91Èȱ¬

It is the final political conference of the season. Last year the Conservatives were in Manchester, this time they are in Birmingham.

The Chancellor and MP for Tatton, George Osborne, makes his key address to the conference on Monday morning.

Of course, he is working through the details of the Spending Review. I interviewed him for the North West Politics Show and he would not be drawn on whether he believes too many people are employed in the public sector in the region.

Critics say the Tories have been energetic in finding areas for cuts but less good at developing strategies for growth.

So it was a little surprising to hear Mr Osborne give clear support for plans to build a second bridge connecting Runcorn and Widnes, a project known as the Mersey Gateway.

"The Mersey Gateway is an incredibly important project and something I am really number-crunching now to make sure we are in a position to say something positive.

"I can't do that today.

"But that's a good example of how I want to invest in the big infrastructure projects that are going to help our economy grow in the regions, not just in the South East of England," he said.

This is the kind of project which will appeal to the private sector. Not only will it create business, it should also lead to greater economic productivity once built.

Also on Monday the Transport Secretary, Philip Hammond, is expected to make a few announcements. Many people in the North West will be keenly listening for that one.

And on Tuesday evening the Mersey Gateway project is sponsoring a fringe event here for local government. They will be hoping for something to celebrate.

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might have lost on Saturday, but he won on Sunday.

A team of Labour MPs beat a team of journalists 5-3 on the football pitch. Andy Burnham scored one of the goals at Manchester United's academy ground.

The Labour MP's love of football should not be underestimated and this probably helped take the edge off a poor leadership result.

He was late to announce his candidacy, struggled to get the necessary nominations and failed to set the agenda. He won less than 9% of the vote in the first ballot.

Even so Mr Burnham told me his campaign had a real impact by forcing the party to confront its relationship with traditional supporters, particularly in the North.

He believes that borrowed some of these themes to win.

But while Mr Burnham stressed his working class roots during the campaign, he is also a committed Labour moderniser.

Indeed if Mr Burnham had his way, Ed Miliband would not be leader.

That's because Andy Burnham wants to reform the leadership rules so that each member of the party has just one vote.

At the moment, the electoral college gives much greater weight to Parliamentarians, while unionists get a vote even if they are not Labour party members.

Remember, Ed Miliband won through strong union support. He did not have a majority among the membership.

Under Andy Burnham's system, the union support Ed Miliband relied upon would evaporate.

Of course Mr Burnham is a party loyalist and is now fully supporting the new leader.

But surely the uncomfortable logic of Andy Burnham's argument is that should be in charge.

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The Lib Dem leader, , called on members to "hold our nerve" in his main conference speech here in Liverpool.

I have been surprised to the extent that people do seem to be holding their nerve, both publicly and privately.

There is, of course, much to be worried about. The Lib Dems are helping push through a programme of tough spending cuts, they are closely linked to the Tories and there are local elections next year.

Readers of this blog may remember the case of the four councillors from Runcorn who left the Liberal Democrats to sit as independents.

They were here on Monday taking part in a 91Èȱ¬ debate. They had been invited to meet Andrew Stunell, the communities minister and Greater Manchester MP. But that was withdrawn, I suspect when they realised I wanted to bring a camera along.

They argue that their principles have not changed, it is the Liberal Democrat leadership which has adopted a Tory agenda.

Anyway I managed to get them a fifteen minute chat with another , who is running for the party Presidency.

Mr Farron is on the left of the party and has bad memories of Thatcherism. Nevertheless he was absolutely clear that coalition is the only game in town.

Had the Lib Dems refused to join the Tories in government then the media and others would have mocked them for ducking power and refusing to take tough decisions.

As Tim Farron put it to me: "The worst time to jump ship is when the waters are choppy."

Cllr , the leader of the Liverpool group, who has previously warned the party could be "wiped out" by coalition has also criticised those who are leaving the party.

In reality not many councillors have left and, I'm told, party membership is actually increasing.

I came here expecting to find people privately hostile to the coalition and the leadership's strategy. In reality everyone I have spoken to accepts there is currently no alternative.

That might change as the spending cuts bite. But not yet.

It's been a vibrant conference in Liverpool. Power has breathed vigour into the party but with a nervy edge.

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After the heavy testimonies of Elwyn Watkins and Phil Woolas, Wednesday almost brought light relief to the Election Court, unintentional though it was.

The defeated Liberal Democrat candidate, Elwyn Watkins, believes Labour lied about him in their election leaflets. One area of serious dispute is over the funding of the Lib Dem campaign.

Labour's charge is that the campaign cost far more than the legal limit and has not been properly declared. They suggested in a campaign leaflet that the money was coming illegally from the Middle East.

But the Liberal Democrats have submitted their accounts to the elections watchdog, the Electoral Commission. They say they spent a very legal £37, 852 on the election campaign.

This helps explain why Rebecca McGladdery, a former Liberal Democrat volunteer, was an important witness.

She claims that Mr Watkins was secretly paying her and other volunteers £3 an hour to campaign from the office on his behalf.

These claims during the election campaign.

These undeclared donations supposedly added up to £30 thousand.

The barrister representing Elwyn Watkins, James Laddie, wanted to know if the letter containing the allegations was actually written by her.

"It was written by me. It was typed by someone else. There is nothing wrong with that," she insisted.

Mr Laddie initially seemed taken aback: "I'm not talking about the rules of typing. Is this your letter?"

She was forced to reveal that she was being helped by Labour councillor and campaign activist, John Battye.

But she insisted: "It is my belief that Elwyn Watkins has not declared at least £30 thousand worth of donations he has given to staff."

The barrister pointed out that since she only started with the Lib Dems in March 2009, she could not know about previous payments.

"I don't put the figures in there," she answered.

"You don't know where the figures come from in your letter?"

"I didn't put in the figures," she confirmed.

By September 2009 she was no longer working for the party. Ms McGladdery said this was because Lib Dem members began harassing her and throwing stones at her windows.

That, she said, was why she ended up at the Labour office: "I went to get help because of the people bullying me."

"In the past when you have been bullied have you gone for help to the Labour party?" inquired Mr Laddie.

She confirmed this had never previously been the case.

Her campaign against what she considered to be illegal Lib Dem practices continued. Next she reported she had been paid below the minimum wage to HM Revenue and Customs.

The court heard that an investigator went to see her. But on that day another letter arrived from her while he was en route. When he reached her house, he asked Ms McGladdery what was in the letter?

A report from the investigator was read out: "She told me it was written by a third party, she was not sure of its contents and was unable to assist."

The HMRC investigation was soon dropped.

It was a disappointing morning for the Labour case. But in the afternoon came an entirely different proposition in the form of Joe Fitzpatrick, Phil Woolas's election agent.

Mr Fitzpatrick was warned by the judges that he was also being accused of electoral offences. But he waived his right to legal representation to allow proceedings to continue and because he had "committed absolutely no offence".

If Ms McGladdery was concerned about £30 thousand, Mr Fitzpatrick had much bigger numbers in mind.

He told the court that he and John Battye had assessed the Lib Dem campaign and calculated its real cost.

"It totalled £300 thousand. But we reduced it to £200 thousand for safety," he said.

It was pointed out to the witness that the total cost of Royal Mail receipts for postage during the campaign was £1300.

"That is not accurate," he responded. "I believe the records to be false."

He went on: "I'm convinced electoral offences have been committed. I hope the police will investigate."

Mr Fitzpatrick was certainly combative. At one point James Laddie suggested an assertion was not true.

Mr Fitzpatrick turned to the judges: "Is he allowed to call me a liar without evidence?"

Mr Justice Griffith Williams quietly responded: "He's putting his client's case."

The other key issue that Elwyn Watkins is fighting is the allegation that he was linked to Muslim extremists.

