After the vote – what if we’re snookered?

A week ago, when I tried to map the outcomes that would follow a close UK general election, I found it hard to find any easy path to the Lib Dems getting their primary goal – electoral reform with full PR.

In all scenarios, I suggested you should:

  • Expect an extended period of political instability at a time when the government will face a highly challenging domestic and international agenda.
  • Give at least reasonable odds for the whole enterprise ending in ignominious failure.

A referendum would de-stabilise any government, I argued. LibCon because ruling partners would campaign on opposite sides. LibLab because there’d be an obvious risk of losing the public vote, especially if the electorate was mostly motivated by a wish to punish the government.

And if a referendum on electoral reform was won, then the Lib Dems would of course want an election as soon as possible. If it was lost, the party would lose its main reason for staying in a coalition.

The fear of these outcomes, meanwhile, would make it harder to form a government in the first place. Why would any party form a deal if it couldn’t be sure what it was going to get for it?

Now we are deep into precisely this mess. The problem has been compounded by the failure of leaders to recognise the first rule of coalition-building: negotiate first with your base.

As I wrote yesterday:

[Cameron] is making a big mistake if he gets out too far in front of his party. He’s going to need every single of his MPs to back his first Queen’s Speech. And he’ll then be vulnerable to any subsequent rebellion turning into a confidence issue.

And what about Labour? […] Assume Brown goes, I simply cannot see how a new leader will have any legitimacy to lead a Lib-Lab coalition and take power as PM. For a start, there’d be a messy and lengthy succession process. After that the new leader would be damaged goods from the get-go – tarred with the ‘unelected’ brush that so damaged his (or her?) predecessor.

Sure enough, Conservative backbench support looks even more shaky now that leaders have suddenly offered the Lib Dems a referendum on electoral reform.

Meanwhile, Gordon Brown’s shock resignation (planned by a small clique) was hailed as a game changer, but a LibLab pact is already facing attack from within his own party (mutual assured destruction for both parties, according to John Reid).

Amidst the uncertainty, too many pundits have tried to maintain the fiction that they know what is about to happen.

How many times have we been told absolute tosh about the negotiations between parties, by people who make it sound as if they have spent the day sitting on David Cameron’s knee, but are actually passing on ill-informed scuttlebutt, or simply making things up?

The truth is this election has left British politics snookered. Four days after the vote, we are still no nearer to knowing what is going to happen.

I’d guess there’s still a good chance that a deal of some sort will be cobbled together in the next few days, but even then, it could fail to make it through a Queen’s Speech (for LibCon a few defectors will have enormous power, while LibLab will need the support or acquiescence of other parties).

So, at the same time, I wonder whether the only ‘impossible outcome’ – the one commentators said could never happen – may now have an outside chance of popping out of the pack.

Maybe we will see no swift resolution, no outbreak of amity, no sudden agreement on what the ‘national interest’ means. Instead, perhaps a fresh election will be the only solution left standing, and not called later this year – but reluctantly – in the next few weeks.

[Read the rest of our After the Vote series.]

After the vote: negotiate first with your base

One lesson I took from from the Northern Irish peace process was that, when building a complex agreement, trouble results if any party forgets this rule: the first negotiation is with your own base.

Republicans understood this well:

Sinn Féin has emphasised that it is involved in a double negotiation – with its political opponents on the one hand, and with its supporters on the other. ‘For the IRA’s position to have been released or made public without its grassroots having had the opportunity to engage … would have been a total disaster,’ Gerry Adams has argued.

But David Trimble failed to keep his base on side, leading to a long period where Unionists were unable to project a credible position at the negotiating table. Their leaders weren’t taken seriously, because no-one could be sure who they were really speaking for.

Back in 2003, the British government was terrified that stalemate was allowing Ian Paisley’s hard liners to grab power – expecting this to lead to a titanic (and fruitless) ‘battle of the bottom lines’. Their pessimism was misplaced. The DUP was able to advance the talks, precisely because it had a much firmer bond with its own supporters.

How does this lesson apply to today’s post-election shake out in the UK?

Nick Clegg has been forced to by his party’s constitution to keep in close contact with his party – he needs 75% of MPs and 75% of the federal executive to approve any deal. He also went out onto the streets to talk directly to demonstrators backing PR.

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Clegg may end up failing to take his party with him – but at least he seems to be trying to keep them on board.

