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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?

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

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.