The had endorsed Mr Watkins in the election, as a way to dislodge Phil Woolas.

So one of the questions the court has considered is whether MPAC is an extremist organisation.

Mr Fitzpatrick certainly knew of them: "I'm sure I've emailed about MPAC saying what a bunch of Mad Muslims they are."

MPAC had only distributed one leaflet in the constituency. And it was James Laddie's contention that it was entirely legitimate: "What's wrong with it? It could even be a Lib Dem leaflet."

"Even the Lib Dems wouldn't stoop this low," responded Mr Fitzpatrick to laughter.

James Laddie wanted him to be specific: "Stop! What's wrong with it?"

"Selecting candidates who can best protect Muslim interests. I don't think that's acceptable," replied Joe Fitzpatrick.

"There's nothing wrong with that," responded the barrister.

Incidentally printed in two of the Labour leaflets.

At the election MPAC had little impact in Oldham East and Saddleworth. But its existence is certainly being felt now.

Joe Fitzpatrick was the final witness to take the stand.

The election judges announced their verdict would be delivered in October. The original aim was to do so on Friday.

It sounds like Mr Justice Griffith Williams and Mr Justice Teare have more to consider than they first anticipated.

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The Election Court in Uppermill in Saddleworth is sitting because the defeated Liberal Democrat candidate, Elwyn Watkins, believes he was cheated out of victory by lies in Labour election leaflets.

It is worth remembering that Mr Watkins is staking his finances on this political gamble and stands to lose as much as £200,000.

But on Tuesday Mr Watkins got his money's worth as the sitting MP, Phil Woolas, was forced to take the witness stand and endure a full day of cross-examination.

Labour made some serious allegations against Elwyn Watkins in the campaign. But it is worth remembering that Phil Woolas does not have to prove they were correct; only that he had reasonable grounds for believing them to be so.

Mr Woolas appeared to be in much better form than on Monday and did his best not to concede an inch.

Even so, as Chris Mason reports here, the MP admitted one of his leaflets, "sailed very close to the wind."

Mr Watkins's barrister, James Laddie, spent a great deal of time trying to destroy the claim that Elwyn Watkins was linked to Muslim extremists.

The Labour election newspaper, "The Examiner", ran a photo of Mr Watkins with the headline: "Watkins accused of wooing extremist vote". Above him was a photo of some militant Muslims.

Mr Woolas was forced to admit the photo was "not Oldham." In fact it was taken in London four years ago.

So, asked one of the two judges, Mr Justice Teare: "What was the relevance of the photograph?"

Mr Woolas said it represented all sorts of horrible things said about him on websites.

But the leaflet centred around another group, the controversial which endorsed Elwyn Watkins at the election.

MPAC was actively campaigning against Phil Woolas, and he described them in court as "extremists." There were similar descriptions in The Examiner.

The barrister suggested that readers would assume the extremists in the photograph were members of MPAC.

But Mr Woolas rejected that.

Mr Justice Teare again intervened: "Was there a threat of violence in any leaflet you have from MPAC?"

Mr Woolas conceded there was not.

So how was the Lib Dem "wooing" extremists?

Phil Woolas argued this was because Elwyn Watkins had not condemned any threats. And also because he had called for a ban on the sale of arms to Israel but not to Palestine.

James Laddie pointed out to Mr Woolas that the sale of arms to Palestine was already illegal. Therefore calling for a ban, "would be the equivalent of calling for Elizabeth Windsor to be made a queen," he said.

Another Labour leaflet, The Rose, came out a little later. The same photograph was published but this time voters were told that Mr Woolas had received a death threat.

The Liberal Democrat team believed this was another attempt to scare white people into supporting Mr Woolas and keeping clear of Elwyn Watkins.

"One extremist website has even created a competition for the most imaginative ways to kill Phil Woolas," Labour reported.

Again this was all linked to Elwyn Watkins with a paragraph headed: "Lib Dem Pact with the devil".

