Nick Clegg speaks at Bloomberg's London headquarters on June 9, 2014. Photograph: Getty Images.
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The smaller coalition party nearly always gets smashed – but all is not lost for the Lib Dems

To cement its identity in future coalitions, the party needs to own departments.

Shortly before the 2010 general election, aware that the Conservatives were unlikely to win a majority, an anxious David Cameron asked Angela Merkel what it was like to lead a coalition government. “The little party always gets smashed!” she mischievously replied. As he met the German chancellor in Sweden in recent days, Cameron could have been forgiven for recalling her remark. Like their sister party in Germany, the Free Democrats, which lost all of its seats in the 2013 Bundestag election, the Liberal Democrats have indeed been smashed.

Since 2010, they have lost a third of their members, 1,500 of their councillors, all but one of their MEPs, nine by-election deposits and more than half of their previous opinion-poll support. The Tories, by contrast, have retained most of their 2010 vote share of 36 per cent and have consistently exceeded expectations in local elections. “We knew we would pay a price for working with the Conservatives,” said Nick Clegg in his recent speech at the Bloomberg headquarters in London.

In these circumstances, one might expect there to be little optimism among the Lib Dems. But the shifting plates of British politics have given them hope. With both the Tories and Labour doubtful of winning a majority in 2015, many Lib Dems believe that they will once again act as kingmakers in a “balanced parliament” and extract significant concessions for doing so.

Some are even more sanguine. At a recent parliamentary party away day in Wyboston, Bedfordshire, Danny Alexander declared that the Lib Dems could become the largest party in British politics by 2025. “We were all rolling our eyes, even Clegg’s spads,” one of those present tells me. David Steel’s 1981 exhortation to Liberal activists to “go back to your constituencies and prepare for government” looks modest by comparison.

Though it is now rarely recalled, there were those who argued that coalition would enhance, not diminish, the Lib Dems’ popularity. The standard explanation offered for the party’s recurrent midterm slumps was that it failed to receive the media attention devoted to the Conservatives and Labour, a defect rectified by equal treatment at the time of the general election. But with Liberal Democrats in government, this disadvantage would be removed permanently. The more the public saw of the third party, the logic ran, the more it would like it.

That the reverse proved to be the case was partly because of their alliance with the Tories. As Tony Blair shrewdly observed, a party that ran to the left of Labour for three successive elections could not hope to avoid punishment for entering government with a party to its right. Long before Clegg and his fellow Lib Dem ministers walked through the division lobby in favour of higher tuition fees, their poll ratings had collapsed.

The party’s “contamination” by the Conservatives encourages the thought that an alliance with Labour could have a cleansing effect. Clegg’s pledge in his Bloomberg speech to borrow to invest in infrastructure was the latest example of policy convergence between the two parties. But a partnership with the opposition would pose dangers of its own kind. Such is the degree of policy overlap that the Lib Dems would risk becoming indistinguishable from their centre-left rival. The existential question that stalks Clegg – “What is the point of the Lib Dems?” – would become more rather than less insistent in coalition with Labour.

It is in anticipation of this fate that the former Lib Dem minister Jeremy Browne has called for the party to embrace an “unbridled, unambiguous” programme of free-market liberalism. Browne considers the left-leaning party president, Tim Farron, and the Business Secretary, Vince Cable, to be examples of what Keynes called “watery Labour men”: social democrats who would be better off with Ed Miliband.

What Browne’s position boasts in intellectual rigour, it lacks in electoral nous. Outside the City of London, there is little appetite for turbo-Thatcherism. Rather than veering to the right, the Lib Dems should adopt other means of differentiating themselves. An increasing number in the party, including on its federal executive, believe it was a mistake for Clegg not to demand control of entire government departments in 2010. His decision instead to spread the Lib Dems across Whitehall made it harder to claim credit for policy achievements and left the party’s junior ministers looking like the helpless hostages of their Tory superiors. The next time parliament is hung, the party should learn from the approach of its Scottish sister, which took control of justice and agriculture in its first Holyrood coalition with Labour in 1999 and prospered in the subsequent election. Far from being wiped out, the party retained all 17 of its seats in 2003 and most of its vote share.

Having named his coalition negotiating team for 2015, Clegg should already be targeting politically attractive departments. A Lib Dem minister could win control of the housing portfolio and take credit for a Macmillan-style building programme, or secure home affairs and act as the guardian of civil liberties. Tim Farron told me: “There’s a lot of wisdom in that . . . When you’re a smaller party, identity is everything. Being known for one or two and, if you’re really lucky, three good things is what you’re after in terms of getting traction with the voters.”

A few days ago, Clegg received a consoling text message from his friend Jan Björklund, the leader of the Swedish Liberal People’s Party (currently polling at 6 per cent). “Us liberals,” he wrote, “must never accept that we can only survive in opposition.” An admirable sentiment – but if the Lib Dems are to avoid being continuously smashed in a new era of hung parliaments, they need to wise up and ensure they are better prepared.

George Eaton is political editor of the New Statesman.

This article first appeared in the 11 June 2014 issue of the New Statesman, The last World Cup

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Should London leave the UK?

Almost 60 per cent of Londoners voted to stay in the EU. Is it time for the city to say good by to Brexit Britain and go it alone?

Amid the shocked dismay of Brexit on Friday morning, there was some small, vindictive consolation to be had from the discomfort of Boris Johnson as he left his handsome home in EU-loving Islington to cat-calls from inflamed north London europhiles. They weren’t alone in their displeasure at the result. Soon, a petition calling for “Londependence” had gathered tens of thousands of names and Sadiq Khan, Johnson’s successor as London mayor, was being urged to declare the capital a separate city-state that would defiantly remain in the EU.

Well, he did have a mandate of a kind: almost 60 per cent of Londoners thought the UK would be Stronger In. It was the largest Remain margin in England – even larger than the hefty one of 14 per cent by which Khan defeated Tory eurosceptic Zac Goldsmith to become mayor in May – and not much smaller than Scotland’s. Khan’s response was to stress the importance of retaining access to the single market and to describe as “crucial” London having an input into the renegotiation of the UK’s relationship with the EU, alongside Scotland and Northern Ireland.

It’s possible to take a dim view of all this. Why should London have a special say in the terms on which the UK withdraws from the EU when it ended up on the wrong side of the people’s will? Calling for London to formally uncouple from the rest of the UK, even as a joke to cheer gloomy Inners up, might be seen as vindicating small-town Outer resentment of the metropolis and its smug elites. In any case, it isn’t going to happen. No, really. There will be no sovereign Greater London nation with its own passport, flag and wraparound border with Home Counties England any time soon.

Imagine the practicalities. Currency wouldn’t be a problem, as the newborn city-state would convert to the euro in a trice, but there would be immediate secessionist agitation in the five London boroughs of 32 that wanted Out: Cheam would assert its historic links with Surrey; stallholders in Romford market would raise the flag of Essex County Council. Then there is the Queen to think about. Plainly, Buckingham Palace could no longer be the HQ of a foreign head of state, but given the monarch’s age would it be fair to turf her out?

Step away from the fun-filled fantasy though, and see that Brexit has underlined just how dependent the UK is on London’s economic power and the case for that power to be protected and even enhanced. Greater London contains 13 per cent of the UK’s population, yet generates 23 per cent of its economic output. Much of the tax raised in London is spent on the rest of the country – 20 per cent by some calculations – largely because it contains more business and higher earners. The capital has long subsidised the rest the UK, just as the EU has funded attempts to regenerate its poorer regions.

Like it or not, foreign capital and foreign labour have been integral to the burgeoning of the “world city” from which even the most europhobic corners of the island nation benefit in terms of public spending. If Leaver mentality outside the capital was partly about resentment of “rich London”, with its bankers and big businesses – handy targets for Nigel Farage – and fuelled by a fear of an alien internationalism London might symbolise, then it may prove to have been sadly self-defeating.

Ensuring that London maintains the economic resilience it has shown since the mid-Nineties must now be a priority for national government, (once it decides to reappear). Pessimists predict a loss of jobs, disinvestment and a decrease in cultural energy. Some have mooted a special post-Brexit deal for the capital that might suit the interests of EU member states too – London’s economy is, after all, larger than that of Denmark, not to mention larger than that of Scotland, Wales and Northern Ireland combined – though what that might be and how that could happen remain obscure.

There is, though, no real barrier to greater devolution of powers to London other than the political will of central government. Allowing more decisions about how taxes raised in the capital are spent in the capital, both at mayoral and borough level, would strengthen the city in terms of managing its own growth, addressing its (often forgotten) poverty and enhancing the skills of its workforce.

Handing down control over the spending of property taxes, as set out in an influential 2013 report by the London Finance Commission set up by Mayor Johnson, would be a logical place to start. Mayor Khan’s manifesto pledged to campaign for strategic powers over further education and health service co-ordination, so that these can be better tailored to London’s needs. Since Brexit, he has underlined the value of London securing greater command of its own destiny.

This isn’t just a London thing, and neither should it be. Plans are already in place for other English cities and city regions to enjoy more autonomy under the auspices of directly elected “metro mayors”, notably for Greater Manchester and Liverpool and its environs. One of the lessons of Brexit for the UK is that many people have felt that decisions about their futures have been taken at too great a distance from them and with too little regard for what they want and how they feel.

That lesson holds for London too – 40 per cent is a large minority. Boris Johnson was an advocate of devolution to London when he was its mayor and secured some, thanks to the more progressive side of Tory localism. If he becomes prime minister, it would be good for London and for the country as a whole if he remembered that.  

Dave Hill writes the Guardian’s On London column. Find him on Twitter as @DaveHill.