Cameron's decision to drop Lords reform will test the coalition like never before

Which will crack first, Cameron’s hold on his party or the glue that binds the coalition?

So now we know. The reported abandonment of Lords Reform means the government’s legislative programme is being run, not by the Prime Minister, but by a group of 100 or so Conservative backbenchers who henceforth will be calling the shots. It’s quite a moment.

The received wisdom seems to be that that "no Lords Reform means similarly no boundary changes", there’s a minor sulk for a day or so and then everyone moves on.

This is quite wrong. From a Lib Dem perspective, the two great constitutional changes we wanted to achieve in government will have failed. There will have to be some mighty great bits of compensation in return – and it’s unlikely the Tories will deliver. Can anyone see Osborne – now guaranteed to be Chancellor until the next election according to the PM yesterday – agreeing to a radical green agenda? Ditto on delivering root and branch banking reform, the so-called "Vickers Plus" plan apparently favoured by Vince. Self-interest means neither the Labour or Conservative leadership will show any great enthusiasm for Party Funding reform. And even if they did, those emboldened Tory backbenchers now know they can stop anything they don’t like in its tracks.

But neither is the status quo acceptable to grassroots Lib Dems. Expect fireworks at the Brighton conference where Lib Dem members will be demanding Nick Clegg negotiates the earth in return for this latest Conservative debacle – but which he knows he cannot deliver because his Tory opposite number is holed below the water line.

Nick’s only power will be similarly to say a firm "No" to anything we find even vaguely uncomfortable going forward. The snooping bill should be firmly in his sights. But more than that, he needs to stop any of the legislation that the Tory right are itching to start pushing – attempts to abandon the European Convention of Human Rights and an EU referendum are two obvious areas in which Nick is more likely to be able to control Tory backbenchers than the PM. There’s an irony there.

And so we reach an impasse in which the sole government agenda item will become the centrepiece of the coalition agreement – reducing the deficit. And even there a fight is brewing as Vince pushes for Plan B and Osborne looks to cut Welfare. Another impasse looms.

And all the time the pressure builds. Tory backbenchers will be stretching their muscles, Lib Dem grass roots will be pushing right back. Eventually something is going to give. The only question is which is the weakest spot – Cameron’s hold on his party or the glue that binds the coalition?

One of them is going to crack first. And then the fun really starts.

 

 

Lords attending the State Opening earlier this year. Photograph: Getty Images

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

Photo: Getty
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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.