Andrew Grice: Past experience suggests that Clegg shouldn't count on a hung parliament

Inside Politics

"A hung parliament would not be a dream. It would be a nightmare." So wrote Paddy Ashdown, the then Liberal Democrat leader, in his diary ahead of the 1992 general election.

Yet his party, convinced that neither the Conservatives nor Labour would win an overall majority, spent months drawing up its strategy for a hung parliament. It obsessed over how to secure proportional representation for Westminster elections. There were seminars, position papers and endless internal debates.

The Liberal Democrats even had a "secret agent" who sounded out the two big parties. Lord Ashdown spent two days war-gaming with his party's German counterpart. He held talks with the Cabinet Secretary and the Queen's Private Secretary. One of his aides recalled this week: "There was a last-minute panic in Whitehall about the opinion polls. We were called in for secret meetings. We were completely distracted in the final week of the campaign."

It was all a waste of time. The Tories under John Major won an overall majority of 21.

Nick Clegg is trying to learn the lessons. He knows he can't avoid questions about a hung parliament. So he tries to turn the inevitable question of "who" his party would support into "what" it would demand, so the voters know something about what it stands for.

Yet history may be repeating itself. Whitehall insiders report that, following recent polls, Sir Gus O'Donnell, the Cabinet Secretary, is taking a close interest in Liberal Democrat policies. "The mandarins are limbering up for a hung parliament," says one source.

There is talk in Whitehall of a formal coalition and, in an interview with me this week, Mr Clegg insisted that all options including that were on the table. A more likely scenario is an understanding according to which the Liberal Democrats would support a minority Tory or Labour government (whichever won the most seats) in key Commons votes such as the Queen's Speech and Budget.

One reason is that, unlike Labour and the Tories, the Liberal Democrats are a democratic party. Their representatives' meeting in Birmingham this weekend would matter. Their leader's hands might be caught in a "triple lock"; he needs the support of his party's MPs, federal executive and members for a post-election deal, which could involve calling a special conference or ballot of members.

Mr Clegg is right to say that politicians must await the judgement of the voters. That doesn't stop the media speculating or politicians playing footsie. The view in Labour land, as one Brown aide put it, is that "Clegg would incline towards the Tories but his party's instincts would lie more with Labour". Tricky, especially when the timing and scale of public spending cuts is the number-one issue.

The cumbersome internal procedures of the Liberal Democrats will only heighten fears about a hung parliament in the financial markets, which were spooked by a poll showing a 2-point Tory lead two weeks ago.

The City of London is used to a quick transition after elections (much quicker than in many other countries). It wants stability and an early sign that action will be taken to cut the deficit, not uncertainty or the prospect of a second election. The markets would prefer a clear winner to the unknown quantity of possible Liberal Democrat involvement in a Tory or Labour minority government. There remain concerns about Gordon Brown's commitment to real cuts, even though he now uses the c-word.

I don't pretend to be an expert on the City. But it's pretty clear to me that some City experts don't really understand politics as they advise clients on what a hung parliament might mean. There is even talk of an all-party campaign to take Britain into the euro involving Mr Clegg, Lord Mandelson and Kenneth Clarke. Now that would be fun to watch but it is fantasy politics.

The Tories are warning that a hung parliament could provoke a run on sterling and soaring interest rates if Labour clung to power. They will no doubt laugh off Mr Clegg's promise to be a "guarantor of fiscal stability". Yet the Liberal Democrat leader has forced his party to curb its spendthrift ways and his party has other serious figures who could bring something to the table after an inconclusive election. Vince Cable, the Treasury spokesman, warned that the debt bubble would create a financial crisis long before any other British politician. Chris Huhne started a successful City business in an office with a phone and nothing else. David Laws is a former investment banker.

As the Liberal Democrats gathered in Birmingham yesterday, one adviser summed up the nation's mood well: "Labour doesn't deserve to retain power but the Tories do not yet deserve to win it."

The trouble for the Liberal Democrats is that they can't claim they could form the next government or campaign actively for what they prefer to call a "balanced parliament", which sounds less threatening.

Although Labour is trying to revive anti-Tory tactical voting, the British people cannot vote for a hung parliament. Talking up the prospect arguably makes it less likely to happen. Despite our flawed electoral system, in recent times voters have found a way to make a decision. Mr Clegg should not bet on a hung parliament yet.