Wednesday, 12 May 2010

Best laid plans?

David Cameron has spent much of the day fleshing out his new Conservative-Liberal Democrat coalition government following his appointment as Prime Minister in the wake of Gordon Brown's resignation. Of the principal appointments, George Osborne becomes Chancellor of the Exchequer, former Tory leader William Hague Foreign Secretary and former Chancellor Ken Clarke (briefly tipped to get his old post back) Justice Secretary. Liberal Democrat leader Nick Clegg will as Deputy Prime Minister have responsibility for reforms to the political system, while his party's Treasury spokesman Vince Cable goes to a Department of Business shorn of its higher education role (and in fact looking suspiciously like the one we had until eleven months ago). Former Conservative leader Iain Duncan Smith is expected to be appointed Work and Pensions Secretary, apparently as a concession to the party's right wing. Commentators have noted the unexpectedly generous allocation of Cabinet posts to the junior governing party, in line with Mr Cameron's pledge of a "proper and full coalition".

Of still greater interest is the agreement between the two coalition partners. Much of its content had already seeped into the public domain, but the full seven-page document is remarkable as a record of the parties' undertakings not to mere voters whose whims can notoriously be sidestepped, but rather to each other. As a blueprint for government it's very much an outline, understandably amid circumstances of economic uncertainty and an unexpected inter-party arrangement. As a statement of what the parties have agreed and what each has conceded, it makes revealing reading. Gone for the duration are LibDem hopes of Proportional Representation, along with Conservative plans to raise the Inheritance Tax threshold to £1 million. Tories will get both their £17bn renewal of the Trident nuclear missile programme and £6bn of controversial government spending cuts this year (approved today in a surprising statement by Bank of England governor Mervyn King), and have even saddled a LibDem Treasury minister with the task of identifying where the latter money's to come from. Gains for low-paid workers from raising the Income Tax threshold in Line with LibDem policy seem likely to be offset in part by higher employee National Insurance contributions (though employers have been spared such an increase in payouts), but there's to be a restoration of the link between the basic state pension and average earnings, again offset by an earlier start in raising the pensionable age.

All this is only a start. Conservatives are determined to reduce the large annual government fiscal deficit occasioned by the recession and 2008 bank bailout, and to reduce the projected cumulative national debt far below its expected level of £1.4 trillion in 2014. Reconciling the resulting austerity measures and likely increases in indirect taxes with the Liberal Democrats' social policy agenda will be an uphill task. Labour politicians are already claiming an influx to their party of grassroots LibDem defectors horrified by Tuesday's deal: the majority of the party will doubtless follow its MPs and Federal Executive in supporting their leaders' coalition venture, but the electoral stakes remain high.

One curiosity of the arrangement is that the two-party alliance is to last for a full Parliament, with the next election due on 5 May 2015 and quinquennial elections to follow, and with a majority of 55% of the Commons required for an early dissolution. This last device is designed to reassure Liberal Democrat MPs that their larger and far richer partner won't scrap the deal at a moment favourable to it and seek a mandate to rule alone, though its suitability as a permanent constitutional mechanism may be questioned. Oddly, though, it emerged today that the two parties will continue to campaign independently, putting up rival candidates against one another at by-elections: this will probably entail some loss of seats after the government's initial honeymoon period, but that is unlikely to threaten its survival. What it means for the Liberal Democrats remains to be seen.

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