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End of the affair — time to get down to business

Why the Tories came out on top in the referendum – and what they must do to keep the Lib Dems’ han

1. The AV vote has killed the romance, but not the coalition
A year ago, in the rose garden of Downing Street, it wasn't clear if David Cameron and Nick Clegg were beginning a new government or a whole new politics. Today, after the bloody battle over AV, it seems very unlikely that we are witnessing a historic realignment of British politics. In defending first-past-the-post with everything he had, Cameron has done more than preserve the existing electoral system; he has also preserved the tribal differences between the Conservatives and the Liberal Democrats.

Barely three months ago, No 10 was still detached from the referendum campaign. There were even suggestions that some leading Tories - notably Michael Gove - would back AV to help build a new Liberal Conservative era. Some Conservative modernisers argued that AV might solidify Cameronism: that the only Conservatism able to win an election where second and third preferences counted was Cameron's detoxified Conservatism.

In February, however, as the opinion polls pointed to victory for the Alternative Vote, Cameron was warned that his party's unity might break down if, a year after losing the general election, the Tories lost the referendum as well. Tory HQ ripped up an unwritten agreement with the Liberal Democrats on how the referendum should be fought. Cameron turned a blind eye to the targeting of Clegg's "broken promises" on tuition fees. Conservative donors were asked to bankroll the No campaign and, in an effort to energise the core Tory vote, Cam­eron even started talking about immigration - a topic he scrupulously avoided a year ago.

After the ugly rhetoric of the campaign, and as a sense that they were betrayed permeates the Liberal Democrat ranks, the coalition is entering a wholly new phase. This is no longer a cohabitation heading for marriage. It's a business deal. There will be agreement about the government's fundamental mission, but licence to disagree in many policy areas dear to the two parties' core supporters.

2. Defeating AV has given Cameron renewed authority inside the Conservative Party
His partnership with Clegg may be less happy as a result of the anti-AV campaign, and yet Cameron is in the strongest position within
the Conservative Party in at least a year. Tory backbenchers are delighted that he unambiguously put his own party's interests before his alliance with Clegg.

The often uneasy relationship between No 10 and the parliamentary party could easily deteriorate again, however, if proportional representation for the Lords or other pro-Clegg concessions go too far. Tory MPs are beginning to see the Liberal Democrats as roadblockers - opposing the NHS reforms in England, attacking plans for elected police chiefs and gutting the much-delayed public services white paper. They say that Cameron has already given enough ground to the Liberal Democrats and cite concessions on Trident, education vouchers, human rights laws and penal policy. Research carried out by University College London reinforces their sense of injustice: 75 per cent of the Liberal Democrat manifesto, but only 60 per cent of the Tories' election promises, ended up in the coalition agreement.

3. Cameron's concessions to the Lib Dems are all about protecting Clegg
Backbench Conservatives who oppose further concessions note that the Liberal Democrats would face annihilation from the electorate if they brought down the government. David Davis has said the Lib Dems are on the coalition aeroplane with good seats, but no parachute. They are not the ones, he says, who are "gonna blow up the plane".

Yet Cameron's concession strategy isn't about stopping the Lib Dems from jumping off the plane. His main concern is to prevent them storming the cockpit and replacing his co-pilot with Chris Huhne, Tim Farron or Vince Cable. Few Tories expect Clegg to be Liberal Democrat leader at the next election, but, knowing that his Orange Book liberalism is not typical of his party, Cameron wants him to survive as long as possible. There is even talk that he may be kept on as Deputy Prime Minister if he is ousted as Lib Dem leader.

4. Don't tell anyone, but the coalition's deficit reduction strategy resembles Barack Obama's
The coalition's core mission remains the Osborne plan to eradicate the deficit. Despite protestations from the left, the coalition is not prosecuting a great ideological attack on big government. Until two years ago, Cameron and George Osborne backed Gordon Brown's spending plans and attacked those on the right who called for a smaller state. The Chancellor does not have a Reaganite belief in the supply- side power of lower taxes. If any US president is Osborne's model, it is the post-stimulus Barack Obama.

The current occupant of the White House is advocating a fiscal retrenchment for America similar in scale and composition to Britain's, differing only in the important matter of timing. Both countries promise to reduce their deficits by about 8 percentage points by 2015 and both will use spending restraint to do 75 per cent of the work. In what Clegg is calling the coalition's second phase, there will be more public disagreement between the partners on matters such as Europe and the environment. The recent disagreement on multiculturalism is seen as the model. What there cannot be, if the government is to survive, is any fundamental retreat from the three central projects of economic renewal, school reform and cutting the cost of welfare (the government's most popular policy, according to all opinion polling).

5. Whitehall and Europe, not the Liberal Democrats, are the big brake on Cameron
There may be a debate about whether or not the coalition, under pressure from the Liberal Democrats, is heading leftwards. There can be little doubt that the pace of "the breakneck coalition" is slowing. The NHS pause is the most obvious sign that Downing Street has understood that it will be impossible to confront educationalists, police officers, the military and local government simultaneously.

Cameron's closest advisers have also become deeply frustrated by resistance from the bureaucracy, and they complain that human rights laws, European directives and an uncooperative civil service are as much a drag as the anti-reform voices within the Liberal Democrats. The Cabinet Office minister Oliver Letwin has calculated that only 40 per cent of the papers that cross his desk relate to the coalition agreement. The rest, in almost equal measure, originate from Europe or from within the Whitehall bureaucracy.

