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Possible Liberal Democrat/Conservative arrangement

Last Updated: Tuesday, August 10th, 2010

Dear subscriber,

Welcome to the latest edition of the ConservativeIntelligence newsletter.

There may well not be a hung Parliament – but that’s what the polls suggest as a possibility. If no party gets a Commons majority there may well not be an informal Conservative-Liberal Democrat arrangement, or a formal Conservative-LibDem coalition – but this note examines the areas of policies where co-operation is (a) Relatively Easy; (b) Possible (c) Improbable and (d) Difficult.

But, before getting into the detail, some big picture observations:

1) Although the detail of the manifesto commitments are important, the gap between the leaderships of the parties is much smaller than the MPs and members. Most LibDem MPs are to the left of Clegg and most Tory MPs are to the right of Cameron. Both leaders will have limited wiggle room on agreeing anything other than short-term co-operation.

2) The LibDem manifesto’s populist tilt at the nation’s wealth creators is deeply embedded, and a serious potential obstacle to an understanding.

3) When policy touches on the environment, the poor, local freedom – the two parties tend to be closer. On the economy and public services, they could strike a short-term bargain. But when policy engages primal emotions – sovereignty, defence, national identity, Britain’s place in the world – the parties gaze in different directions although might agree to maintain the staus quo.

4) If there is to be any agreement, it’s much easier to see a time-limited understanding between them in a hung Parliament – if that – than a formal coalition government.

Areas in which a Conservative-LibDem understanding looks relatively easy to reach.

Climate change, energy security, the environment and farming

Nuclear power remains a potential stumbling block – the Conservatives are for (though without public subsidy), the LibDems against. But otherwise the two parties paths tend to converge. Both are set on a global climate change deal, reducing emissions, greater energy efficiency, creating green jobs, encouraging renewables, raising home insulation, more offshore provision, carbon capture, more local energy production, and supermarket regulation. The Conservative accent is on energy security and a greener national grid; the LibDems on climate change and a European dimension (the party wants a European “supergrid”), but their views are compatible. Cameron’s shift to green politics – which has upset a large number of his own MPs and candidates – could pay dividends in a hung Parliament.

Transport

Both parties, unlike Labour, oppose a third runway at Heathrow, are against second runways at other major airports, want to replace air passenger duty, support network rail being more accountable to its customers, and would scrap the backdated ports’ business rates demand. The Conservatives would view the LibDems as too pro-rail rail (the party wants to cut fares), and the LibDems would view the Tories as too pro-road (they would question the Conservatives’ proposed fair fuel stabiliser, and their plan not to fund new speed cameras. The parties also differ on road pricing – the LibDem manifesto wording implies a national scheme, which the Conservatives oppose). But on the big ticket items, the two parties are close – another product of the Tory leadership’s greenery.

Civil liberties

Although the framework within which the two parties view civil liberties is very different – the Conservatives want to scrap the Human Rights Act, the Liberal Democrats to keep it – both are committed to scrapping ID cards, the national NHS computer scheme, protection for personal data, the reclamation of DNA data by innocent people, the use of surveillance powers by local councils and the national child database. The LibDem manifesto is more forceful on these matters than its Tory equivalent, but they have a fellow-spirit in Dominic Grieve, the party’s Justice spokesman. Grieve has said that replacing the Human Rights Act with a British Bill of Rights is not a priority for a Conservative Government, a view that paves the way for accommodation.

International development

Again, the worldview which informs the two parties’ view of international development is very different. The Conservatives and LibDems have different takes on foreign affairs generally and the EU in particular. But although the LibDems are spikier against vulture funds and tax havens, Cameron’s firm commitment to meet the 0.7 per cent aid target (Vince Cable has vetoed ringfencing the development budget) is a sign of his determination to woo LibDem-leaning voters – and makes a settlement between the two parties on development easy to reach, since both are committed to writing off debt, and combatting HIV/AIDS, malaria and TB, and supporting the supply of such basic facilities as clean water.

Local Government

Localism – the devolution of power from Westminster and Whitehall – is a longstanding Liberal Democrat bias. The Conservatives’ traditional suspicion of strong central government, diluted in some ways under Margaret Thatcher, has been strengthened significantly since 2005. Two independent-minded politicians – Dan Hannan, an MEP, and Douglas Carswell, an MP – blazed a trail with “The Plan”, a heady localist manifesto. The Tory leadership, suspicious of Labour’s control of the commanding heights of Westminster and Whitehall, has responded sympathetically. Both parties want to close government regional offices, put regional development agencies in the hands of local authorities, tear up inspection regimes for local councils, empower local people to use elections to control policing and implement the Sustainable Communities Act. In a few respects, the Conservatives are more localist than the LibDems – in their support for local referendums, for example.

