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May 12 - 18 2010

News

Election 2010: Thenegotiations

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The Telegraph

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Sub-prime terror? Was the Times Square bomber motivated by the recession?

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LOTTO 05/05

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THE RULES

Continued from page 1 agreement that we make will be economic stability and a reduction of the budget deficit,” he said. Mr Hague added that “political reform, economic issues and the reduction of the deficit, banking reform, civil liberties, environmental issues” had also been discussed.

Danny Alexander, Mr Clegg’s chief negotiator, confirmed: “We’re agreed that any agreement made will have deficit reduction and economic stability at its heart.”

Mr Cameron needs the support of the Lib Dems to ensure that his first Queen’s Speech and emergency Budget are passed in the Commons. If they were to be voted down, then Mr Cameron would face a vote of no confidence and the prospect of another general election.

Tory sources told The Telegraph that they were seeking a deal that would last at least two years. Privately, however, many feared that any agreement would collapse in the autumn, triggering a second election.

Mr Brown was refusing to stand down despite his own MPs urging him to go with dignity and not try to stitch up a “shabby” deal with minority parties.

On a day of covert meetings across Whitehall, Mr Brown left Downing Street to meet Mr Clegg at the Foreign Office, a few hundred yards away. However, Lord Ashdown, the former Lib Dem leader and close ally of Mr

PUGH

GEOFF

William Hague speaking before a meeting at the Cabinet Office to try to work out a deal between the Lib Dems and Tories

Clegg, indicated that his party would not form a pact with Labour. He said of Mr Brown: “Amongst his personal qualities is not one that makes him an easy or very able leader of a collegiatestyle government.”

After two teams of negotiators emerged from the Cabinet Office on Sunday night, the likelihood remained that Mr Cameron would finalise a deal with Mr Clegg over the next few days.

The Tory leader is believed to have suggested a number of concessions, including a reduction in the number of MPs, a fully elected House of Lords and fixed-term parliaments.

However, several Tory MPs are highly sceptical of a deal with a party they were fighting so hard only days ago. Some were urging the Tory leader to go it alone in a minority administration.

On Sunday, Michael Gove, the shadow schools secretary and key ally of Mr Cameron, said that he would forego his Cabinet position in favour of a Lib Dem if that would lead to a period of stable government.

Mr Gove’s comments encouraged some Lib Dem MPs to seek a clear promise on voting reform – specifically a commitment of a fairer system and possibly proportional representation (PR). One senior Lib Dem MP said: “That Gove interview shows they’re more desperate than we thought. I’m starting to think Cameron would be prepared to give a lot of ground on PR to get this done.”

By Bruno Waterfield in Brussels and James Kirkup AFTER a frantic weekend of negotiations in Brussels, the Eurozone’s 16 finance ministers unveiled a package that pledges to guarantee the debt of any of the countries that use the euro.

The unprecedented measures include: €440 billion (£380 billion) in loans or guarantees from Eurozone countries, €60 billion from the European Union’s Budget and up to €250 billion from the International Monetary Fund.

The news helped buoy Britain’s blue-chip index more than 4.4pc by midmorning on Monday, with France’s CAC 40 Index and Germany’s Dax matching it.

The biggest relief and strongest rallies came in Portugal and Spain, the two countries in the cross-hair of investors’ fears over European debt.

The beleaguered euro surged more than two cents against the dollar to head back above $1.30. Alistair Darling, the Chancellor, representing Britain until a new government is formed, was forced to participate in a £95 billion “stabilisation mechanism” aimed at helping EU countries that face a debt crisis.

The decision followed a crisis meeting in Brussels to discuss the financial turmoil that has raised doubts about the future of the euro.

It exposes the British taxpayer to £9.6-£13 billion in liabilities should Spain or Portugal go the way of Greece. Mr Darling had no choice but to surrender because the decision was taken under a Lisbon Treaty “exceptional occurrences” clause that stripped Britain of its veto.

“I think it’s important that we do everything we can to stabilise the markets to show we’re coming through what is a difficult period,” he said.

Britain did, however, succeed in staying out of the even larger fund solely for the 13 countries using the euro.

“This is Shock and Awe, Part II and in 3-D,” said Marco Annunziata, the chief economist at the Italian bank UniCredit Group.

“This is truly overwhelming force, and should be more than sufficient to stabilise markets in the near term, prevent panic and contain the risk of contagion.”

