22 Days in May: The Birth of the Lib Dem-Conservative Coalition

David Laws and the coalition of the willing.

David Laws has written a highly informative - as well as highly partisan - account of the days preceding and following the formation of the coalition government this May. The key question is why the Liberal Democrats went with the Conservatives rather than with Labour. To understand the reason for this, one has to look back long before 6 May. Laws does not do so systematically, but his various backwards glances in this day-by-day account of the events are all to the same effect: to highlight the rising tide of neoliberalism within the Lib Dems and how this conditioned the party into forming an alliance with the Tories that would have been inconceivable just a few years ago.

Political parties are driven by ideas, leaders and antipathies in about equal measure. Under Nick Clegg and David Laws - Clegg's de facto right-hand man during those "22 days in May" - all three led the Lib Dems decisively to the right.

Laws became an MP in 2001, following a successful banking career. The Orange Book, which he edited with a fellow financier, Paul Marshall, in 2004, was a clarion call for a return to classical small-state liberalism. In his essay "Reclaiming Liberalism", Laws defined this reclamation as an unambiguously neoliberal pro­ject: "How did it come about that over the decades up to the 1980s the Liberal belief in economic liberalism was progressively eroded by forms of soggy socialism and corporatism, which have too often been falsely perceived as a necessary corollary of social liberalism?"

In 22 Days in May, Laws identifies The Orange Book as helping "to shift the centre of gravity in the party . . . from big government solutions and from tax and spend". It was but one part of a wider intellectual shift. Tellingly, John Stuart Mill, the apostle of classical 19th-century liberalism, is the subject of an adoring biography by Richard Reeves, now Clegg's chief of staff. Tellingly, the only recent biography of David Lloyd George, the animateur of modern social liberalism, is by Roy Hattersley; while John Maynard Keynes's biographer, Robert Skidelsky - the intellectual guru of David Owen's SDP in the 1980s, who refused to join the Liberal Democrats because they were too leftist - has turned into a forthright critic of the coalition from the left.

At a recent discussion of Lib Dem ideas at the Institute for Government, younger speakers were full of "the failure of the social-democratic experiment", arguing that a small state would enhance both prosperity and fairness. This is the chief intellectual proposition on which Lib Dem participation in the coalition rests.

Laws is explicit about his neoliberalism and how this led him naturally towards the Conservatives. "I believed that a Lib Dem-Conservative coalition could be capable of delivering the 'tough but tender' economics which I had long believed in, and which would be essential in dealing with the budget deficit," he writes. He notes with particular approval that in the coalition agreement, "where the parties had [previously] differed, we had generally decided on one policy or the other". On the economy, this was George Osborne's policy for eliminating the structural deficit within a parliament, a policy immediately taken forward by Laws as chief secretary to the Treasury - "the job I wanted more than any other," he adds.

The Osborne-Laws mutual admiration society was crucial to the formation of the government. Laws recalls Osborne's pre-election attempt to persuade him to change parties, with a promise from David Cameron of a cabinet seat if he did so. Laws declined, but he does not disguise his pleasure at having achieved the same result by coalition means. The Lib Dem-Tory relationship is "astonishingly positive and constructive", he writes, lavishing praise on the "bright, sharp and amusing" Osborne with his "extraordinary strategic and tactical understanding of British politics".

Antipathy to Labour also drove the Lib Dems rightwards. This wasn't just about Gordon Brown and electoral tactics in Lib-Lab marginal seats. In two sentences, Laws condemns New Labour and virtually all its works:

Many Lib Dems were now as disenchanted with Labour as they had earlier been with the Conservatives. The war in Iraq, the undermining of civil liberties, the endless centralising and micromanaging, the failure to embrace radicalconstitutional reform . . . and the lack of progress on social mobility and improving public services . . .

It matters not that Iraq is now long past, and that against this list could be set the renovation of the NHS, the minimum wage, the Climate Change Act, the Human Rights Act, Sure Start, academies, tens of thousands more teachers, doctors and nurses, devolution, equal rights, international development and so on. Objective judgement isn't the issue. What matters is that Laws and the neoliberals believe in the "failure of the social-democratic experiment" as an article of faith. They emphatically reject the label "social democrat" - for all that a good proportion of Liberal Democrats regard themselves as such (indeed, most of them did when I belonged to the party before 1995).

