There was a joke going around Westminster in 2010, when the Liberal Democrats formed a coalition with the Conservatives. If you phoned Lib Dem headquarters, it ran, and asked for a copy of the party’s manifesto, the answer was: “Sorry, we’ve sold out.” At the time, even newly empowered Lib Dem Cabinet ministers allowed themselves a chuckle at the gag. Now, they aren’t laughing.
Nick Clegg is paying the price of his decision in 2010 to join in a coalition with a party with very different views from his own on everything from Europe to immigration to constitutional reform. It was a gamble, the consequences of which are now shaking the party.
The Lib Dem record in government has been mixed. There have been successes, such as the raising of the personal income tax allowance, which will increase to £9,205 from April 2013. The party also scored a victory when it managed to block Conservative plans for a cut in inheritance tax. There have also been successes in the introduction of the pupil premium, which commits more government money to the schooling of disadvantaged children; the restoration of the link between the state pension and earnings; and a plan, announced by Danny Alexander, chief secretary to the Treasury, to crack down on tax evasion.
But there have been painful defeats. The “No” vote in the referendum to change Britain’s electoral system to the Alternative Vote system means that Lib Dem hopes of electoral reform may have been destroyed for a generation. Opposition to the proposed reforms was encouraged by Conservatives. The Lib Dems also dropped their objection to the removal of the 50p tax rate for high earners, which George Osborne scrapped in this year’s budget. The recent failure to secure House of Lords reform was also a sore defeat for Clegg and his party. Perhaps the most damaging of all was the Lib Dems’ acquiescence in the debate over university tuition fees. Before the election the party had said it would oppose a rise in fees, but once in power, the coalition raised the cap on fees to £9,000.
It is not the first time that the Lib Dems have found themselves trailing alarmingly in the polls. Senior party figures are quick to point out that there are two and half years before the next election, which gives time for a comeback. But this is an optimistic analysis, and the threat of electoral extinction is opening big internal rifts.
It is hard to find a Lib Dem MP who will attack Clegg openly. On the surface they are loyal. However, party strategists are highly concerned about the erosion of the party’s base. In the May local elections, the party failed to put up a full slate of candidates for councils in major cities including Liverpool and Leeds, and lost 336 councillors overall. Next year’s county council elections and the London borough elections in 2014 threaten the Lib Dems with what one senior MP calls “existential wipeout.” The party faces the possibility of a return to the position it was in before the formation of the Social Democratic Party in 1981: unable to challenge for power at a local level, let alone a national one.
The opposition is enjoying the spectacle of a coalition in trouble. “Ed [Miliband, the Labour leader] may sound publicly sympathetic, but the dynamic is to watch the Lib Dems squirm as it’s in Labour’s electoral interests,” says a senior Labour strategist.
For Clegg, there is every incentive to help David Cameron hold the coalition together. If it imploded suddenly, the Lib Dems would be forced to go to the polls with support perhaps not far off its current low levels, with no chance to benefit from an improvement in the economy, the perception of future successes, let alone the calculated positioning of a campaign. They could face an electoral meltdown from which they might never recover. In those circumstances, the Tories might not be returned with a majority. Some Lib Dem strategists have speculated that Clegg will replace Catherine Ashton as the EU’s high representative for foreign affairs before the next election. But that would be a decision for the European Council and is not something that Clegg alone can control. Given that, “Nick’s challenge now is to come up with imaginative ways of doing deals with Cameron to prevent revolts in both their respective parties,” says a friend of the deputy prime minister.
The most likely plan, for those around Clegg, is for the two coalition parties not to divorce but to break shortly before the general election, to campaign separately. But others in the party believe this will jeopardise its future—and their seats. The run-up to the party conference has brought a frenzy of talk about ways to improve the chances of survival, as we set out below.
Exit the coalition now
Outside the central group of party leaders, some Lib Dem MPs are musing about the “nuclear option” of withdrawing from the coalition. They say their only chance of avoiding electoral oblivion is to “back-pedal,” sooner rather than later, towards the kind of distinct, centre-left position that filled a gap in the British political market under Charles Kennedy. But the chances of this are dismissed by leading figures in the party.
It is understandable that senior figures are keen to quell any thought of a sudden splitting of the coalition. But in terms of brute political calculation, some Lib Dems conclude that the next election will be best fought with as much space between themselves and the Tories as possible. If economic conditions continue to worsen, this view may gather support.
