Futhermore…

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If the Lib Dems go into coalition with the Tories, they will get a referendum on the alternative vote system. That much, I think, they can be sure of. Labour, of course, seem to be luring them in with the promise that AV can be brought in without putting it to the people, and that full-blown PR can be looked at a little further down the line. But is that promise realistic?

I doubt it. Firstly, there are a lot of Labour backbenchers who won’t vote for AV or PR, and who favour first-past-the-post as much as the Tories do. And you can be sure that Cameron’s 307 MPs will do their best to vote down electoral reform if the Lib Dems throw the offer of a referendum in their face.

Moreover, an electoral reform act would take time (a year, maybe two) to get through both houses of parliament. And there is no way a Lib-Lab government would last that long. Long before AV could get Royal Assent, there would be another general election in which both Labour and the Liberal Democrats could expect to be punished for the way they had grabbed hold of power. As John Reid, the former home secretary, said last night, this coalition would mean deep unpopularity in England and, come polling day, mutually assured destruction.

Compare that with a deal with the Tories. OK, the tribal activists won’t like it (on either side). But the deal guarantees the Lib Dems that they will be able to implement at least part of their agenda (raising the personal allowance, introducing a pupil premium, political reform) while also giving them the opportunity to show the country that they are a serious political force, capable of governing in the national interest, and not just a none-of-the-above protest vote.

And then there’s a point I’ve made before: the real dividing line in politics is not the tribal one between left and right, but the intellectual one between localizers and centralizers, between market liberals and statist authoritarians. This is the ground around which the Conservatives and Liberal Democrats could rally, and do a great deal of good in the process. They just need to put their baser instincts aside first. Signs are that the Tories are prepared to do that. Will the Lib Dems follow suit?

OK, panic

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Hearing Paddy Ashdown press for a Lib-Lab minority coalition, supported by the Scottish Nationalists, Plaid Cymru and an assortment of Northern Irish parties, on Radio 4 this morning, I couldn’t quite believe my ears. It’s not that I’m surprised Paddy would rather crawl into bed with Labour than the Conservatives – that much is obvious. What astounds me is that he – and presumably others in his party – believe such an arrangement would be acceptable, legitimate, or workable.

Quite frankly, a Lib-Lab pact of this sort would be the greatest stitch-up in our political history. It amounts to two parties who are widely perceived to have ‘lost’ the general election bribing Celtic MPs with promises not to cut their public spending, so that they can rig the electoral system without putting the changes to a referendum (a direct contradiction of Labour’s election manifesto, but then, they’ve got form). Oh yes, and the deal would mean the next prime minister would not be chosen by the British public, but by the Labour Party – and in particular, by the trades unions that have one-third of the leadership votes.

It is extremely unlikely that such a government would be able (or even willing) to take the measures we need to bring public spending under control, and start tackling our deficit and debt issues. People I’ve spoken to in the City expect the markets to make their feelings known pretty quickly if this does come to pass: expect gilt yields to rocket, making it much harder to finance the deficit, and the pound to tank, sparking inflation. It really isn’t difficult to see a Greek scenario coming down the line if businesses lose confidence in UK plc, and people start to panic.

The fatal conceit

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Thursday’s election produced a very curious result; unusually for the first-past-the-post system, it resulted in no obvious winners, and few distinct losers. What was particularly interesting however was the unexpectedness of several constituency results. Parties held onto wards they were expected to lose, and were subject to significant gains and losses in unexpected seats. It all came as rather a surprise. For a start, the media certainly called it wrong. Despite many newspapers’ endorsement of the Conservatives, they failed to gain an overall majority- while the media-fueled flurry of Cleggmania proved to be embarrassing when the Liberal Democrats actually lost seats. Polls swung wildly throughout the election period and failed to accurately predict the result of a great many seats. It was impossible to watch more than a few minutes of TV election coverage (let alone 8 hours of it) without coming to the conclusion that absolutely none of the presenters, politicians or ‘experts’ had a clue what was going on. Everybody simply had to sit back and watch the chaos unfold.

