Could Labour and the Liberal Democrats realistically come up with a coalition agreement? The hardware for a coalition—the tallies of votes and seats—won’t be in place until after election day (though many opinion polls suggest that a Lab-Lib bloc may be large enough to govern.) But most of the software for a coalition can be assembled now. Centre Forum—a liberal think tank—and the Fabian Society—often close to Labour party policy—have tried to do that in a report this week. They find “significant common ground” between the policy promises of the two parties, enough to provide a starting point for negotiation.
Some of the common ground is featureless. Both parties, for example, support “an active industrial strategy with government led sectoral partnerships,” whatever that means. They also support investment into green technologies. While these might be issues for the back half of a coalition agreement, inserted to add gravitas, they’re not the stuff of the Rose Garden Redux. More significantly, the two parties describe a similar outline for future public spending—cuts, yes, but mitigated by maintaining investment and some tax rises. They would devolve more power and funding to local decision makers, as well as reform the House of Lords. They would agree not to have a referendum on British membership of the EU. While some of Labour’s criticism of big business may create tension across the coalition divide, both parties promise to be tougher on tax avoidance and they have a similar position on getting more employers to pay the Living Wage, through persuasion rather than compulsion.
There are certainly issues where the parties do not agree. Labour is firmer on keeping Trident; increasing runway capacity in the South East; reforming the energy market, starting with a freeze on prices; as well as putting up the top rate of tax. By contrast it is likely to be more hesitant than the Liberal Democrats on changing the voting system for the House of Commons or ending the use of prison for the possession of drugs for personal use.
As the authors of the report observe, these specific differences are indicative of a divide between the parties on the right level of state activism in the market—but the gap is like that between France and Germany, countries that both have coordinated market economies rather than the gap between, let’s say, the state-led market economy of a country like China and a bastion of free enterprise like the USA in the late nineteenth century. Equally, the parties hold differing views on social and political liberalism. Though again it’s the subtle difference between the liberalism of New York versus the liberalism of California rather than the difference between the latter and Texas.
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On top of the definite disagreements there are some unknowns. Labour has yet to announce its policy on higher education funding. Whatever the position, unless it’s status quo, Liberal Democrats are likely to find it difficult. Labour will claim the credit for any change and Vince Cable’s view on a radical alternative like a graduate tax is that he has considered it thoroughly and rejected it. A fresh review of the area may be what emerges as a compromise. For their part the Liberal Democrats claim ownership of many of the pensions changes made under this Government. Labour hasn’t provided much detail on what it would do instead. This may be tacit assent that it will play along with the changes, or here too we might predict the announcement of a new commission.
The two areas of decision making that probably can’t be laundered in the same way are the future of the NHS and tax policy for those in low pay. The Liberal Democrats are much more open to the use of personal budgets and private and voluntary providers in the NHS than what seems to be the dominant view in the Labour Party. That said, Liz Kendall, the Labour Shadow Care Minister, seems more open to transforming the NHS and might quite appreciate the flexibility provided by coalition.
On tax, the Liberal Democrats have said that they will keep increasing the personal tax allowance, whereas Labour has said previously that their priority is re-introducing a 10p rate for the first chunk of taxable income. The Liberal Democrats attach totemic importance to their tax allowance policy; Labour think tankers and campaigners believe it’s a very ineffective way to help those in low pay. This is genuinely difficult to negotiate, though on the other hand focusing on how best to help those at the lower end of the income distribution might provide just the right mood music for a rapprochement between two political rivals.
While in 2010 the coalition agreement focused on the grim work of cutting the deficit it may just be that in May compromise will be motivated by reducing inequality.