David Cameron, however, seems much more isolated. The Guardian, of course, has an enormous incentive to sow dissent on Tory ranks (it badly wants a Lib-Lab pact that leads to PR), but its account of rebellion within the Conservative Party has a ring of truth about it.

Most damaging was that not all the dissent came from the backbench MPs (who are said to have heard little from their whips). One ‘senior frontbencher’ was prepared to dish the dirt (off the record, of course):

He ran his campaign from the back of his Jaguar with a smug, smarmy little clique – people like Osborne, [Oliver] Letwin and Michael Gove. He should get rid of all of them. The party will settle for nothing less.

For Cameron, there’s an enormous attraction in binding his enemies, the Lib Dems (or as Alex prefers, ‘the frenemy‘) into a formal coalition. He can dump unpopular policies foisted on him by the grass roots, implicate his coalition partners in all the hard decisions about spending, and leave the Lib Dems too unpopular to ever win the argument on PR.

But he is making a big mistake if he gets out too far in front of his party. He’s going to need every single of his MPs to back his first Queen’s Speech. And he’ll then be vulnerable to any subsequent rebellion turning into a confidence issue.

And what about Labour? I wonder if here, too, the interests of the ruling Brownite clan diverge from those of a (currently silent) faction in the party.

Assume Brown goes, I simply cannot see how a new leader will have any legitimacy to lead a Lib-Lab coalition and take power as PM. For a start, there’d be a messy and lengthy succession process. After that the new leader would be damaged goods from the get-go – tarred with the ‘unelected’ brush that so damaged his (or her?) predecessor.

Maybe, maybe, they might hope to wait out the storm that would accompany them taking office and wait for better economic times to heal the wounds – but they’d have a referendum on PR to fight, and that – as I argued last week – could well get ugly.

Surely better to head into opposition with a decent share of the seats and fight a government that – whether its Tory minority or LibCon – will struggle with some of the hardest political decisions of a generation.

But Gordon Brown has no incentive at all to see things that way – opening up a gulf between the leader and a party he still (just about) leads…

[Read the rest of our After the Vote series.]

After the vote – politics in an age of uncertainty

It’s a fitting end to the British general election.

We have had thirty years of entrenched majorities – as a dominant party defined the terms of the debate, and the media made sure the opposition never caught a break. In 1997, the swing from Conservative to Labour dominance was sudden and decisive.

Now we have an utterly unpredictable polling day. Tiny shifts in the share of vote between parties and, especially, its geographical distribution could have a disproportionate impact on the political landscape that emerges on Friday.

If it’s close, it will all come down to spur-of-the-moment decisions by three very tired men. Constitutionally, Brown remains Prime Minister until someone else can command ‘the confidence of the House.’

As incumbent, he also should get first dibs on forming a new government, though it is widely expected that Cameron will declare victory early, and use the media to establish his right to govern.

As Alex has warned, there’s also a possibility that the bond markets will push the pace, as they open at 1 a.m. tomorrow morning to react to election news. Yields on UK 10-year bonds have spiked this morning, but are still lower than they have been for much of the year.

If Cameron gets the most votes and the most seats, he’ll surely go on to form a government. If not, a period of Florida-style uncertainty seems more than possible. What, one wonders, will be the UK’s equivalent of the hanging chad?

Either way, we can expect some exceptionally close Commons votes, perhaps a referendum on electoral reform, and  – surely – a Parliament that won’t last for a full term. That means more elections for parties that have bankrupted themselves during this one.

This unaccustomed volatility in the electoral system seems curiously appropriate. As the past few years have shown, we now live in an era where the UK is far from being in control of its own destiny.

Look forward and we can expect the following forces to frame the government’s strategic choices.

First, global risks will continue to drive domestic policy. Voters will not actively call for a more effective foreign policy, but they will notice and bemoan its absence.

Global forces will continue to have considerable impact on their lives, with the main sources of strategic surprise coming from beyond the UK’s borders.

Over the next ten years, moreover, most risks will be on the downside. We have lived, as I have argued, through a volatile decade. There is every reason to expect risks to continue to proliferate.

Each new crisis will create political aftershocks with demands for governments to clear up the mess, matched by inquiries into why they failed to prevent the problem in the first place.

Finally, the government will find that, in most cases, it does not have the levers to manage risks as effectively as it would like to.

Whatever the next Prime Minister wants to do, he is going to find that global volatility, a lack of money, and government mechanisms that are equipped for the problems of another age, constrain his scope for action.