In most others, the LibDems are more supportive of local authorities’ autonomy: for example, they haven’t signed up to the Tories’ scheme for elected Mayors. They also still hanker after a local income tax, and have no equivalent of the Conservatives’ “post-bureaucratic age” – their plan to put most government spending online. Although the two parties agree that Labour’s Home Information Packs scheme should be scrapped, they agree less on housing. For example, LibDems want to return business rates to local government outright. The Tories don’t, proposing rather to allow councils to keep the business revenue they generate. But on localism, both parties have plenty of room to manoeuvre for agreement.

Areas in which a Conservative-LibDem understanding looks possible.

Deficit reduction

The LibDems want a one-year stimulus package. The Conservatives want to start cutting now – if only by one per cent of Government spending. But there is significant convergence. Both parties want to scrap tax credits for the better off, scale back child trust funds, cap public sector pay (protecting lower paid workers), make efficiency savings (the LibDems claim to have identified £15 billion a year), and – most tellingly – the Tories proposed Office of Budget Responsibility and the LibDems Council on Financial Stability clearly overlap in scope (if not in membership). A potential stumbling-block is the bank-bashing stance increasingly taken by Vince Cable. The LibDems are proposing to break up banks, bring in a banking levy and split retail and investment banking. Although George Osborne wants some banks to transfer bonuses on to their balance sheets rather than pay them to their employees, the Conservatives might view the Cable package as punitive. Nonetheless, key details of the two parties’ plans are eerily similar, even if their views on an immediate stimulus are unambiguously different.

Public Services – Schools, the NHS, Universities

As recently as during the last Parliament, the idea that the two parties could share a view of the public services would have been laughed to scorn. The Conservatives were the champions of radical reform, the LibDems the defenders of the status quo. But under Clegg, his party’s view has been transformed, with David Laws, the clever right-of-party-centre Orange-Booker who now leads on education, acting as a pathfinder. The detail of the LibDem education policy differs substantially from the Tories’ – for example, the LibDems want a substantial role for local authorities – but the broad sweep has converged: both Laws and the Conservatives’ Michael Gove want a pupil premium for poorer children, streamlined testing, a slimmed-down curriculum, independently-assessed exams, freedoms on pay and conditions. On health, the Conservatives want an independent board to fund the NHS centrally; the LibDems new boards to plan the service locally. But the latter may be ready to hand the former a tantalising “get out of jail free card”. For on money, the Tories, fearful of their reputation in some quarters as axe-wielders, are proposing to protect the NHS budget. The LibDems, boldly, are claiming that efficiency savings can be made. A deal between the two parties might allow the Conservatives to rein in the NHS budget, thereby allowing other Departments a little more breathing-space. Furthermore, the Tories and Libdems are of much the same view on public health provision. The latter still propose to scrap “unfair” tuition fees, but have scaled back their timeframe for doing so in most cases to six years. Such realism is a green light signal to the Conservatives. Getting agreement across the vast range of public service issues would be a vast endeavour – mainly because of tensions between the LibDems’ more reformist leadership and its regressive MPs – but it no longer seems to be mission impossible.

Community relations, Big Society, Culture

The LibDems won’t take the robust view of the Conservatives on integration. Or share David Cameron’s support for a national service scheme – even a voluntary one. But they won’t entirely share Labour’s reflex hostility to the Tory leader’s Big Society, and a possible meeting-ground is the LibDem idea of a Mutuals, Co-operatives and Social Enterprise Bill. The Conservatives have dabbled in encouraging Mutuals for some time. There is a fledgling Conservative co-operative movement – formed by influential Tory PPC Jesse Norman – and co-operation in this area is well and truly possible, bolstered by general agreement on the broad contours of culture policy – the rolling-out of broadband, maintaining free entry to museums and galleries, support for grassroots sport, no great changes to the BBC.

Pensions

As previously stated, the LibDems want to tear up the present system of tax breaks for pensions, which the Conservatives are likely to fight shy of. But there’s been a convergence of view for some time between the two parties on linking the state pension to earnings, scrapping the annuities rule, and even overhauling public sector pensions – though both are cautious on the matter. Furthermore, they’re both committed to acting on Equitable Life. On pensions, the two parties are now very close – with the LibDems taking a more austere view on trimming parts of the Winter Fuel Allowance.

Areas in which a Conservative-LibDem understanding looks improbable.