Mr Woolas accepted this macabre competition actually referred not to a website but a leaflet created by another group called RADAR.

Mr Justice Teare read the leaflet and concluded the author, "has not threatened you."

"He has not," accepted Mr Woolas.

James Laddie wanted to know if the death threat had been reported to the police. Mr Woolas thought so but was not sure. Though he was certain he had not reported it formally as a crime.

In fact, Phil Woolas had received a real death threat sent by email to the House of Commons which is being investigated. However in court it seemed highly unlikely that it had come from either a Muslim or a constituent.

Nevertheless, Mr Woolas concluded: "I believed the threat was real. I was not talking it up for political advantage."

Whatever the truth of all this, Labour is certainly not getting any political advantage from it now.

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There aren't normally security guards and metal detectors to pass before you can enter Saddleworth Civic Hall. But then it's never been home to two High Court judges before and an Election Court.

For the rest of this week, this quiet building will be the location for some of the fiercest political and legal arguments in the country.

The judges sit up on the stage. Below them is the official recorder who has been sent from the House of Commons. The barristers in their wigs lead two teams of lawyers on either side of the room. There is plenty of room for the public, while the media are perched on the balcony above.

The defeated Liberal Democrat candidate at the last general election, Elwyn Watkins, is petitioning the Election Court to get rid of Phil Woolas.

The core argument is that Mr Woolas thought he was going to lose and was particularly worried because the Conservatives chose an Asian candidate, Kashif Ali. Labour feared many voters would not support a Muslim candidate, and instead would vote for the Lib Dems. Therefore Labour's tactics, so the Lib Dems argue, was to destroy Elwyn Watkins's reputation so that Tory supporters kept away.

Helen Mountfield QC said Phil Woolas was willing to: "Stir up racial tension."

In her opening address, she added: "Statements were made in a desperate attempt to influence election results."

Elwyn Watkins was the first to undergo cross examination by the relentless Gavin Millar QC. The barrister's objective was to convince the court that Labour had reasonable grounds for believing the claims they made. He did not have to prove that any of them were true.

Mr Millar began with the issue of why Labour had not believed he lived in the constituency and was able to extract a number of puzzling statements from Elwyn Watkins.

When asked how long he had lived in Saudi Arabia, he struggled to answer but "guessed" it was about four years. And he admitted that he was just eight days away from being deselected as a Rochdale councillor because he had been abroad and not turned up to meetings for almost six months.

The issue then turned to the funding of his campaign.

At one point Mr Watkins declared: "I was not the major contributor." Yet later the barrister was able to prove that he had given £38, 904 to the local party. This was marginally more than the party says it spent on the entire election campaign.

And Mr Watkins admitted that several times he had paid bills which the local party could not afford.

On the issue of links to Muslim extremists, Gavin Millar revealed that known Lib Dem campaigners were leafleting with members of the controversial Muslim Public Affairs Committee (MPAC) outside a mosque. To Elwyn Watkins this was "a complete surprise."

Mr Watkins was also cross examined about his working relationship with Rebecca McGladdery. She was the woman who left his team alleging she had been secretly paid to work as a volunteer.

Sitting in the witness stand, Mr Watkins was asked whether she had complained to him of a sexual assault by another councillor. Mr Watkins did not seem sure so asked for the date. When told it was Christmas 2009 he responded: "I have no recollection of her telling me about that."

But while clearly under pressure, Mr Watkins was able to hold his own. There were no major revelations, no shock evidence of campaign finance fraud or proof that he was mixing with Muslim extremists.

He told the court that he was living in the constituency and did not own property elsewhere.

He had made generous donations to his campaign but all these were properly declared.

He denied funding his entire campaign but said he was one of several legal donors.

His tax affairs were in order, it was: "ludicrous to think of me as a non-dom."

He called Rebecca McGladdery a "liar" who he asked to stay away after she assaulted one of his staff.

He said he had avoided MPAC and did not even know they had endorsed him on their website until after the election.

