If the Lib Dems want a coalition with Labour, they need to start work now

In 2010, the centre–left failed the people of this country. It must never do so again.

Dear Liberal Democrats,

As your party gathers in Brighton, the end game of your amazing governing odyssey, and whatever life takes place after it, can no longer be avoided. And the question is this, given it's impossible to imagine you are going to govern alone, who would you rather form a coalition with in less than two and half years' time: the Conservatives, Labour or simply the biggest party?

The electorate will help you make the actual decision, of course. If the numbers say it has to be the Tories again, then you must decide how to deal with that – coalition or confidence and supply? But I ask again - not what you think might happen but what do you want to happen and, therefore, what will you do to make it happen?

As someone who has long argued and worked for a progressive alliance in British politics, I can understand the maths and electoral reality. Being the third party means hoping no one has overall control and therefore a share of power for you. I can also understand how difficult it is to be a junior partner in a coalition. You have helped show that coalitions can work. People may not like the policies, just like any single party government, but they cannot say it's been weak. But it's not strong government, whether single party or coalition, that we ultimately want, but governments with the right sense of purpose and direction.

You can’t be blamed for the electoral outcome, but what you can't be forgiven for is not trying to achieve the best possible result.  If you genuinely don’t care which party you deal with, or if you would rather stick with the devil you know - then fine. But if you would rather see a progressive centre-left coalition then A) good and B) how are you going to help create the conditions in which you get one?

Now, I know your first reaction will be "but what about bloody Labour". What indeed? I’ve written endlessly about the party's problems and will continue to do so, but for all of Labour's faults, most of its hearts beat to the same rhythm as yours. It is on the side of poor and the dispossessed.

Of course, my party, which I'll turn to next week, has to grow up and decide whether it wants to stay in the wilderness or govern in partnership in the event of a hung parliament.  It’s a huge test. In a recent survey, 57 per cent of Labour List readers said they didn't want to talk to the Lib Dems. Unison general secretary Dave Prentis has said he will halt a pact. If Labour doesn’t secure a majority, one can only presume that they would rather have another centre-right coalition. So it won't be easy. Labour has a cultural revolution to go through to be part of the modern world.

It's likely that the test is coming. The pollster John Curtice has long predicted a hung parliament at the next election. He recently wrote, "the hung parliament brought about by the 2010 election was no accident. It was a consequence of long-term changes in pattern of party support that mean it is now persistently more difficult for either Labour or the Conservatives to win an overall majority". Bookmakers, too, think the next parliament will be hung.

In 2010, the centre–left collectively failed the people of this country. It must never do so again. It was a dereliction of duty that no one had done the policy work or built the relationships required for a progressive coalition. The numbers made it tough, but we weren’t even ready before the polls closed. Shall we leave it to Michael Gove and David Laws to stitch it up again?

That’s why we have to build relationships now – through policy, ideas debates and campaigns. We might find we have more in common than we think. Everything good about liberalism is social – it was New Liberalism that founded the welfare state and Beveridge who gave it its post-war form. It was Keynes who helped rebuild the post war economy and it is a Keynes we need today. On Europe, constitutional reform, climate change, civil liberties, a Plan B or Plan C, the best of both parties would provide a half-decent programme for government. Labour needs to be more liberal. The Liberals needs to be more social. So can we start to sketch out the outlines of a new coalition agreement to rebuild Britain? This doesn’t mean either party losing its identity or distinctiveness, it does mean preparing for the best feasible outcome.

So tell Vince Cable to keep texting Ed Miliband and Labour’s leader to keep texting back. Ed Balls should continue to find ways to agree with St. Vince and vice versa. Peter Hain should keep stating the obvious: that Labour should prepare for coalition with the Lib Dems because it will struggle to win an overall majority at the next election.

As the Tories shift right and Labour tries to refashion itself under Miliband, who do you really want to work with next time? Charles Kennedy, Shirley Williams, Tim Farron, Ming Campbell, Paddy Ashdown, Simon Hughes – what do you want given you won't win alone? And if you want it, what are you prepared to do about it?  

The political crime would not be to react as best you can to the verdict of the people – it would be to have failed to even try and build something different and better before the people speak and in, so doing, influence what they might say.  For that, we all have a responsibility.

Enjoy your seaside break – and I look forward to your answers on a postcard.

Neal

Neal Lawson's column appears weekly on The Staggers.

Which way will social liberals like Vince Cable turn if there's another hung parliament? Photograph: Getty Images.

Neal Lawson is chair of the pressure group Compass and author of the book All Consuming.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR