Leaders of the pact?

The time has come to think the unthinkable, argues Sunder Katwala: a coalition between Labour and th

Even the double-digit Tory poll leads which have plunged Labour into deepening gloom do not settle the next election. Our erratic electoral system may demand a ten-point Tory lead for any majority at all - or make Labour the largest party while five points behind. So the hung parliament guessing game is exercising many Westminster minds.

It is a red herring. There would be no coalition. The Liberal Democrats could be expected to stand aside, just as they rejected all coalition options in Scotland and Wales last year. A Tory-Lib Dem deal is a non-starter: negotiations would dig deeper than David Cameron's belief that "progressive ends" are nice things. His party would much rather form a minority government than offer electoral reform. But many Lib Dem MPs think a bigger blue-yellow deal-breaker is Europe. What policy could a cabinet containing William Hague, Nick Clegg and Chris Huhne ever agree on?

And a Labour-Lib Dem deal probably couldn't happen ­either, once the government has gone into an election with a Commons majority and come back having lost it. No prime minister wants to become another Edward Heath, glowering in the Downing Street bunker, trying to avoid resignation ­after his "who governs" election went wrong in 1974. Standing on your head on questions like the electoral system only the day after election defeat would not convince the public.

A hung parliament would put David Cameron in Downing Street with a Tory minority government. If that suggests a "do nothing" first term, he may not much mind.

Yet there is an alternative. A Lab-Lib deal is possible - but only if a pre-emptive progressive coalition is formed soon. By the time Barack Obama leaves these shores in April, Gordon Brown should invite Nick Clegg to be deputy prime minister with Vince Cable as chancellor. The coalition would govern for a year - announcing the date of the next election, and legislating for fixed-election dates, too. This year it would focus on the response to the recession, while agreeing on core progressive priorities for the next four-year parliament in both party manifestos.

It sounds impossible. After Tony Blair left Paddy Ashdown at the altar a decade ago, what sounds like a return to the Lib-Lab pact of the Seventies will hardly rekindle the romance. But what if Gordon Brown made the Lib Dems an offer they cannot refuse? What could "the deal" look like?

The question is much less how many Lib Dems there would be in cabinet - though the parties should share out Home and Justice; the Environment and Climate briefs; and the international portfolios - than how to propose enough substantial change to make a credible public pitch for a different politics.

On electoral reform, the two frontbenches have long been ready to compromise on the alternative vote system, rather than full proportional representation. But a new constitutional settlement should go further. A century after the People's Budget took on the hereditary peers, let us honour Lloyd George with a Great Reform Act, finally fully electing the Lords, alongside Commons reform, votes at 16, fixed election dates and, perhaps, full PR for local government, too.

On civil liberties, ID cards would have to go. Labour could ditch the project on cost grounds, or at least freeze it for five years. A civil liberties commission - perhaps with Shirley Williams and Charles Clarke co-chairing and involving Tory voices, too - could engage the public on how to reconcile ­security and liberty.

A pro-European agenda for the age of Obama should be Lab-Lib Dem common ground. But public closure is required on Iraq. Shaping the scope of an inquiry would be a perfect task for Ming Campbell. The progressive parties would together champion a post-Kyoto global climate change deal, but guaranteeing a Commons vote on the Heathrow runway would, in practice, make it a casualty of the coalition.

The Lib Dems could show they had used their influence for liberal change. They would need to drop their opposition to tuition fees and the child trust fund. Immigration and crime policies would have to be thrashed out as well.

While many in the Labour tribe were suspicious of the Blair-Ashdown project, this deal should bring them some cheer. "It would sort out the issues which have left our people reluctant to go out and knock on doors," says one activist. And Blairites who might otherwise cavil at such leftish concessions could pay that price for the Lab-Lib "project".

Reconnecting with progressive constituencies would enable the coalition to take the fight to the Conservatives. While a national government denies political choice, this deal sharpens the choice between starkly different responses to recession and a fiscal stimulus. A Cable chancellorship with Labour backing could be bold in redistributing the tax burden - ending higher-rate tax relief on pensions, closing tax loopholes at the top and reducing the share paid by lower earners. The Conservatives have tried to say nothing about Labour's new top rate of income tax, but would have to show their hand.

The only major objection? It won't happen. But why not? Gordon Brown wanted Lib Dems in his government on day one and flummoxed all of Westminster by seeing the strategic logic in Peter Mandelson's return. Many in both parties rue the missed opportunity of 1997. "A Blair-Ashdown coalition would have been a better, more progressive government," says Roger Liddle, who left Labour for the SDP before returning to help found new Labour. Liddle cites constitutional issues and a European policy "much less in hock to Murdoch". A solidly pro-European cabinet could have changed the multilateral diplomacy of Iraq, too, he believes.

Senior Labour and Lib Dem figures have remained committed to genuine centre-left dialogue even as party relations have deteriorated, though most believe the form any progressive realignment would take is now a post-election question. James Purnell, David Lammy, Charles Clarke, Peter Hain, Vince Cable, David Laws and Ming Campbell have all taken part in joint Lab-Lib Dem events with the Fabians and CentreForum at both party conferences in the past two years. The Tories pose as "progressive" but could never do the same.

 

Akey Lib Dem fear would be that a coalition would make it harder to defend against the Tories in the south. But Labour should stand down in those Lib Dem seats where the Tories can challenge from second place. It is logical for a coalition fighting one last first-past-the-post election to seek a mandate for electoral reform (though how far the Lib Dems reciprocating would benefit Labour is partly a tactical judgement about how their vote would divide).

The coalition would not mean guaranteed re-election but - going into it with a majority of over 150 - it would have more than a decent shot. A Tory majority government could be well beyond Cameron's grasp and the centre of gravity would shift away from the right in a campaign where two progressive ­parties challenge Cameron's Tories - rather than the two-on-one attack on Labour (on eye-catching issues such as ID cards and Heathrow), which we are currently on course for.

If this was the deal on offer, why would the Lib Dems bet their yellow chips on a hung parliament when they could never get a better offer from Cameron anyway? A third party, committed to pluralism, but which can never share power, will always fail to change the culture of British politics.

Past economic crises have seen Britain's progressives ­divided - and defeated. In 1929, Labour, wedded to Treasury orthodoxy, rejected Lloyd George's Yellow Book Keynesianism. In the 1980s, the SDP split from Labour as Margaret Thatcher dominated. A progressive coalition could surely have realigned British politics more securely in 1997 or 2007. One final chance still remains.

Sunder Katwala is general secretary of the Fabian Society. This column is a personal view, not the view of the Society