Thursday, 15 April 2010

Hanging in the Balance

I have written about hung parliaments for this week's Public Finance:

Liberal Democrat leader Nick Clegg said last Sunday that a narrow victory for either Labour or the Conservatives could create ‘social unrest’. And the opinion polls still suggest that the Conservatives will find it difficult to secure an overall majority on May 6.

Media and City pundits tell us we are ‘in danger’ of having a hung Parliament. Yet if that’s what our democracy produces, why should we be so afraid of such an outcome?

Clegg might be mixing disingenuousness with party advantage: he refuses to say who he would favour in a hung Parliament, yet clearly wants one to give the LibDems the upper hand. Even so, in the current economic circumstances, such a result could be better not only for the country but also for the main party leaders than a narrow majority for either of their parties.

Indeed, a weekend poll for the Independent on Sunday showed that Labour could benefit most from talk of a hung Parliament: 51% of voters want the party to be in power either on its own or as part of an alliance with the LibDems (with 26% favouring a Lib-Lab alliance and 25% a majority Labour government) against 49% saying the same about the Conservatives (split 29-20).

Yet saying so is heretical for Prime Minister Gordon Brown and Conservative leader David Cameron, even if LibDem voters are actively courted by the likes of Transport Secretary Lord Adonis. But across Europe, coalitions are the norm. In part, that’s the result of their more proportional electoral systems: governments need more than 40% of the popular vote. It is also often the result of a political system that is rather more honest with the voters than ours.

Here, po-faced hedge fund managers tell us that a hung Parliament would cause a run on the pound. They seem to forget that British political parties are broad, often disunited coalitions. Labour’s rebellions have reflected strong differences between Left-wing radicals and a centrist leadership. In Germany and Scandinavia, such views are represented by several different parties.

Similarly, John Major’s Conservative government in the 1990s struggled as Eurosceptic and Europhile MPs constantly bickered. In a Cameron-led government, there would likely be big differences with those who favour a return to Thatcherite certainties, as rows over grammar schools have shown.

In truth, there is more uniting the mainstream leadership of the three main parties – on issues such as policing, education and the need for spending cuts – than they might care to admit or than this week’s manifestos might suggest.

But Clegg’s strongest point was about the difficulties involved in making public service cuts or raising VAT, decisions a new government will have to make. Chancellor Alistair Darling has already said that the cuts will be deeper than anything experienced in the Thatcher years and his Tory counterpart George Osborne is keen to be seen as an even more fervent cost-cutter.

These cuts will be deeply unpopular. One only has to look at Ireland for a flavour of what might lie in store: higher staff contributions to public sector pensions, big public sector staff and pay cuts, major reductions in public spending. The idea that a party with less than 40% of the popular vote would be better able to withstand this than a government with the combined support of say, 55% or 60% of voters, is fanciful. Whether this involves a formal coalition or agreement to support a minority administration, it would still potentially be stronger than one party governing with a slim majority.

Of course, all this presents a real dilemma for the LibDems. It was easier in Scotland, where they happily supported Labour. That is, as Adonis mischievously pointed out last week, where their activists see their natural allies. Indeed, Clegg’s reluctance suggests that he and his allies feel closer to the Conservatives.

The LibDems need to tell voters where they would stand if no party won an outright majority. In Germany, federal voters knew that the liberal Free Democratic Party would back Chancellor Angela Merkel’s Christian Democrats in last September’s elections even if the details had later to be agreed.

But whatever happens, we shouldn’t buy the myth that what might result would be any less stable for the country than a single party government with a tiny majority. It might be just what the economy needs.

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