal moment to become Shadow Chancellor. Such is the prevailing global economic gloom, that Osborne could even be right about the medicine, without getting any reward. If for instance the deficit were to be halved, rather than eliminated, his policy might be seen as a failure. Likewise, a jobless recovery is unlikely to win over voters. Economic competance is not an exact science. It is largely driven by voters' general feelings about their own economic prospects, rather than distant, relatively arcane issues like the structural deficit or GDP growth. The last Tory government boasted impressive growth figures following recession, but couldn't recover the damage done by Black Wednesday and raising interest rates to penal levels.

But what of the concerns about Balls' divisive influence within the Labour Party? If there's one thing that could render all their critique of the coalition irrelevant, it would be another internal feud. Contrary to the media narrative, I expect the two Eds will work fine together, at least for now. Remember, while the seeds of the Blair/Brown feud were sown in 1994, it never mattered until they were in government. And while Balls does indeed resemble his former mentor in many respects, we should remember that Brown was well respected for 15 years until the financial crisis and taking on the PM job, for which he simply lacked the personal skills.

On policy, the one known difference between Miliband and Balls, concerning the speed and scale of deficit reduction, is overstated. Oppositions are rarely judged on the nuances of their evolving economic policy, as we saw with Cameron and Osborne. Their economic critique and platform shifted several times between 2005 and 2010. What mattered was that by the time of the election, they had a clear, consistent plan.

Far likelier than a split between Miliband and Balls, both of whom were Brownites, is a reaction from the Blairite wing of the party. As well as the personal disputes, the party's feud revolved around ideological differences. Ed Balls is a distinctly left-of-centre politician, and will add to the growing sense that the 'New' Labour era is over, and the party is gradually shifting to the Left. It remains to be seen whether there is a future in such a party for the likes of David Miliband or John Reid. For now though, any differences on that front will surely be put aside in favour of a strategy upon which they can all agree - scoring open goals against an increasingly unpopular government.

Recommended bet: Labour to win the next General Election @ 2.24

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