On top of that, he’ll only be able to solve problems if he can rustle up a coalition of other countries, all of whom will be beset by the same problems.

If – and it’s a big if – there is to be a new dominant paradigm in British politics, replacing those established by Thatcher and New Labour, then it will be because a leader emerges who has the skill to govern well in an age of global uncertainty.

I can’t imagine a more exciting time to pitch up in Downing Street, but it’s going to be a bumpy ride.

[Read the rest of our After the Vote series.]

After the vote: how would coalition negotiations work? (updated)

So we’ve looked at the composition of a potential coalition government, how a coalition might change policymaking in Whitehall, and what it might mean for electoral reform. But what about the most immediate issue: how negotiations between the parties would work on the morning after the vote?

Start with the constitutional issues. The key thing to remember is that if we do end up with a hung parliament, then the Queen will first invite Gordon Brown to form a government, because he’s the sitting PM, and only if he can’t will she invite David Cameron to take a shot.

This sequencing issue is of no small importance, because it fundamentally shapes the Lib Dems’ room for manoeuvre – and according to Philip Stephens, they’re already screwing it up. He pronounces himself “baffled” that Nick Clegg “seems intent on throwing away his best negotiating cards in the event that Britain wakes up on Friday to a hung parliament”. He explains (emphasis added):

Were Mr Clegg to repeat on Friday morning that he intended to shun the prime minister and talk to the Conservatives, Mr Brown would be obliged to resign immediately. Mr Cameron would be summoned to the Palace and would be prime minister by Friday afternoon, regardless of anything Mr Clegg said. It would then be entirely up to the Tory leader whether to talk to the Lib Dems before the Queen’s Speech on May 25 or whether to dare Mr Clegg to try to vote the new administration down.

The Lib Dems would have lost all leverage, since forcing a second election would be to risk a backlash from the voters. By contrast, by stating that he was ready to talk to both party leaders with a view to a coalition or other electoral arrangement, Mr Clegg would keep hold of his bargaining chips. Mr Brown would remain in Number 10 while talks were under way, putting pressure on Mr Cameron to match any offer to the Lib Dems from Labour.

I agree with Philip’s argument, but there’s one key variable he doesn’t take account of: the bond markets. In a radically unhelpful move, LIFFE – the London futures exchange – has announced that instead of starting off at 8am, as normal, gilt markets will be open from 1am on election night.

Bond traders will be able to react in real time to results rolling in from key marginal seats, in other words: so as well as measuring how the night’s going through the traditional BBC swingometer, we’ll also be able to track progress through yields on three month short Sterling interest rate futures. Well, great.

Because bond traders – those noted political science experts – have clear views about what a hung parliament would mean for the deficit, as today’s Wall Street Journal makes clear.

“It will be difficult for a minority government to implement credible fiscal tightening through tax hikes or cuts in spending [if] we end up with a hung Parliament,” said Mark Schofield, global head of interest-rate strategy at Citigroup.

As it happens, they’re wrong. As I argued in my post on coalition scenarios, a coalition would be more credible on cutting the deficit, not less, as long as it can hammer out a joint programme; a government with a wafer-thin majority and less than a third of the popular vote doesn’t exactly have a resounding mandate, whereas two parties, with 60% of the national vote, have much more of a base from which to be able to make unpopular decisions.

But who cares about any of that? What LIFFE’s decision means is that if we do end up with a hung parliament, then rather than having a few hours for party leaders to draw breath, get some sleep, and ready themselves for the talks ahead, the pace of events and the media narrative will be dictated by the stampede mentality of the bond markets – and potentially by a rout on sterling that could be well underway hours before the Queen is even awake, never mind receiving party leaders.

Admittedly, such a scenario would pressure party leaders to move decisively to create greater certainty for the markets. But realistically, forming a government is just the first step, nowhere near sufficient on its own. Before investors start to calm down for real, the coalition will need to agree a joint programme for cutting the deficit – and how long do you suppose that’s going to take them to hammer out?

Earlier this week I quoted Alan Beattie observing of the Eurozone crisis that “adherence to constitutional niceties is admirable, but this is a debt crisis in the capital markets of the 21st century, not the Congress of Vienna”. Let’s hope his words don’t come to have similar resonance closer to home.