Simon Hughes, deputy leader, concedes that: “There are members of the party that feel nervous—success is difficult. There are a few who say we should never have joined the Tories. Some people think we ought to go sooner rather than later. At the highest levels, there is nobody who thinks it’s the right thing to do.” For Hughes, it is preferable to be in power and with influence rather than being “on the outside carping at a Tory minority government.”
The Liberal Democrat peer Chris Rennard has also detected no urge within the party to break from the coalition. Rennard, who was formerly the chief executive of the party and also its chief by-election coordinator says that “the level of support for ending the coalition is negligible. People understand the electoral arithmetic and economic necessity; these make it a political necessity.”
Cable for leader
A change of leadership before the next election is a possibility. Nick Clegg will forever be seen as an ally of the Conservatives, despite his occasional public disputes with the Tories. “Even a stopped clock is right twice a day,” is how one Lib Dem MP on the social-democratic wing of the party describes those disagreements. The MP’s verdict: “it is too little, too late.”
Under one scenario floated by frustrated Lib Dem MPs, Vince Cable would take over in time to lead the party in the next election. Despite the Tory-led fiscal policy which Cable has helped to underpin, the Lib Dem rank and file adore him.
Some party members still hold out for Chris Huhne to stand for the leadership again. Huhne stood against Clegg in 2007, campaigning to the left of his rival and losing out by only 511 votes. He is a heavyweight who stood up to the Tories when in Cabinet until last year, arguing openly against George Osborne in Cabinet over Tory tactics in the Alternate Vote referendum. However, his career is on hold, and he is writing a book. He tells friends he is “out of action” thanks to a court case involving his estranged wife Vicky Pryce in which it is alleged that he falsely informed the authorities that Pryce was driving his car, when it was clocked speeding.
The only other figure who has been floated as a future leader is Tim Farron, the Lib Dem president and the party’s most outspoken rebel. But it is hard to find a single MP who believes he has the clout to lead the party out of the wilderness. He is seen as an “opportunist” and a “lightweight.”
So attention is focused on Cable. Since he became business secretary, he has held a series of strategy dinners with figures in the party. He has invited to these dinners figures from the so-called “Orange Book” group: that is Lib Dems on the right of the party, including Ed Davey, the energy and climate change secretary who replaced Chris Huhne. “It is a mistake to think Vince is only appealing to the left of his party,” said one individual close to events.
Some senior people are dismissive of the idea. Asked whether Vince should be leader, Simon Hughes answers “No. Nor would it be wise at all. The talk of it is foolish. All the evidence is that this talk [of the leadership] puts people off.”
However Lord Oakeshott, until last February Cable’s spokesman, has been telling friends that he expects his former boss to be leader “within a year.” This may well be wishful thinking. A Cabinet-level Lib Dem politician warns against taking Oakeshott’s whispers too seriously. “By promoting Vince, Matthew is promoting himself. He just wants to be senior under a Vince leadership.” Other senior Lib Dems, like Chris Rennard, the Liberal Democrat peer, dismiss all talk of a leadership challenge.
One senior Liberal Democrat offered a stark analysis. “People have got to wake up to the collapse of the standing of the party in the country,” he said. “Because of [Cable’s] history and because he has not been so identified with the economy, then he could be seen to have a clean set of hands—if a fresh start were needed.”
Team up with Labour
Ed Miliband, Labour’s leader, has said he cannot work with Clegg. But a change of Lib Dem leadership would open the door to a future Lib Dem–Labour alliance, which would make sense as the two parties have much in common. Cable, a Labour councillor in the 1980s, was keener than any of his colleagues to form an alliance with Labour in 2010 and is now talking occasionally to Miliband. The business secretary is said to be impressed by Miliband’s positioning, especially on “predator” bankers. Large sections of Labour, led by Ed Balls, the shadow chancellor of the exchequer, remain deeply, tribally hostile to the Lib Dems. But Miliband’s own instincts are to reach out.
However, as Rennard points out, “the greatest danger is that we are seen as subsets of Labour, or of the Conservatives,” and running to Labour for salvation would only increase the danger for the Lib Dems of being perceived as subordinate.
Doing a deal with Labour would be a high-risk move, but Lib Dem MPs now believe it is their only way of answering the charge that they have “sold out.
