UK Election - Burson-Marsteller Insight

BURSON-MARSTELLER INSIGHT

The UK general election Cameron enters Number 10 – with a little help from new friends 17 May 2010

On 6 May, the people of the UK spoke – but it took a further five days for it to become clear what they had said. For the first time in 36 years, a British general election left no party with an overall majority; and for the first time since the Second World War, the UK has a coalition government.

David Cameron, leader of the Conservative Party, has become Prime Minister, as leader of the largest party at Westminster; Nick Clegg becomes Deputy Prime Minister, with his party, the Liberal Democrats, sharing power under a formal coalition agreement.

After three years in 10 Downing Street, Gordon Brown was defeated, leaving Labour to re-group in opposition under a new leader.

Britain now faces a change of direction, not only domestically but also internationally. How will a Eurosceptic Conservative Party and the Europhile Liberal Democrats work together, and what will be the impact on the UK’s relations with the rest of the EU?

The election The people vote for change – but in different varieties As the broadcasters’ exit polls were announced at 10pm on Thursday 6 May, most observers assumed that they must be wrong: the Conservatives were said to have failed to achieve an overall majority (which was not entirely unexpected) and Labour, which had been written off by the media, had rallied to a score of more than 250 seats. The Liberal Democrats, whose support had been boosted through effective showings by their leader, Nick Clegg, in the UK’s first ‘prime ministerial debates’, were projected to lose seats, not gain them.

And yet, this extraordinary projection turned out to be true. The UK would have its first post-election ‘hung parliament’ since 1974.

Labour had lost power – but the Conservatives, despite a financial advantage in marginal constituencies, an unpopular government, and a favourable media, had not ‘sealed the deal’. The LibDems – mathematical losers on the night (in terms of seats at least) – had become the ‘king-makers’. Mr Clegg immediately re-iterated his assertion that the party with the greatest number of seats should have the first opportunity to form a government; within hours, talks between the Conservatives and the LibDems had begun.

In spite of the impatience of the 24-hour broadcast media, and predictions of dire consequences on the financial markets, the talks continued over the weekend. Then came a new twist: Gordon Brown, still Prime Minister until it was clear that there was someone else who could command majority support in Parliament, announced

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that he was to resign as Labour leader. The LibDems had signalled that they wanted to start talks with Labour as well – but not with Mr Brown. A ‘rainbow coalition’ of Labour, the LibDems and smaller parties was now an option on the table.

Yet within 24 hours, the idea was rejected – with many doubting that it was ever a serious option, but rather a negotiating tactic for the LibDems to extract greater concessions from the Conservatives.

The Lib/Lab deal was rejected not only by LibDems, but also by senior Labour figures, worried about deals with Scottish and Welsh nationalists, a lack of popular legitimacy, and an unstable government. The Con/LibDem deal was the only game in town.

On the evening of Tuesday 11 May, Mr Brown visited Buckingham Palace to tender his resignation to the Queen; within an hour, Mr Cameron had accepted the monarch’s invitation to form a new government, becoming the youngest prime minister in 200 years.

He entered Downing Street and confirmed what everyone knew: there would be a full coalition with the LibDems, the first such pact in a UK government since 1945.

In the end, the combination of electoral arithmetic and a new generation of economic liberals at the head of the LibDems made a coalition with the Conservatives the only realistic outcome. Team Clegg were well-prepared. Treasury spokesman Vince Cable’s ‘game theory’ experience in scenario-planning at Shell and the knowledge of Mr Clegg’s chief of staff, Danny Alexander, about the Lib/Lab pact negotiations in Scotland both put them in a strong position.

Yet it was a very ‘un-British’ outcome, capping an extraordinary

The results

Party

Con

Lab

Seats (out of 649)*

306 258

Vote share (turnout 65.1%)

36.1%

29.0%

LibDem

Others

57

28

23.0%

11.9%

CON / LIB DEM COALITION MAJORITY OF 76 SEATS * There are 650 seats in the House of Commons; one election, in Thirsk & Malton, was postponed to 27 May due to the death of a candidate.

election campaign that centred on three debates between Mr Cameron, Mr Clegg and Mr Brown. So much for the ‘internet election’, which many predicted: this was a televisual affair. Mr Clegg, often sidelined as leader of the ‘third party’, seized his opportunity and the LibDems gained a big boost in the polls, even threatening to push Labour into third place.

Gordon Brown’s fortunes were not helped by the storm that surrounded an off-the-cuff, disparaging remark about a voter he had just met – which was picked up by a TV microphone. ‘Bigotgate’, which included a grovelling apology at the home of 65-yearold Gillian Duffy, dominated the headlines for days.

Yet the other leaders struggled at times as well: with his success threatening the Tories as well as Labour, Mr Clegg came under intense (and unfair) scrutiny from the right-wing press. Mr Cameron and his candidates struggled to communicate his party’s big idea, ‘The Big Society’, a plan to reduce the role of the state in favour of citizens taking control of public services.

