Nick Clegg faced a double blow on Saturday night as one of his closest advisers admitted that the coalition's spending cuts had been too deep and a new poll showed the Liberal Democrats were now the fourth party in British politics behind Ukip.
In a severe embarrassment to the Lib Dem leader as his party conference opened in Brighton, it emerged that his recently departed director of strategy, Richard Reeves, believes the coalition has squeezed spending too tightly and been blind to the benefits of investing in the economy.
According to a pamphlet written by Reeves, the policy may have choked Britain's economic growth and pushed the country into the double dip, as Labour has repeatedly claimed.
Reeves's admissions are particularly incendiary because he only left his position at the heart of government weeks ago and was known to have Clegg's ear.
Writing in a pamphlet to be launched on Sunday he insists that the broad thrust of the government's deficit reduction plan is right and admits that the eurozone crisis is the major stumbling block. But he speaks of frustration at the mistakes the government has made, in what he concedes could be viewed as a "searing critique".
He writes: "Nobody knows for sure whether tightening at the pace set by the coalition government has choked off growth, or laid the foundations for recovery. For what it is worth, I think the coalition tightened a little more than necessary in the first two years; relied a bit too much on spending cuts rather than tax rises to fill the hole; and above all has taken a myopically conservative approach to borrowing for investment."
In a further attack on George Osborne's adoption of Thomas Jefferson's approach to government as a "nightwatchman", Reeves adds: "One of the most painful experiences of being in government was looking in one direction at an ocean of absurdly cheap capital, and in another at a transport and energy infrastructure crying out for investment – and knowing that outdated Treasury practices and a Tory version of Jeffersonian economics was all that stood between them."
The outspoken intervention, seized on by Labour as evidence of confusion at the heart of government over economic strategy, comes as an Opinium/Observer poll puts Labour on 42%, the Conservatives on 30%, Ukip on 10% and the Liberal Democrats on 8% – one of the party's lowest shares of the vote in recent years.
Clegg's personal ratings also make gloomy reading for Lib Dems before a conference where his leadership is bound to be a major subject of discussion. Clegg's net approval rating is -48%, compared with -20% for David Cameron and -14% for Ed Miliband.
The survey also reveals the extent to which people who voted Lib Dem at the last election have deserted to Labour. Some 39% of those who voted Lib Dem in 2010 say they would now vote Labour – compared with just 33% who say they would stick with the Lib Dems.
When the same question was asked in July, 39% of those who voted Lib Dem in 2010 said they would stand by the party, while 34% said they would switch to Labour – suggesting a steady drift to Miliband's party since mid-summer.
By contrast the poll shows that 94% of those who voted Labour in 2010 intend to stick by the party, while 81% of those who voted Conservative said they intend to stay with Cameron's party.
One crumb of comfort for Clegg, however, is that voters seem only marginally more enthusiastic about the Lib Dems if there were to be a change of leader, with Vince Cable, now the business secretary, taking over. Only 2% of people said they would be more likely to vote Lib Dem if Cable were put in charge.
On Saturday Clegg unveiled the conference slogan "Fairer tax in tough times", telling delegates: "It's just wrong that people on low and middle incomes who work hard and play by the rules are taxed so much while Russian oligarchs pay the same council tax as some of you do on a family home.
"Liberal Democrats are fighting to change that. Lower taxes on work and more on unearned wealth. I want to reward people who put in a proper shift, not those who sit on a fortune. People for whom a bonus means a few extra quid at Christmas, not a million-pound windfall."
Clegg and his aides will hope that the conference will focus less on leadership issues and more on how the party can present itself to voters as a distinct force within the coalition in the last two-and-a-half years of this parliament.
The Lib Dems are certain to rally around opposition to George's Osborne's plans for a further round of welfare cuts and will also condemn moves by Osborne and Cameron to distance themselves from the green agenda.
In an interview with the Observer today, the Lib Dem energy secretary, Ed Davey, attacks what he describes as the "Tea Party tendency" in the Tory party which is questioning climate change and the green agenda. Davey says their arguments are "perverse" and that they are creating an uncertainty around government policy that is putting off investors in green infrastructure projects worth tens of billions of pounds and many thousands of jobs to the country.
In his speech to conference on Sunday Davey will call for a legal de-carbonisation target for the power sector, something it is believed Osborne opposes. "Energy is always a long-term investment. So if we are to create greater investor confidence in Britain's low-carbon energy future, a long-term target is best," Davey will say.
Chris Leslie MP, Labour's shadow Treasury minister, said: "Nick Clegg should be sorry that he didn't listen to his own adviser and many others who warned against signing up to a plan to cut spending and raise taxes too far and too fast. The country is paying a heavy price as a result, with the economy in a double-dip recession and the deficit rising by 22% so far this year. We need a change of course now and that must include ending the Treasury's block on bringing forward the long-term infrastructure investment our economy so desperately needs."