Douglas Carswell MP has compared the new "enemies of enterprise" to the trade unions that ruled much of Britain in the 1970s. Moreover, he has likened Cameron's response to these enemies to that of Ted Heath. The Tory backbencher says Britain is still waiting for a Thatcher figure to free democratically elected politicians from bureaucratic, legal and supranational shackles.

6. Cameron still lacks a big message to compete with the idea that his government is all about cuts
If Cameron has been insufficiently bold in cutting back the "super-bureaucracy", he has also been insufficiently ambitious in his attempt to redefine conservatism. Although he has consistently understood that conservatism needs to be about much more than pounds, shillings and pence, the individual components have not added up to a coherent narrative. The "big society" remains his government's most important intellectual project, yet it has not caught the public's imagination. Despite countless relaunches, most voters still don't understand it. In the absence of a strong, popular explanation of his mission, the vacuum has been filled by the idea that this government is all about cuts.

A new definition of Cameron's compassionate conservatism can't come soon enough. The Centre for Social Justice's idea that family, school and work are the routes out of poverty and towards the good life could yet provide that superior narrative.

7. Cameron's German model
An alternative way of describing this coalition government's overall philosophy is to think of it as being inspired by Germany. Paying off the debts before cutting taxes puts Cameron closer to Angela Merkel than Margaret Thatcher. Policies on apprenticeships, the English Baccalaureate and technical colleges are another nod to the Germanic belief that economic progress ultimately depends on the quality of the workforce. The emphasis on green, railways-driven, regional growth adds to the Teutonic feel.

8. Tories take heart from Ed Miliband's reluctance to modernise
Tory spinners told the media that they expected to lose 1,000 seats in the council elections but, privately, expected only about 500 losses. The gain of 80 seats was a complete surprise, and in large part reflected the referendum campaign. Conservative HQ operated at something like a general election tempo to defeat AV, and this energised many more Tory voters than one usually gets in a midterm set of elections.

Cameron's circle was also delighted at the modesty of Labour's advances and the "shellacking" that Ed Miliband received in Scotland. The Scottish experience shows that a large Labour lead in the opinion polls can evaporate in one sunny April of campaigning if there has been no attempt to create a positive attachment. Labour thinks it has recovered from last year's election, in which it received 29 per cent of the vote. It hasn't. The 40 per cent rating in the opinion polls reflects a one-off windfall of left-leaning Lib Dem voters. A good proportion might easily return to the yellow corner if Clegg is replaced by a left-winger.

To reach out to Middle England (and I mean England), Miliband should be helping to fix the deficit, but instead he has played to the left-wing gallery - most notably in that speech to the TUC rally in March where he compared his defence of public-sector benefits to the suffragette movement.

9. Cameron needs to find an answer to the Scottish question
If Cameron enjoyed Miliband's discomfort at the collapse of Scottish Labour, he won't relish the prospect of going down in history as the prime minister who presided over the end of the Union. Despite pressure from some quarters in the Conservative camp, the Tory leader has carefully avoided antagonising the Scots. He has opposed the idea of an English parliament and any review of the Barnett formula, which determines the funding allocated to the devolved administrations.

Cameron knows that Alex Salmond's victory at Holyrood was not because of the Scottish National Party's belief in independence. The Nationalists won a majority because of their leader's charisma and because of promises to freeze council tax and protect public-sector jobs. Salmond wants to use the next few years to build up resentments between Edinburgh and "Tory London". Cameron should not allow Scotland's First Minister to play that game. He should join with the other unionist parties and force a vote on independence to be held sooner rather than later.

10. George Osborne's road to a Conservative majority

The Chancellor, who makes all of the government's big political calls, now knows that Cameron has to win the next general election outright. Each one of the likely successors to Clegg as Lib Dem leader would be happier in alliance with Labour. Aside from Labour's weakness, Osborne's election strategy is based on holding the coalition together long enough for the economy to look like it's on the mend and for the constituency boundary review to be completed, giving the Conservative Party 20 or so extra MPs.

Osborne has also taken great care over the party's biggest and most reliable voting bloc: pensioners. All of their benefits have been protected or enhanced. Hopes for re-election also depend heavily on Cameron himself. He is still seen as much more prime ministerial than Ed Miliband. That's not to say he is without vulnerabilities. When, last August, I wrote about him for this magazine, I noted that he didn't put in the hours. Downing Street hotly contested this. I cannot be sure of Cameron's work rate but I do know ministers don't fear a meeting with him in the way Margaret Thatcher's cabinet feared encountering the Iron Lady and the contents of her handbag.

Thatcher always looked for a weakness in a draft policy and relished probing it. Cameron's ministers describe his dismissive wave of the hand whenever a conversation becomes focused on the detail of an initiative.

Perhaps Cameron trusts his ministers more than Thatcher or Brown did theirs, but flying over his government at 10,000 feet is risky - as the NHS saga has shown. In an age of 24-hour media, when the spotlight and the pace of scrutiny are relentless, the half-life of a politician gets ever shorter. The secret to preserving Cam­eron's standing will be a more strategic use of the Prime Minister. His speeches and appearances need to be more of an event, carefully prepared and choreographed to have high impact. Thus, a strong economy, redrawn constituency boundaries, a good-times manifesto and an intact Cameron add up to the Tory battle plan for a second term.

Tim Montgomerie is the editor of ConservativeHome.com

Tim Montgomerie is the editor of the ConservativeHome website.