In the end, no party shone through, and it seems that, in spite of the sometimes unpredictable outcomes generated by the UK’s ‘first-past-the-post’ constituency-based electoral system, the British public achieved what it seemed they wanted: politicians working together to tackle the country’s number one problem – its massive public deficit.

European impact The odd couple The Conservatives and Liberal Democrats outlined their policy agreements in a seven-page document (see below for details) – including a substantial part on European policy.

This was one of the policy areas that led people to doubt the possibility of a Con-LibDem pact. The LibDems have traditionally been Britain’s most pro-European party, backing membership of the single currency. The Tories have become progressively more anti-European: as well as opposing the euro, they called in their manifesto for a ‘referendum lock’ on future treaties, the repatriation of powers, including social legislation, and a ‘sovereignty act’ to assert through law the ultimate power of the UK Parliament – despite the supremacy of EU law.

In the end, the text of the agreement is fairly centrist, even though the choice of Foreign Secretary – William Hague – will send shivers down the spine of pro-Europeans. Mr Hague, as Conservative leader, ran the stridently antiEU and anti-euro (and unsuccessful) 2001 election campaign. He engineered the withdrawal of the British Conservatives from the EPPED Group in the European Parliament, to form the ECR (a move with caused great difficulties for Mr Cameron in his relations with the German Chancellor, Angela Merkel, and the French President, Nicolas Sarkozy). He vehemently opposed the Lisbon Treaty. Mr Cameron and George Osborne (Britain’s new finance minister), as well as many other Conservative cabinet ministers, are also Euro-sceptic.

And yet the coalition’s foreign policy would seem designed to avoid the feared collision course with the EU, and focus on more general external priorities. (Indeed, Mr Hague’s first foreign trip was to

Washington, DC; and his foreign policy priorities seem to revolve around Afghanistan and Iran, not Europe.)

Mr Hague’s Minister for Europe will be David Lidington. A parliamentary veteran, Mr Lidington was first elected in 1992, having previously worked as a special advisor to Douglas Hurd during his tenure as Foreign Secretary. He also worked under Mr Hague when the current Foreign Secretary was the Conservative leader (1997-2001), Mr Lidington’s appointment should be a relief to Brussels. In opposition, the Conservatives’ European spokesman was Mark Francois, a strong Eurosceptic. By contrast, Mr Lidington is a moderate: he backed John Major during the battles between the then Prime Minister and his Eurosceptic backbenchers in the 1990s.

Mr Lidington’s appointment can be seen as a mark of the influence of the LibDems, who are thought to have vetoed the appointment of Mr Francois (to the anger of many on the right wing of the Tory party, who are concerned about a softening in the Tory approach to the EU).

Fears in Brussels about a Cameron government will also have been tempered by the involvement of Mr Clegg, a former MEP and former European Commission official (he worked for Leon Brittan, a former British Conservative commissioner).

So Britain will be, according to the deal, a “positive participant” in the EU, in order to address the “challenges of the 21st century” global competitiveness, global warming and global poverty. On the constitutional side, there is opposition to the transfer of new powers to the EU over the course of the next parliament, but only a promise to “examine” the split of competences between the EU and member states – although with an emphasis on the Working Time Directive. The sovereignty bill idea will be examined further before any proposal in made.

There will be a ‘referendum lock’, but significantly, only for the transfer of powers and competences: this is a neat arrangement to ensure that EU enlargement, a traditional goal of the UK’s EU policy, can go ahead without a plebiscite. The plan to increase the number of MEPs, in line with the Lisbon Treaty, should also avoid scrutiny in a referendum. Any use of the ‘passerelle’ mechanism under the Lisbon Treaty will be put before Parliament.

The Brussels connection at Westminster IN GOVERNMENT Nick Clegg

LibDem

Former MEP, re-elected and now Deputy Prime Minister

Chris Huhne

LibDem

Former MEP, re-elected and now Secretary of State for Energy & Climate Change

Con

Former MEP, re-elected and now a Minister of State in the Department for Transport

Theresa Villers

NEWLY ELECTED TO PARLIAMENT Caroline Lucas

Green

MEP, Leader of Greens in England and Wales, now MP for Brighton Pavilion (she will resign as an MEP)

Chris Heaton-Harris

Con

Former MEP

Jonathan Evans

Con

Former Chair of EP US Delegation, and former leader of Conservative MEPs

Neil Parish

Con

Former Chair of EP Agriculture Committee

Nick Smith

Lab

Former Secretary-General of Labour MEPs

Emma Reynolds

Lab

Former staffer at Party of European Socialists

Nigel Farage MEP (UKIP) finished third in his election, as did Nick Griffin MEP (BNP).

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Membership of the euro is, unsurprisingly, off the agenda. There is also no surprise that the new government says it will mount a strong defence of the UK’s interests in the forthcoming EU budget negotiations. It may not be Thatcher II, but Britain will be reluctant to contribute more – and wants to see EU funding only for those policy areas where the EU can “add value”.