What became apparent is just how difficult it is to predict the actions of millions of different individuals - people with different circumstances, political views and choices of candidates. The political experts proved themselves incapable of fully understanding the complex network of factors that will influence group and individual's drives- and ultimately their decisions. It bears more than a resemblance to Hayek's work on the 'fatal conceit' of central planners, who believe they can organise society and outcomes according to their rational plans and limited information. Just as, when armed with their statistics, briefings and opinions commentators can't accurately figure out what the public will do at the ballot box, a state department would be unable to calculate the optimal decision to best satisfy society as a whole. There is no real harm done from polls and the media inaccurately portraying the nations 'mood'. However, it reaffirms the importance of resisting an overcentralised state. There is a lot more at stake when the government is spewing directives, not predictions- based on the same incomplete understanding of how society reacts, and what its individuals actually want.

The dog that hasn't barked

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When I filmed an episode of Dinner with Portillo last summer, Timothy Garton Ash, the author and historian, referred to English nationalism as ‘the dog that hasn’t barked’. We were talking about Scottish independence.

Well, if things go the way the media are speculating, I doubt that particular dog will stay quiet much longer. Imagine the scenario: the Conservatives came first in the election, and have the overwhelming majority of the seats in England, but a Lib-Lab minority coalition with an unelected leader is kept in power by Scottish, Welsh and Northern Irish MPs, in return for no spending cuts in their territories – which already get more than their fair share, courtesy of English taxpayers. And while the English continue to pick up the tab for sovietized Celtic economies, Scottish, Welsh and Irish MPs would be voting for unpopular policies that couldn’t possibly affect their own constituents, who have their own devolved parliaments or assemblies, and will only impact upon the English.

Already one can feel a palpable sense of anger building, but my guess is that English nationalism could very easily ‘go mainstream’ before too long. And frankly, I’m not sure I would have a problem with that.

Back in the UK

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Coming back from Iraq’s Autonomous Region of Kurdistan to the UK on election day was certainly a shock. Set against the challenges faced by the Kurds after so many decades of real suffering, the squabbling between Nick and Dave and Gordon seemed so…..trivial.

This seemed especially so since the UK election campaign was notable for its deliberate avoidance of that big elephant in the room – the government’s horrific finances. There really is a big problem but the three went out of their way to not scare the children by mentioning it other than in the most vacuous and tentative way.

Somehow, the whole country – from the politicians to the chattering classes to the voters themselves – just seemed oblivious to what’s coming down the pike, even with all the vivid images from Greece to remind them of what’s at stake. The final result from the polls perfectly reflected that drift.

Back in Iraq, they’ve just completed a recount of ballots cast in the Baghdad area in the general election last March, confirming results from the original tally. That means forming a government can go ahead after ongoing negotiations between the various parties since the election. That process makes the Nick’n’Dave’n’Gordon show look like a piece of cake.

It’s going to be messy in Iraq, what with Shiites and Sunnis and secularists and Kurds, all in more than one guise in a heady cocktail of wildly competing interests. Somehow, though, they seem more deserving of our best wishes than that oblivious lot in Westminster. At least the Iraqis have a valid excuse.

Policies to agree on

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As the bargaining gathers pace between the possible coalition partners, both are looking for possible areas of agreement. Of more importance are the areas they disagree on, and on which neither would wish to compromise. The Conservatives are unlikely to modify their support for Trident, or the Liberal-Democrats their endorsement of voting reform.

There are two policies, however, both advocated by the Adam Smith Institute, on which agreement might be reached almost immediately. The first is for a lifting of the starting threshold for income tax to £12,000. The thinking behind it is that those earning the minimum wage or less than half the average wage should not be charged income tax at all – they have enough problems making ends meet as it is.

This runs totally counter to Gordon Brown’s view that he should decide how much tax everyone pays, combining high taxes on low earners with tax credits to reimburse then. It is a system that makes everyone a state dependent, with welfare even going to those earning 50 percent more than the average income.

The ASI has advocated a high threshold for years, long before the Liberal-Democrats came out for a somewhat lower threshold of £10,000. This would be a good time for the Conservatives to accept what we have told them many times: poor people should not be paying tax.

