Deal or No Deal

(Written on 11th May - Two Hours Before the Change of Government)

It is now a five full days since the British election and no new British Government has emerged. While it is looking possible that the Conservatives and Liberal Democrats could secure agreement at a senior level between their two parties, it is not at all certain that the political parties themselves will agree to the coalition that emerges. Meetings later today with the respective parties may raise new roadblocks to the emerging deal and show just how far out in front of their parties their leaders are.

Meanwhile, Prime Minister Gordon Brown has also been in meetings with Nick Clegg, the Liberal Democrat leader, countering the offers being made by the Conservatives and suggesting that, if the process breaks down, then Labour would be willing to enter into discussions with the Liberal Democrats. In particular, Brown has been stressing his willingness to quickly introduce legislation for a referendum on proportional representation – a key issue for the Liberals. He has also resigned as leader of the Labour Party effective after the Party Conference in September so as to remove himself as an obstacle to any workable agreement. (Importantly, he has not resigned as Prime Minister).

The problem with a Lib-Lab pact is arithmetic. Between the two they do not have an overall majority and need the support of some independents and others to enable a stable government to take place. The Scottish Nationalists and the SDLP of Northern Ireland both see this as an opportunity to secure both transfers of powers and new cash investments in exchange for their offers of support. The Scottish Nationalists will only act in the interest of Scotland and for them its about further aspects of independence.

The problems with a Con-Lib pact are more complex. First, David Cameron has been adverse to major electoral reform. His initial offer was for an all party process to define the options – hardly exciting to the Liberals, who have been party to such conversations since 1922. It is now clear that Cameron is offering a referendum, but has indicated his party would oppose any change in the electoral system. Second, there are real identity issues for the Liberals. The Conservatives are seeking to make large and immediate cuts in public spending as means of lowering deficits and debts. Such moves are popular, until their full impact begins to be felt. The Liberals, as coalition partners, will be blamed for not moderating (or worse, fully supporting) the cuts and will suffer electorally. Finally, engineering the Liberal and Conservative parties to constantly vote with an agreed agenda will be a constant challenge for both leaders – it may, in fact, become their preoccupation. Rather than a clear majority (the coalition would, in theory, have over 370 votes when the threshold required for a successful vote is 326), each vote would see defectors on both sides.
Clegg is playing both sides and did so, for a time at least, secretly thus giving the lie to his insistence that transparency is a key value in politics. Also, his behavior raises questions about whether his motives are as direct as they once appeared. Is he seeking the best for the Liberals in terms of political reform – which all of his acolytes stress is the key issue – when Rome is in fact burning. As Conservative acolytes are continuously saying, very few of the British people see electoral reform and reform of the Lords and other aspects of the constitution as being critical when the economy is so fragile.

The elephant is the room in these discussions is the economy. The key difference between the Conservatives on the one hand and the Lib-Labs on the other is the speed at which they think the deficit should be tackled. The very able finance critic for the Liberals, Vince Cable, sees the real immediate challenge to be continuing to support the green shoots of recovery from recession – acting too quickly to cut the deficit and tackle Britains very serious excessive public borrowing and spending may harm this recovery. He wants to wait at least a year before getting serious about cuts. Gordon Brown and his Labour Chancellor Alistair Darling share this view and most of the left of the Labour Party still think it possible to recovery from recession and save a lot of the public services currently slated for cuts – after all, most of them were put in place by Labour since 1997.

The Conservatives take a very different view. They want serious and deep cuts now so as to return confidence to the markets, secure new investment and create a reenergized economy which will spur growth. Reducing government and increasing the focus on the private sector is what they see as essential in returning Britain to being a country which lives off its wits and skills rather than off the teat of taxes and public sector borrowing. Over half of the UK’s GDP is derived from Government activity (its 65% in Wales and 62% in Scotland).

It is these very different philosophies, coupled with the fracas over electoral reform, which is the heart of the Liberal dilemma. Who should they get in bed with?

There are another set of considerations, linked to a particular view of democracy. The British people gave the Conservative party the largest share of the vote and the largest number of seats. If the Lib:Lab pact emerges and the Labour party is kept in power then it looks like the party that had the lowest share of the votes, colluding with parties that hardly anyone could vote for, will be seen to be keeping in power the party that seventy two per cent of the people did not want to Govern – Labour. It will be a gift for the Conservatives. They will use the Lib:Lab pact as a vehicle for demonstrating that, while on the one hand Nick Clegg seems most concerned about democracy, in reality all he is interested in is raw power.

The second set of considerations for Clegg is that he will be doing a deal with a party without a known leader. Gordon Brown, throwing the dice one last time, has resigned as party leader after one of the worst showings for the Labour Party in eighty years. While there are several candidates to replace him – Alan Johnson, Ed Balls, Ed Milliband, David Milliband, Jack Straw to name just a few – the Prime Minister has considerable personal power, whatever deal with the Liberals say. One power he has, unless this is changed by the deal itself, is when to call an election. Another is to make key appointments. Would you enter a long term political relationship with Mr X?

We should known the outcome of all of this very soon – possibly as this “goes to the web”. What is obvious to those of us with memories is that, whatever the deal says in writing, there will be another election in Britain sooner rather than later. Some pundits are suggesting November, but the more common assumption is that it will be this time next year when the coalition or agreement falls apart. What will be critical in that election is the judgment of the people on the Liberals and their current behavior as well as the state of the economy. Its back to the economy and trust.