Clegg - The Kingmaker

With six weeks to go before the British general election, not yet called by the Prime Minister, betting on the outcome is moving quickly. The online betting store paddypower.com is looking at a very close election. David Cameron’s Conservatives had odds of 1-7 and Gordon Brown’s Labour Party have odds of 4-1. A hung parliament is looking increasingly likely. Polling on St Patrick’s day gave the Conservatives a five point lead over labour, with a 3 point margin of error. Its very close.

These odds and polls gives the spotlight to the would be “kingmaker”, Nick Clegg of the Liberal Party – the odds of him winning the election outright are 150 – 1. The Liberal Party is being courted by the outriders of the two main parties, since his guarantees of support would enable either Labour or the Conservative party to claim victory in a minority government, supported by Liberals.

But what would Clegg want in return? Clegg is, by instincts, a watered down version of David Cameron and he would be most inclined to cut a deal with the Conservatives. However, his party – once the bastions of power in nineteenth century Britain, are generally left of centre and more sympathetic to Labour. He has established four tests for power sharing or support for Government. These are: lower taxes on the poor, a pupil premium in education, a greener economy, and political reform. Each of these are accompanied by policies which he would expect his political partner to endorse.

He would also expect, though it is difficult to understand why, a raft of cabinet positions in a true coalition government. Indeed, Vince Cable, his very capable shadow finance minister, has already been in talks with officials from the Treasury and he is touting himself as “the next Chancellor”, likely to be the most unpopular person in Britain once the election is over. Britain is mired in debt and the EU are demanding that taxes increased and programs be cut dramatically so as to pay down deficits and reduce debt. Britain already has the highest personal tax rates in the G8 and has a deficit close to 12% of GDP – twice the average of the EU. Personal debt levels of British households are also very high - 170 percent of overall annual income, compared with 130 percent in the United States – indicating that any reduction in social support services or increase in taxation will be very difficult for the public to tolerate.

Clegg’s thinking is based on the idea of a coalition – power sharing. Based on the election results, whoever is successful in courting Clegg would allocate a number of key cabinet positions to the Liberals and would form a power sharing executive. The least likely position the dominant party will allocate to the Liberals is the position of Chancellor of the Exchequer – the finance ministry. This will be the central position in any British government for a decade to come. More likely are positions in Education, Health, Social Services or Justice. The problem here is that the benchstrength of the Liberal Party in these portfolios is weak.

It is also unlikely, given Cameron’s desire to be an agent of social change in Britain – especially in relation to health and education – that a Liberal coalition would last long. Disputes at cabinet, significant tensions over policy direction would flare quickly and the whole enterprise might fall apart almost before it got started.

A more likely model for resolving a hung parliament is the Canadian model now in place in Ottawa. The party with the most seats, but not enough to form a majority government, acts as the Governing party and trusts in the support of the house issue by issue. While this is less stable in theory than a coalition, given the scale of the challenge Britain faces, it is more likely to be the case that the Conservatives could govern in this way for a period of time – say two years – before being defeated on a key issue. It is known that the “backroom boys” in Cameron’s conservatives are looking closely at Stephen Harper’s strategy for maintaining an aggressive minority government.

Whatever happens, this will be the most interesting election in Britain since Thatcher was first elected Prime Minister on 4th May 1979. Should Cameron repeat her success on the 6th May 2010, he will have an urgent set of tasks to start to restore confidence in Britain’s economy and to reduce the size, scope and intrusion of Government. Should Labour win, which is still a possibility (though remote), Brown will have succeeded in proving that miracles can happen and that Lazarus is not the only person to have come back from the dead.

What we know for certain is that paddypower.com, in taking all of its bets on the outcome of the election, will be the sure fire winner.