Laws highlights Nick Clegg's election as Lib Dem leader in 2007 as being "of particular importance" in paving the way to a coalition with the Tories: "Nick was the first leader for decades who felt genuinely equidistant in his attitude to the other two parties." Clegg's continental liberal pedigree - ambiguous in its positioning before he had to make straight left/right choices - led him decisively rightwards with Laws on the crucial economic agenda, where continental liberals of the Dutch and German FDP variety also veer right. This sets him apart from the previous generation of progressive-left SDP and Lib Dem leaders, from Roy Jenkins and David Steel to Paddy Ashdown, Charles Kennedy and Ming Campbell. Without this
neoliberal context, it is hard to fathom the five days of post-election negotiations and why the Lib Dem negotiators plumped for a Tory rather than a Labour coalition.

Once Cameron had conceded a referendum on electoral reform, economic policy was the essential Labour/Tory dividing line. And the key point to emerge from Laws's account is that the Lib Dem negotiators did not seek to negotiate with the Conservatives on the central issue of economic policy - the pace of deficit reduction. They simply accepted Osborne's plan for eliminating the structural deficit within a single parliament, in preference to Alistair Darling's - and their own - policy of halving the overall deficit within a parliament. Instead they negotiated on other issues, particularly constitutional reforms of totemic importance to Lib Dem activists but of marginal concern to Joe Public.

For Clegg and Laws, it was important to have Labour in play until the Tories had given sufficient ground on these constitutional issues. Once this was achieved - on the evening of Monday 10 May, when Cameron conceded a referendum on AV - a Lab-Lib coalition be­came a redundant option. For, having accepted Tory economic policy, there was no reason whatever to contemplate the far tougher political task - given the weakerparliamentary arithmetic and the necessity to deal with Brown as interim coalition leader - of seeking to form a Lab-Lib coalition, only to achieve a less drastic deficit-reduction policy that they did not want anyway.

However, Clegg and his team thought it critical at the time - and useful in retrospect - to be able to tell the Lib Dem mainstream and left that Labour was not serious about a deal in any event; hence the criticism of Labour's negotiating style. Mostly this is an inconsequential yarn about body language, intended to imply that a Lab-Lib policy deal was never doable. Yes, Ed Balls stands his ground, but have you met Chris Huhne and Andrew Stunnell?

There is also the claim that Labour was not serious about negotiating economic policy because Darling was not part of the negotiating team. But neither was the Lib Dem Treasury spokesman, Vince Cable, part of the Lib Dem team, so it was entirely reasonable for the Labour side to suggest that the two should meet to discuss deficit reduction. When Clegg's office discovered a meeting had been arranged between Cable and Darling for the Tuesday morning (11 May), it was promptly cancelled and only took place in the afternoon, by which time both knew it was superfluous. (Laws describes the intended meeting as "another Gordon Brown wheeze" - curious, since Cable agreed to it readily enough.) By now, the Lib Dem negotiators and Clegg had opted definitively for the Tories. At the end of Tuesday morning's Lib-Lab negotiating session, I suggested to Danny Alexander, the Lib Dem co-ordinator, that we draw up a note of issues resolved and those for further discussion later in the day. "That will not be necessary," he said. I knew what this meant.

At the back of 22 Days in May, Laws publishes a selection of documents from the negotiations. There are notable omissions. While the papers tabled by Labour for the Lib-Lab talks are there, the papers tabled by the Lib Dems are absent. These are the papers that refer to "the eradication of the structural deficit within a responsible timescale" (which the coalition's Budget on 22 June set as a single parliament), "a commitment not to raise the cap on tuition fees", "a commitment to no public subsidy for nuclear power stations", "a cut in the number of government ministers", a four- (not five-) year fixed-term parliament, and more besides.

As for the future, Laws does not rule out a Lib-Con electoral pact for the next election. While he describes this as "highly unlikely", he stresses that "it will take many years to deliver on the programme and the aspirations which the coalition has set out so far". "This is a coalition formed in the tough times of fiscal retrenchment, one which has the potential to be a partnership for the good times, too," he writes. Behold a marriage of true minds.

Andrew Adonis is director of the Institute for Government. He was transport secretary in the last government and a member of Labour's post-election negotiating team.

Read David Laws's response.