Update: anonymous senior Tories are quoted in today’s Telegraph as coming close to ruling out a deal with the Lib Dems:

Even if he fails to secure an outright majority, it is understood Mr Cameron is preparing to “go it alone” and form a minority government. The Tories are confident an informal understanding with unionist MPs from Ulster could secure Mr Cameron a safe passage with his key early Commons battles, including getting a first Queen’s Speech and Budget passed …

… Mr Cameron is also relying on the reluctance of the Lib Dems or Labour to risk unpopularity with the electorate by bringing down a minority Tory government at a time of economic uncertainty. Nick Clegg, the Lib Dem leader, indicated yesterday that his party would be unlikely to force another election. Senior Whitehall sources have indicated they expect Mr Cameron to push ahead without a formal coalition if he falls short of a majority. A shadow Cabinet minister said: “We don’t need a formal coalition deal if the unionists are on board for the key pieces of legislation.”

The Democratic Unionists have eight seats in the current Parliament, having won nine of them in 2005.

[Read the rest of our After the Vote series.]

After the vote: electoral reform

I have been wondering how the road to reform of the British electoral system might play out. Assume Thursday’s vote gives the Liberal Democrats sufficient power to extract a pledge from one of the other parties to move this agenda forward, what might we expect to ensue?

An easy way to address this question is to assume the Lib Dems end up in the (perhaps unlikely) position of being given everything they ask for on the issue.

A bill would swiftly be pushed through Parliament to switch future elections to Single Transferable Vote in multi-member seats, right? After all, the party’s policy brief on political reform is unequivocal (if frustratingly lacking in detail) on the subject:

The Liberal Democrats will change politics forever and end safe seats by introducing a fair, more proportional voting system for MPs, and for the House of Lords.

Well, no, changing politics forever may not be nearly as simple as that.

The Lib Dems can hardly claim a mandate for a fundamental transformation of British democracy based on what Nick Clegg derides as a ‘clapped out’ and ‘potty’ electoral system.

After all, the party knows that polls suggest public ambivalence, at best, about PR. It would have to offer a ‘fair vote’ on a concrete reform proposal. To me, that means a referendum would be inevitable.

Lib Dems concur. The party’s manifesto describes STV as its ‘preferred’ system, but it also promises to ‘introduce a written constitution’:

We would give people the power to determine this constitution in a citizens’ convention, subject to final approval in a referendum.

So, in the Lib Dem ‘dream scenario’, a government would be expected to

  1. Set up a process that it wouldn’t fully control (and that’s not to criticise the need for inclusion and consultation).
  2. Through that process, agree a constitution that would contain a package of issues that went far beyond electoral reform.
  3. Put the whole package to an up-or-down vote and then live with the consequences.

All this would, presumably take time (creating new constituencies would then take even longer). In some ways, this would be good for the stability of a coalition. After all, the Lib Dems will have an enormous incentive to trigger a new election once PR is in place.

But there would be considerable political dangers as well. One can’t help being reminded of the tortuous process that led to the Lisbon Treaty. It also started life at a citizen’s convention and then floundered through a series of referenda.

Surely a Lib Dem-ish government would risk losing a vote on PR because the electorate objected to other parts of the proposed constitution; or was angry with the government for other reasons (highly likely, in an era of austerity) and used the referendum to punish it.

And if the referendum was rejected, wouldn’t the government fall as well? Either because the Lab Dems pulled support in a huff. Or because the government was simply discredited by losing such as important vote. Continue reading

Coalition scenarios for the UK election

So with a week to go until polling day and the polls still suggesting the possibility of a hung Parliament as the result of the gripping election campaign currently underway in Britain, this is as good a moment as any to start thinking through how such a scenario might pan out – and what it will mean for Whitehall and foreign policy.

First, the obvious question of what colour coalition we might end up with. Many in Labour had assumed that the Lib Dems’ natural inclination would be to snuggle up with them, given their shared progressive tendencies. Rather a rude awakening for them, then, to see Nick Clegg distancing himself from Labour last weekend – prompting plaintive noises from David Miliband on Twitter, who complained that

“Clegg swerve to back Tories needs to be explained to all progressive minded voteras. Old politics not new.”

But according to a senior Tory I spoke to earlier this week, it’s straightforward political logic that the Conservatives would be the Lib Dems’ first choice as a coalition partner, given the political risks they’d run for the next election campaign if they were seen to have propped up “the fag end of an unpopular government”. Well, maybe, maybe not – Lib Dem activists and MPs, most of whem are well to the left of Nick Clegg, might have something to say about that.

More interestingly, though, this same Tory also suggested to me that David Cameron himself might secretly prefer a coalition with the Lib Dems – if the choice is between that and a wafer-thin outright majority.  Cameron’s own position as party leader would be secured by an outcome that puts him in Number 10, coalitions included. But the wafer thin majority scenario would face him with the horrendous possibility of his administration being John Major 2.0 – with Number 10 held to ransom by MPs well to the right of the Cameroons’ Tories.  (As polling of the Conservatives’ prospective parliamentary candidates shows, many of the likely new intake of Conservative MPs are not, shall we say, in the same place as Global Dashboard readers on issues like Europe or climate change).

A coalition government, on the other hand, might strengthen Cameron’s hand considerably – above all when it comes to making the tough calls needed on public spending cuts. A government with a tiny majority and less than a third of the popular vote has a de facto legitimacy problem in taking brutal decisions. A coalition with 60% of the popular vote, on the other hand, will find it much easier to claim a serious mandate – if it can agree a joint program.

But it’s also too soon to rule out the possibility of a Lib / Lab coalition. There’s a whiff of panic in the air, with even seasoned commentators questioning whether Labour could be obliterated as a political force. My old boss Matthew Taylor said two days ago that “if Labour trails in a bad third next week, a divided, demoralised and impoverished Party could easily go into a long term decline, becoming a Party whose highest realistic aspiration is to a be a minority partner in a future coalition”; Rachel Sylvester, too, asks whether we’re looking at “the end for Labour”. All this may make for fertile ground for a further-reaching coalition deal than the Tories would be willing to offer – and note that Nick Clegg followed his appearance on the Andrew Marr show with an interview with Patrick Wintour setting out his terms for a deal with Labour.

Whichever of the two big parties the Lib Dems get into bed with in a hung parliament scenario, a massive what-if will be whether The Deal is just a short term political pact – on that runs through to October 2011, say – or a proper continental-style Coalition, built to last for a four year term.  And that brings us to one of the biggest questions in all this: what would be the Lib Dems’ top negotiation priorities.

To the extent that the media are asking this question, their main assumption is that it will be electoral reform that sits at the top of Nick Clegg’s shopping list.  But while that certainly does matter for them, the other sine qua non will be as many seats in the Cabinet as possible. This is all about being seen to be a serious party, ready for government. Today, the Lib Dems have zero ministerial experience, and only two front benchers with national recognition (Clegg and Vince Cable). But if they secured – say – five Cabinet seats, and held on to them for four years, then that could shift how people see the party for good.

I agree with that analysis – and would only add that given the public spending context, there’ll be much more of a premium on some jobs than others. Of course, the obviously top jobs – PM, Chancellor, Foreign and Home Secretaries – will be desirable simply by dint of profile and prestige, even if (as in the case of Chancellor) they’ll be unpopular due to spending cuts. (Interesting to note, incidentally, that in his Paxman interview, David Cameron ruled out any possibility of Vince Cable being Chancellor in a Tory / Lib Dem coalition, saying he disagreed with his underlying analysis of the crisis. That would of course increase the chances of a Lib Dem foreign secretary, always a more politically straightforward job to give to a ‘frenemy’: c.f. David Miliband under Gordon Brown, Joschka Fischer under Gerhard Schroder).

As for the other posts in the Cabinet, I think they’ll fall into two camps. On one hand, there’ll be the big public spending departments: Children & Schools, Housing & Planning, Work & Pensions, Communities & Local Government, Transport, Defence, Scotland, Wales and Northern Ireland. Running any of these departments will, for the most part, involve a whole world of pain: unpopular cuts, furious public sector workers who will spend much of their either abusing you or on strike (or both), and a steady stream of bad news stories. I’d also include Health in this list, as I simply don’t believe that any party will be able to protect it a hundred per cent.

And on the other hand, those departments that are not primarily about spending money: Business & Innovation, International Development, Energy & Climate, Environment & Food, Culture (plus the Leaders of both Houses, and Chief Whip). Given the choice, wouldn’t you rather have one of these?  And what’s interesting from a Global Dashboard perspective is that suddenly it’s the departments for global issues that are the really interesting ones, rather than (as has traditionally been the case) the big spending departments.  Also interesting is that these are some of the issues the Lib Dems are most interested in.

So much for the political stripe of a coalition government and its ministerial composition.  Next question: how might it change the way policymaking works in Whitehall?

[Read the rest of our After the Vote series.]