Tax cuts

Tax cuts are the other side of the coin of deficit reduction. But although the two parties are close on the latter, they differ wildly on the former. The Conservatives want to stop Labour’s NIC rise now, but apart from their business package appear to want to get the deficit down before honouring their tax commitments – on inheritance tax, stamp duty and marriage. As an establishment party, they’ve avoided the specifics of a Shadow Budget – remembering the damage Labour’s did for them in 1992.

The LibDems have blown hot and cold about the NIC increase, but are signed up to an elaborate and detailed cut for low earners, paid for primarily by a mansions tax, cuts in pensions relief for the better off, and what some commentators see as an unconvincing crackdown on tax evasion. As an outsider party, they’ve sought to establish as sharp and distinctive a profile on tax as possible. The Tories have also made it clear that they want to see the 50p top rate go as soon as possible – an aspiration that Cable doesn’t seem to share. Unless both parties are prepared to junk large parts of their programme, tax looks to be a stumbling block to any informal arrangement – let alone a formal coalition.

Business

The LibDems have a pet scheme for a green infrastructure bank. The Conservatives are keen on green jobs. Their plans for corporation tax cuts, tax simplification and NI relief for small businesses are part of a characteristically pro-business agenda, but would seem unexceptional. Both parties want less regulation, and support a one-in, one out scheme. But, as with tax, the LibDems are in general going for populism – a startling mix of a “public interest test” on business take-overs from abroad, specific conditions on a Royal Mail sell-off, new regional stock exchanges and public company pay declarations. The bulk of this package would be fiercely opposed by the Conservatives.

Families, women, disabled people.

Allowing parents to share maternity leave, new Sure Start health visitors, tackling on-line bullying, a stronger youth service: the first and third proposals are LibDem, the second and fourth Conservative. There’s little difference, so what’s the problem? The answer is: marriage. Cameron’ s support for a part transferable allowance between married couples was a vital element in his election as Tory leader and remains his chief offering to the Daily Mail. But backing for such a tax cut is an offence to everything that most LibDems stand for. It’s hard to see room for compromise here. Most socially conservative measures would die under a LibCon pact.

Areas in which a Conservative-LibDem understanding looks difficult to reach

Work and welfare

The Conservatives are planning to cut benefits for those who refuse work. The LIbDem manifesto has almost nothing to say on the matter – a startling gap given the detailed nature of the publication. It’s difficult to imagine a LibDem Parliamentary Party falling in behind the Tories’ programme.

Immigration

The Conservatives want an annual limit on non-EU economic migrants, a new border police, a tougher visa regime, and transitional controls on any new EU entrant. The LibDems agree on the border police, disagree on the other points, and want a region-based system so that migrants will work where needed – which many observers believe to be hard to enforce. Little room here for a meeting of minds. David Cameron has ridiculed the Clegg policy on regionalising the immigration regime.

Crime, Police, Justice

The LibDems want fewer six month sentences and the Government’s prison-building programme scrapped. The Conservatives are committed to abolishing the Government’s early release scheme for prisoners. There is some common ground on rehabilitation, and control of police chiefs by elected people or bodies – but, overall, not much. Agreement on the issue will be even harder if, as is expected, The Tories bombard the “soft” Liberal Democrats on this issue in the remaining weeks of the campaign.

Foreign Affairs, National Security, Europe and Defence

On Afghanistan, the Conservatives are in much the same place as Labour; the LibDems are “critical supporters”. On Europe, the LibDems want to be “at the heart of Europe”; the Conservatives are committed to a Sovereignty Bill and the repatriation of powers. On defence, the Conservatives will replace Trident; the LibDems rule out “like for like” replacement. Edward Llewellyn, David Cameron’s Chief of Staff and former adviser to Paddy Ashdown, would be critical to finding agreement on foreign policy.

Cleaning up politics

Recall ballots for MPs, capped donations, curbs on lobbyists, even the requirement that Peers be domiciled for tax purposes – both parties are committed to these measures. But this apparent agreement on individual items makes deep disagreement on fundamentals. The LibDems are wholeheartedly committed to a federal UK, a written constitution, an elected upper house and, above all, proportional representation: a deal-breaker, it seems, for Clegg. Cameron supports an Upper House that’s at least part-elected, but it’s not a priority for him: indeed, to many in his party the proposal is a threat, as in their view is the rest of the LibDem package. PR would probably split the Tories and possibly bar them from office for many years. It’s impossible to see how any Conservative leader could sign up to full PR, even if he wanted to, and stay in post.

As always, please call me on 0771 726 1570 with any questions.

Tim Montgomerie

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