Given there is no sign at all that the Conservative’s disastrous 2010 campaign is likely to improve, this question of the economy’s performance with a minority governmetn will continue.
A note from CitiGroup puts the case for the prosecution:
There is no consensus across the parties on fiscal policy, while Lib Dem voters disagree with the Conservatives on fiscal policy and prefer Labour’s policies on most other key political issues. Lib Dem voters would rather go into coalition with Labour than the Conservatives. We suspect that a hung parliament would only be able to implement and sustain major fiscal consolidation if boxed in by a market crisis. Gilts and sterling remain vulnerable.
The author acknowledges Nick Clegg’s recent vow ‘not to take any risk with UK plc’, and suspects that they LibDems will not cooperate unless given the Holy Grail of electoral reform in return. Which the Conservatives will never grant.
Clegg is getting annoyed:
“David Cameron and George Osborne are stoking up fears in the markets, actively trying to destabilise the pound and reduce the government’s ability to borrow. It’s like a protection racket: vote for us or our friends in the City will lay waste to your economy, your savings and your job.”
Too right. Chris Cook in the (you guessed it) FT has a more nuanced summary of how things might pan out:
the threat of the LibDems pulling the plug on a government is overstated. The third party would, very quickly, be seen as co-culprits for the administration’s programme. So the LibDems would be stuck with them. If they then caused the fall of the government, they would be blamed for the chaos that follows … So the path of short-term naked self interest – the most powerful force in politics – would almost always be for the LibDems to back the administration.
The Lib Dems have the most to gain and the most to lose from the hung parliament situation. Their incentives are unambigiously in the direction of fiscal responsibility. No-ones goes around thinking “I can’t vote Lib Dem – they are too serious about the deficit”. A period where the LibDems hold the sensible middle of the debate: between diehard romantic deniers on the Labour benches, and blinkered trapped-in-the-1980s CutNowCutHarders on the other side, could gain them real credibility with a public worried about the difficult, um, balancing act that needs to be performed.
Then I would say that, wouldn’t I?
Jackie Ashley’s column praises Nick’s round-the-country efforts and also holds sensible advice:
They should boldly say they will back whichever party produces an economic plan closest to their own, and will allow that party to produce a budget and essential legislation. But they will not go into coalition. They will keep their integrity, vote on issues according to their principles, and be ready to fight a following election on that record.
This doesn’t mean the choices will be easy. Hey, just look at the horrible alternatives for cutting – which of these seem attractive in a recession? Well, maybe that VAT on finance and the carbon tax …