The second ASI policy they could both agree on is to set up a one-year judicial review of the state of civil liberties in Britain. Following years of legislation inimical to the freedoms we once took for granted, and thought enshrined in our unwritten constitution, a thorough review is needed.

A senior law officer, sitting for a year, taking evidence in public, would identify the areas of concern and make recommendations accordingly. Proceedings would be televised, giving expert evidence night after night on TV about what recent legislation has done to our legal protections.

Although the government would not be bound by the review’s recommendations, there would be powerful moral pressure for them to be enacted, going some way to restoring our lost liberties.

These are two policies to help the next government, both easy to agree upon. In the coming weeks, the ASI will be putting forward many more proposals which can similarly secure wide support, and help turn Britain back from its recent ruinous course.

The fake election

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Some are optimistic, even excited about the changes brought about by Thursday’s general election. However, I remain unconvinced about the prospects of a Tory/Liberal coalition.

The blaring reality of the country’s future is the rising national debt. Britain may not be in as much danger of a sovereign default as some European countries, but the budgetary pressures applied by such a high national debt are serious. As debt rises, and growth falters, the chance of an increase in the cost of borrowing rises, further squeezing public finances and reinforcing the whole dismal cycle. This presents an existential risk to health of the UK economy.

Against this backdrop, much of the party debates seem almost trivial. Perhaps some good policies, education and tax reform included, may get through as a result of a ‘liberal coalition’, but the focus should really be on restoring fiscal discipline. None of the parties have exhibited an open or honest stance on the issue, this is a travesty.

An IFS report revealed that none of the parties have outlined more than a quarter of the measures that will be required to restore fiscal credibility. This has not been an election of ‘real change’, I see no justification for the ‘politics of hope’ and we are not entering a new era of a ‘fresh approach’ to governing. Commentators and the media are scrambling to make a narrative out of these confusing events, well here’s a straightforward one:

This was a fake election. Every party failed to take on the central, potentially crippling issue of the day. It was a race to see who could bury their heads farthest into the sand, who could toss the biggest bones to a style-obsessed electorate. Cameron and Osbourne attempted to position themselves as the party of fiscal sustainability, but failed to outline 82% of the spending cuts required.

The hung parliament is a false culprit; none of the individual parties presented the electorate with a credible plan. Many countries manage an economy effectively with coalition governments; the problem for the UK is that the politicians coalesced around fantasy economic plans, not facing up to the real challenge.

To me, the situation points to a Conservative minority government supported minimally by a distant Liberal party, who have every incentive to disassociate themselves from the poisonous cuts to come. A lot depends on Labour; if they present an ‘anti-cuts’ agenda in reaction to the Conservatives, the debate could shift in the worst direction.

I have the feeling we are only at the beginning of the process of coming to terms with the scale of the problem.

The West Lothian Question must be addressed

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The results of the general election have again highlighted the unfairness of our asymmetric devolution arrangements. In a sense, it didn’t matter much to Scotland who won the election – they have their own parliament and their own government, and pursue their own policies on many domestic issues. And yet they still got to send 59 members of parliament to Westminster, who will now spend most of their time voting on and debating legislation that only applies to England.

In such a tight election race, these Scottish MPs could easily have held the balance of power, and been able to wield enormous influence over policies that could never impact their constituents. That this hasn’t happened should be welcomed, but it shouldn’t distract us from the fact that there remains something fundamentally wrong with our constitutional set-up. If – as seems to be the case – political and electoral reform is going to be a major issue in coming months, devolution must be part of the discussion.

I’ve written many times before that the only solution to this ‘West Lothian question’ is for power to be devolved to England as it is to Scotland. The radical decentralizer in me likes the idea of Swiss-style localism, with power devolved to the English counties, but realistically an English Parliament is the more obvious solution.

