Andrew Grice: Lib Dems must talk to the Tories but they have more in common with Labour

A number of Tories will not feel comfortable in bed with the Lib Dems and the feeling is mutual
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The Independent Online

A new figure made his debut on the political stage yesterday: "David Clegg." It was a slip of the tongue by Henry McLeish, Labour's former first minister in Scotland, as he spoke about David Cameron and Nick Clegg, but it summed up the confusing world of the new politics after last week's election.

Forging a marriage of convenience between the Conservatives and Liberal Democrats is not proving easy as negotiations on their prenuptial agreement continue. It could yet be called off before they reach the altar out of fear that it would end in a messy divorce. That is one reason why some figures in both parties believe a fully fledged coalition with senior Liberal Democrats sitting in a Tory cabinet is less likely than an arrangement under which Mr Clegg's MPs would support (or not oppose) a minority Tory government in key Commons votes such as on next month's Queen's Speech and the emergency Budget to follow.

Even if the Lib-Con negotiators reach a deal, MPs in both parties fear trouble ahead. A significant number of Tory MPs will not feel comfortable with getting into bed with the Liberal Democrats and the feeling is mutual.

While the Tories' deep-seated hostility to electoral reform is seen as the most likely deal-breaker, it is not the only problem. The central issue facing the new government, the economy, may also prove a stumbling block and was central to yesterday's marathon negotiations at the Cabinet Office.

There are limited areas of agreement on regulating the banks and curbing tax credits and child trust funds. Some Tory tax proposals opposed by the Liberal Democrats could be kicked into the long grass; cutting inheritance tax and rewarding marriage in tax system were in any event likely to be delayed until later in the parliament due to the lack of money.

The Tories were hostile during the election to the flagship Liberal Democrat plan to raise tax thresholds to £10,000 but some Tory insiders suggest it could now be on the table. The move would benefit all taxpayers, not just the low paid, and so could be acceptable to the Tories as a long-term objective to be phased in as resources allowed.

Some Tories hope this could be a prize for Mr Clegg to display to his own party, a possible diversionary tactic from electoral reform. They might be disappointed. It might prove easier in the consensual atmosphere of the Cabinet Office to agree a form of words on voting reform than it would be to sell it to the the Liberal Democrats' MPs, federal executive committee and members – who, under the party's rulebook, have to approve a deal.

The £163bn deficit in the public finances loomed large in yesterday's talks – to reassure the City of London and because there is a fundamental disagreement between the two parties. The Tories do not want to give up their manifesto pledge to start the cuts this year, but the Liberal Democrats share Labour's concern that this could wreck the recovery.

While the Tories and Liberal Democrats could reach a headline agreement on moving to a "low carbon economy," that is motherhood and apple pie and there could be tensions over the environment.

Mr Cameron hugged a husky when he became Tory leader to show his personal commitment to tackling climate change. But the Liberal Democrats, the most green of the three main parties, are worried about the sceptics on the Tory backbenches. Many do not believe that climate change is man-made and opinions have hardened since the controversy over leaked emails from the scientists at the University of East Anglia.

Then there is Europe. Many Liberal Democrats feel revulsion about the Tories' extreme right-wing bedfellows in the European Parliament after their walk-out last year from the mainstream centre-right European People's Party, to which the parties of Angela Merkel and Nicolas Sarkozy belong.

Mr Cameron is not seeking to "pick a fight" with the European Union, but "events" in Europe are not under the control of the British Government – as the current crisis in Greece shows. A big majority of Tory backbenchers will want to hold their party leader to his word about repatriating powers over employment laws to Britain. The pro-European Liberal Democrats will not want to go down that route.

Although Mr Clegg has to play this game of political poker with the hand dealt him by the voters, many senior Liberal Democrats would not have chosen it. The blunt truth is that the Liberal Democrats have much more in common with Labour than the Tories – on the economy, Europe and constitutional reform.

On "fair votes", the crucial difference is that Labour would recommend a "yes" vote in the referendum it has already promised. Even if the Tories offer a referendum, Tory hostility to change is so strong that Mr Cameron could not promise to campaign for it. More likely, he would have to urge a "no" vote.

Cabinet ministers have not given up hope that the Lib-Con talks will collapse and that Labour can yet forge an agreement with Mr Clegg. For a Lib-Lab pact to happen, Mr Brown would need to make the ultimate sacrifice and give Mr Clegg a timetable for his own departure. His legacy would be the "progressive alliance" which he saw as his best hope of survival, but he would not be around to implement it.

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