Split the party
“The question is whether Clegg and his allies in the Commons are so committed to the coalition that they refuse to seize this chance to make a break if and when it comes,” says a senior Lib Dem peer. “They appear to me to have convinced themselves that their only option is to see things through to the general election.”
In that case, the left of the party will need to decide whether to break with those Lib Dems who remain committed to the coalition. This would mean a split between them and “coalition liberals” who would stay with the Tories. There is a precedent: in 1931 the Liberal party broke up over the Conservative-dominated National Government’s economic plans.
Party insiders expect the key plotters for a breakaway group to be Charles Kennedy, who opposed the coalition’s formation, Chris Huhne and Vince Cable.
Go half way
The Lib Dems can seek a middle position between the Tories and Labour, hoping for economic recovery and a share in its electoral rewards, while courting the support they have lost on the left. In this scenario, they would withdraw from full coalition with the Tories, but would agree to provide them with “confidence and supply”—a technical parliamentary agreement to give support during votes on government budgets and confidence motions.
This compromise position chimes with a sense among many Lib Dems that the Conservatives may well have been unfair and uncharitable partners, but that a dramatic exit from government would do immense harm to the party. “We recognise the need for compromise,” says Susan Kramer, a Liberal Democrat peer, whose expertise is in financial and economic affairs. “A lot of us feel let down by the Conservatives over things like House of Lords reform. We keep our side of the bargain, but that’s not the way the Tories look at this.”
Stay with the coalition
The party’s upper echelons say stay with the coalition. David Steel, now a Lib Dem peer, was leader of the old Liberal party, until its merger in 1988 with the SDP. In a recent column in The Times, he argued that, “Because of our commitment to proportional representation, an unwritten attachment to the principle of coalition is in the party’s DNA. Compromises are therefore essential in the wider interest.” It would be contradictory for Liberal MPs to walk away from coalition because they are unwilling to make the sorts of compromise that their desired voting system inevitably entails.
Stay in coalition, but differentiate
“We must make sure that we have not become the Conservatives,” says Rennard. “We are different. This issue of differentiation has become stronger—Nick will aim to make this point this September.”
Some feel that an attempt by the Liberal Democrats to differentiate will be gladly mirrored by the Conservative party, which also wants a more distinct identity within the coalition. “The opposition to [the coalition] is much more in the Tories—on the Tory right—who want Cameron to be more anti-gay, more anti-immigrant,” says Rennard. “What we need to do is show that the coalition is a professional relationship. It’s a professional, businesslike relationship. We must show the differences in popular policies concerning tax and education, spending, environmental progress.”
The main way to show this difference is on the economy. Cable stated in March, in a letter to Cameron, that he felt the treasury lacked a coherent growth strategy and that the government had failed to present a “compelling vision” for Britain. Senior party strategists say they envisage a “window of opportunity” if George Osborne’s plan is seen to be failing, with debt continuing to rise and markets beginning to lose confidence. This would allow them to put space between the Conservatives’ economic policies and their own.
“We chose the wrong issue [Lords reform] with which to have a stand-up row with the Tories,” says once close to Vince Cable. “If we are to break free of the coalition, it has to be on the economy.”
The next spending review, which is due to be published before the end of 2013, is the likeliest point of departure. Danny Alexander, the chief secretary to the Treasury, backs siding with the Tories. But Cable privately believes Osborne’s strategy is failing and wants to wriggle away from it.
Kramer emphasises the extent to which the coalition was forged in the heat of the financial crisis. At the time, she suggests, “any story that suggested that government was about to collapse was very dangerous for the economy.” The party was perhaps too keen to compromise on too many critical policy points at the outset.
Of all these plans, staying with the coalition is the most likely for now. It has the weight of the party leadership behind it, although that comes with an exhortation to Clegg to begin drawing clear distinctions between the party and the Conservatives. Those around Vince Cable may be able to put an uncomfortable degree of pressure on Clegg, given the deep support in the party for the business secretary, and the never-dying speculation about whether he would make a better leader. At the same time, Clegg cannot afford to antagonise the Tory leadership, itself under pressure to take a tougher line on immigration-—despite the Olympics —and on spending. Clegg’s strongest weapon in keeping discipline is the fear by many—probably most—of his MPs of the annihilation that might follow an early collapse of the coalition or a formal split in the party. His greatest vulnerability is that some of his party fear that things can’t get much worse, and that he is their weakest link.