What the ASI has recommended before is that the MPs representing English constituencies in the House of Commons be constituted as a separate English Parliament, which would elect its own first minister, and take over the Commons for several weeks each month to deal with English issues. Interestingly enough, if this English Parliament existed today, it would contain 298 Conservative MPs, 191 Labour, 43 Liberal Democrat, and 1 Green. That would add up to a Tory majority of 31, compared with being 19 short of a majority at the UK level.

This is not an argument about whether or not England should have a Conservative government. Rather, my point is that if Scotland can elect a parliament that represents their views, and if Wales and Northern Ireland can elect assemblies to do the same, why can’t England? It is a simple matter of fairness that ought to be on the agenda.

P.S. Britain’s geographic polarization – the Tories won 71 percent of the seats in the South, compared with less than 2 percent in Scotland – is a striking feature of the 2010 electoral map. To me, that mitigates in favour of genuine political decentralization, a theme I’ll be returning to in future posts.

Liberals vs Statists?

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Well, I have to admit I’m surprised. I expected the Conservatives to want to go it alone, ruling as a minority government, rather than enter into any formal coalitions. But in his speech a few minutes ago, David Cameron made it clear that while he was prepared to take the ‘confidence and supply’ option if necessary, he would prefer to join forces with the Lib Dems, and would be seeking an agreement with them as soon as possible.

He laid out a few Tory non-negotiables: no more powers ceded to the EU, immigration control (i.e. no amnesty), and national defence (i.e. renewing trident). But most of his speech was concerned with the areas he thought the Tories could work with the Lib Dems: introducing a pupil premium for disadvantaged youngsters within a funding-follows-the-child school system; moving to a low carbon economy; raising the income tax personal allowance; protecting civil liberties and getting rid of ID cards; and reforming the political and electoral system. On that last point, he made clear the Conservatives remained committed to first-past-the-post, but called for an ‘all party committee of enquiry’ on the voting system. He finished by reiterating his 100 percent commitment to getting started on tackling the deficit now.

So how do I feel about this? Actually quite positive. Many people have talked about how a Lib Dem–Labour coalition would be a ‘progressive’ alliance against conservatism. But could a Tory-Lib Dem pact actually signal a far more welcome realignment of British politics – a union of liberals against statists and authoritarians? Perhaps that is going too far. I know that any British government, whatever its composition, is going to be more statist than I would like. But maybe for classical liberals like me, this will at least be a government we can do business with.

Hat-tip to Guido – who seems to share my optimism – for the picture.

Don't panic

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So it’s a hung parliament. That isn’t ideal: Britain could do with a strong government with a clear mandate to sort out the fiscal mess that Gordon Brown has landed us in. But it need not be the chaotic disaster that some pundits were predicting in the run up to the election.

I think by far the most likely outcome at this stage is a minority Tory administration. After Nick Clegg’s remarks a few moments ago, it is clearly David Cameron’s ball to run with, so here’s what he could do:

First, come to some accommodation with the Ulster Unionists. This should be relatively straightforward.

Second, get on the phone to SNP leader Alex Salmond. Offer fiscal autonomy for Holyrood and a referendum on Scottish independence in return for his support. He would be a fool not to leap at the offer.

Third, since that still wouldn’t give the Tories control of the Commons, try to co-opt the Lib Dems. There’s no need for a coalition – all the Conservatives really need is Lib Dem backing for their budget. Letting Nick Clegg have his ‘Council for Financial Stability’ is an obvious olive branch.

Fourth, focus on what can be done without the need for primary legislation. In reality this is a lot: a public sector efficiency drive, a bonfire of regulations, and even the Tories’ school reforms can be accomplished via secondary legislation and administrative orders.

Fifth, get ready for another election within a year. Come up with a clear platform that (a) people actually understand, and (b) answers the question ‘what will a Conservative government do for me?’

The fact that the Tories only got 36.1 percent of the vote, despite facing a tired government, a discredited, disliked prime minister, and should make them ask some serious questions about their campaign. Thatcher got 43.9 percent in ’79, 42.4 percent in ’83, and 42.4 percent in ’97. John Major got 41.9 percent in ’92. Whatever the spin coming out of CCHQ, last night was not a victory for Project Cameron.