Germany, France and the rest of the euro countries have been forced into these unprecedented steps because of fears that the debt crisis that engulfed Greece will spread to other indebted nations. The real fear was that the debt crisis could cripple Europe’s banks and plunge the global economy into another recession.

“There has been a poker game going on between the markets and the EU,” said Gary Jenkins, the head of credit strategy at stockbroker Evolution. “This is probably reaching a climax as the EU has just gone ‘all in’.”

THE main political parties have 15 days to thrash out a deal to form the next government before the country faces the prospect of a second general election.

Under a new set of guidelines put in place by the Civil Service, Gordon Brown can remain as Prime Minister until May 25 – the day of the Queen’s Speech. By then, either he, David Cameron or Nick Clegg has to show he has the confidence of the Commons.

The unusually long period between the election result and the Commons sitting was agreed by Sir Gus O’Donnell, the Cabinet Secretary and the country’s most senior civil servant, who drew up the new rules earlier this year anticipating the possibility of a hung parliament.

Previously, there had been no written guidance on what should happen in the event of no single party having an overall majority of MPs.

The extra time is designed to allow the three main parties to reach an agreement on which should form the next government.

The new guidelines, set out in an updated Cabinet Office manual, are designed to ensure that the country is not forced to go back to the polls almost immediately in the event of no one party winning an overall Commons majority.

The backdrop of the fraught economic climate was also uppermost in Sir Gus’s mind when he drew up the rules. There have been fears that an inconclusive result would lead to a run on the pound and potentially devastating shock waves in the City.

Under constitutional convention, Mr Brown can request a second dissolution of Parliament if he does not win a vote of confidence when the Commons sits again. That would normally trigger a second general election.

The Queen is not obliged to grant that second dissolution and would be reluctant to do so. Instead, at that point she is likely to ask Mr Cameron if he can form a government.

In reality, it is unlikely to get that far. If Mr Brown cannot lure the Liberal Democrats from their probable deal with the Conservatives to side with Labour, then he will have to accept that it is Mr Cameron’s right to try to form a government.

Similarly, if Mr Cameron is able to lead only a minority government – in the event of talks breaking down with the Lib Dems, but Mr Clegg refusing to do a deal with Labour – then he, too, would have to get his Queen’s Speech through and survive any vote of confidence.

If he failed then he would have to seek a dissolution of Parliament. Mr Cameron will have calculated that neither the Lib Dems, nor Labour, would like the idea of another election so soon and are unlikely to block Tory plans.

Andrew Porter telegraph.co.uk/expat

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T Financial analysis Ian Cowie on what the hung parliament means for your money telegraph.co.uk/election

May 12 - 18 2010

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News

Searching for the centre ground Parties need to reach agreement on range of policies

Any negotiations between the Liberal Democrats and the other parties about a power-sharing deal will be based not just on changing the voting system but the full range of policy positions held by the parties.

Before the general election, the Lib Dems set out four minimum requirements for supporting another party in power: electoral reform, reducing the tax burden on the lowest-paid, channelling money to the poorest state school pupils and a greener immigrants. He has also insisted that he would not back down on plans to start cutting public spending during the current financial year, something the Lib Dems oppose.

would not cede any more power to the European Union, give up Britain’s nuclear deterrent, or where they are not prepared to compromise.

economy. Those demands have been made only in broad terms, allowing significant opportunities for the Lib Dems to reconcile their policies with those set out by other parties.

David Cameron, the Conservative leader, has said he consider an amnesty for illegal

The Conservatives also have set out some “red line” positions, areas

No to proportional representation

Annual cap on non-EU economic migrants

But beyond that, the Conservatives have been keen to talk up the areas

Tax breaks for married couples

Elected police commissioners

£6billion cuts this financial year where they could agree with the Lib Dems,

particularly on civil rights and public

Ring fence NHS and aid budgets

Emergency budget within

No national insurance rise for most earners

Inquiry on political reform services reform.

In the event that the Lib Dems end up in talks with Labour, there are also several areas of potential agreement, including the need to wait until next year before starting to cut spending.

The Venn diagram below sets out some of the areas where the parties’ policy positions overlap. The green area shows common ground between the Tories and Lib Dems, orange is Labour-Lib Dem overlap and purple shows Tory-Labour crossover. The central grey area shows where all parties agree.