Significantly Mr Watkins was able to argue that the allegations had damaged his personal character, not just his politics. "If you state someone is getting money illegally from abroad that does affect my character."

There was surprise that the court also heard from Phil Woolas on the first day. He was cross examined by James Laddie, a barrister with a very sharp edge.

Mr Laddie got straight down to business, challenging Mr Woolas over the way a photograph of Elwyn Watkins had been altered. In the Labour leaflet Mr Watkins appeared to be being led away by police officers.

Mr Woolas denied the photo had been doctored: "I think they call it a superimposition."

He said it was obvious to readers the photo was not real. But Mr Laddie suggested that was: "Fanciful, except to the sharpest eye or the most suspicious reader."

The court was told that Mr Woolas had attacked his Lib Dem opponent in 2005, Tony Dawson, for similar tactics: "When you send out election addresses, it has to be right," Mr Woolas was quoted as saying at the time.

The barrister also challenged him over why his had not been handed to the lawyers.

Mr Woolas said the diary was in the House of Commons. But he did not know if it was possible to hand over because it contained some personal details.

Mr Laddie referred to the published extracts pointing out that in January 2010 Mr Woolas was expecting to lose. The MP denied that saying his mood was up and down.

Byy the time two of the contentious leaflets had been published, Mr Laddie said the diary entry indicated his mood was changing: "It's moving our way."

The barrister asked him whether at one point he: "Felt like a superman?"

"Yes."

"A superman can't be stopped. Correct?" asked Mr Laddie.

At this point Mr Woolas looked irritated: "I suppose so."

But Elwyn Watkins's lawyers will be doing all they can to stop Mr Woolas when his cross examination continues on Tuesday.

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After the general election in the days when we were all trying to understand how the business of coalition government would work, I visited where they were well used to the process. There is a coalition of Conservatives, Liberal Democrats and the For Darwen party who run the council.

I am returning there for this week's 91Èȱ¬ Politics Show because as the coalition is now in danger of collapse. Labour is preparing to move a motion of no confidence in the administration next week.

It's because two For Darwen councillors have left the party to become independent. That leaves the Labour group and the coalition on equal numbers. It is not clear who the two independents will support in the confidence vote.

But why have they quit? One of them - Cllr Trevor Maxfield - was responsible for leisure services. He was not prepared to chop that budget, arguing larger savings could be made elsewhere.

There's a similar story in the chamber of , which is responsible for Runcorn and Widnes. There, four Liberal Democrats have left the party to go independent.

Halton is a Labour council and so those Lib Dems were not going to be directly responsible for the coming budget cuts anyway. Their resignations were a protest against the national party and the policies of the ruling coalition.

In particular, they believe government policies have hurt more deprived areas, such as Runcorn, more than richer parts of the country. They point to the scrapping of the area based grants which supported poorer areas.

"I was not elected to be a Tory," Cllr Bob Bryant told me.

One councillor in Liverpool, Ian Jobling, moved from the Liberal Democrats to Labour last month. While in Manchester, Cllr Ken Dobson has also left the Liberal Democrats but will sit as an independent. Again both spoke out against spending cuts, though the Lib Dems say they actually refused Cllr Dobson the right to stand again.

Is this evidence of council groups fracturing due to financial pressure? It's worth remembering that councillors often jump ship, not always for reasons of high principle. Indeed that the bigger story is actually how few political refugees there have been.

Cllr Simon Ashley, the Liberal Democrat group leader in Manchester, says: "These people didn't mind standing for the party and getting elected using our platform. Now when it gets tough, they're off.

"Well, I'd rather they go than stay and spoil the party I'm in."

The Lib Dems say that since the general election they have signed-up an extra 200 new members in the region.

Nevertheless there are worries here for the central parties. As budget cuts bite, the political pressure will increase and more councillors will be fearful of being associated with them.

No wonder the Liberal Democrats say they have invited the four defectors to their annual conference to win them back around.

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