50 days

Instant grounding for anti-social youths

Cut child trust funds for middle

Different types of government that could be formed

Referendums on

Free schools on Swedish model, run local issues class

Toughen teaching qualifications

Ban former ministers from lobbying for by parents and charities

Roll out living wage for some Government

1. Single-party majority rule The norm since 1979, this is the most stable form of government and allows one party to introduce legislation as it sees fit with only the risk of occasional backbench rebellions. This is not possible in a hung parliament. 2. Formal partnership coalition majority rule Two parties have a formal deal under which they share government posts and agree a programme of legislation in advance.

Possible compulsory levy on personal care

Electoral reform —

employees

Renew Trident

National youth volunteer service

Keep voting age at 18

two years

Critical of European Union

End child detention

Oppose compulsory education to 18

alternative vote

Cut NHS bureaucracy

Green investment bank for renewable

Cut number

No income of MPs

Pupil premium economy tax rises

Protect budgets of front line health,

education and police services

Protect child trust funds and tax credits

Halve budget deficit in four years

Immigration points system

One per cent increase in NI contributions

Yes to Heathrow third runway

50 per cent tax on earnings above £150,000 a year

Compulsory education to 18

Support mission

Reduce tax

No to Heathrow in Afghanistan for earners third runway

3. Confidence and supply

Recall of MPs agreements One party

Cut tax credits agrees not to back a vote of no confidence against

Tax on banks Money for schools

Scrap ID cards

Cancel £480billion prison building programme the ruling party and to support revenue

Limit public with poor pupils sector pay raising (supply) measures. However,

Amnesty for illegal immigrants

Votes at 16

it can still vote against individual government policies. The parties may also establish

One-to-one

£2.5billion to cut

Fixed-term parliaments tuition class sizes

Scrap Trident

Continue spending until

Pro-European

Union

2011 Register of lobbyists

Regional cap on non-EU economic migrants

Electoral reform – alternative vote plus?

£2million-pound mansion tax

No ring fencing of

NHS cash

Rehab not prison for addicts

£10,000 income

Scrap all child trust funds

More freedom for school heads tax threshold

Electoral reform – single transferable vote formal committees to liaise on key legislation. 4. Single-party minority government One party governs the country without an outright majority. It effectively “dares” the other parties to vote against key laws, which would lead to a political crisis and force another election. There may be some formal or informal negotiation between parties over certain policies. 5. Minority coalition government The weakest form of government, which is likely to prove short-lived and unstable.

Voting reform Alternatives to first past the post

Single transferable vote

This system works on the basis of multi-member constituencies and the starting point for adopting the system would be the abolition of the current constituency boundaries.

The existing constituencies would be replaced with larger electoral districts, which each elect several MPs, perhaps five. To win, a candidate would need the endorsement of one fifth of voters in the district.

Like the alternative vote, voters rank candidates in order of preference and their votes are redistributed. When a candidate meets the threshold for election — one fifth, in this example — their secondpreference votes would be redistributed. The process would continue until all seats have been filled.

STV would be the first choice for the Lib Dems, but would be opposed by most Tory and Labour MPs because it breaks the link between them and their constituencies.

Alternative vote

Voters rank candidates in order. If a candidate gets 50 per cent of first-choice votes, he is elected.

However, if no candidate reaches that threshold, then the one with the least votes is eliminated and the second and then third-preference votes are added to the remaining candidates’ totals until someone has 50 per cent or more. This is the system proposed by Gordon Brown to woo the Lib Dems. It is similar to the supplementary vote system, which saw Boris Johnson elected as Mayor of London in 2008.

Some Tories have indicated that they could live with the AV system, partly because it favours the main parties, and maintains the link between a constituency and an individual representative.

However, many Lib Dems feel that it does not go far enough in reforming the electoral system.

Alternative vote plus

Voters would have two votes: one for a constituency MP elected by AV and one from a regional list of “top-up” MPs, who would make up about 20 per cent of the Commons.

The regional members would be elected on an “open list” system, where voters cast a single vote for one of several candidates put on the ballot paper by each parties. So if a region had five “top-up” MPs, the five winners would be those who received the five highest vote totals. The system, never implemented anywhere in the world, was drawn up by the Jenkins Commission of Labour and Lib Dem members in 1997 when Labour was looking at alternatives to first-past-thepost for general elections. A referendum on voting reform was planned, but abandoned after the commission reported.

While Lib Dem purists again reject AV+ as inadequate, Nick Clegg, the party leader, has suggested he could accept it.