The results in detail

On criminal law and justice, the document is pragmatic, reflecting the split between the two parties. Legislation on criminal justice will be examined ‘case-by-case’, and only accepted in the interests of the country’s security. The UK will not support a European Public Prosecutor.

In the end, there are very few surprises in policy, given the divergence of the two parties in their approaches to the EU. The surprise is in the moderate tone – which may create difficulties for MPs (and MEPs) from the more stridently Eurosceptic wing of the Conservative Party. They will maintain pressure on Mr Cameron to stick to the words he used when he was a rising star in the Conservative Party nearly 15 years ago – that in the EU, we should have a “British lion”, not a “federalist pussycat”.

One of those few policy surprises is an explicit mention for the new government to press for the European Parliament to have only one seat, in Brussels. Nick Clegg was one of the founders of the Campaign for Parliamentary Reform, a group which called for an end to Strasbourg sessions of the European Parliament. This policy has his fingerprints on it (as well as those of Chris Huhne, another former MEP who was in the LibDem negotiating team) – but also reflects a wider agreement among the British political parties.

Mr Sarkozy and Mrs Merkel, were among the first leaders to congratulate David Cameron, even though they will both be anxious about the Tory approach to Europe. Mr Sarkozy will meet Mr Cameron in June – and they are sure to disagree on the ‘one seat’ issue. However, Mr Sarkozy is reported to have told his party’s MPs that Mr Cameron will "start out Eurosceptic and finish up proEuropean. It's the rule... He'll be like all the others."

Mr Cameron may not see things in the same way. Battles lie ahead.

However, predictions of immediate confrontations seem to be misplaced. Despite reservations over the proposal to regulate hedge funds, an important issue for the City of London, Mr Osborne seems set not to oppose (or try to postpone) a measure that is supported by the majority of other member states. It remains to be seen if this consensual approach will continue.

The deal A new politics at Westminster?

The seven-page Conservative-Liberal Democrat deal is based around two major domestic themes: how best to secure the UK’s economic recovery, and political reform.

During the campaign, the Conservatives had emphasised the need to reduce the public deficit by making cuts in public spending this year; the cuts will happen, but on the basis of advice from the Treasury and the Bank of England. A new, independent ‘Office for Budget Responsibility’ will be created to oversee public spending.

An ‘emergency budget’ will take place within 50 days, and the public budget is likely to see £6bn (€7bn) in cuts in 2010-11.

These public spending cuts will affect jobs and pay in the UK’s public sector (a large part of the economy in the north of England, Scotland, Wales and Northern Ireland). The pill is being sweetened for low earners, and tax reductions will be focused on them,

Number of seats per party

ENG

Conservatives

297

1

Labour Party

191

41

Liberal Democrats

43

11

3

Green Party

1

0

0

Respect

0

Independent

0

Scottish National Party Plaid Cymru

SCO

0

WAL

Total

+/-

8

306

+97

26

258

-91

0

N.IRE

0

1

6 3

57

-5

1

+1

0

-1

1

-1

6

0

3

+1

Democratic Unionist Party

8

8

-1

Ulster Cons/Unionists

0

0

-1

Sinn Fein

5

5

0

SDLP

3

3

0

Alliance Party

1

1

+1

scuppering Tory plans for tax incentives for married couples and a cut in inheritance tax. Job creation and ‘green taxes’ will be the priorities, as will a review of public spending. The National Health Service (NHS) and overseas aid will be protected – the cuts will fall elsewhere, such as on education and police budgets.

Little is said of the NHS in the agreement, but the new Health Secretary, Andrew Lansley, is likely to follow the agenda of the Conservative manifesto: cutting waste, and re-directing money into ‘front-line’ services, especially cancer care. A new cancer drugs fund may be created – and the body responsible for assessing the costeffectiveness of drugs in England, the National Institute for Clinical Excellence (NICE) may have to begin assessments earlier (in parallel with drug approvals) and take into account societal concerns, following previous recommendations not to fund some (less effective) cancer drugs. Such moves are likely to be welcomed by pharmaceutical companies.

Banking reforms will a priority, to remedy what the agreement calls “Labour’s financial crisis”. There will be an inquiry into whether banks should be broken up, in order to split retail and investment functions. Bonuses are likely to be curbed, a new tax on financial transactions introduced, the Bank of England given greater financial oversight responsibilities. SME development will be encouraged.

Although it was highly unlikely to happen in any case, the agreement confirmed that the UK will not join the euro. Business and banking policy will be overseen by one of five LibDem cabinet ministers, Vince Cable (the party’s former finance spokesman).

On defence, the Conservatives and LibDems have decided to carry out a review on the replacement of Trident, the UK’s independent nuclear deterrent. The Conservatives strongly support the replacement of the system; the LibDems argued during the campaign that a renewal should be part of any defence review.

Political reform will be a major priority, overseen by Nick Clegg, as Deputy Prime Minister. Britain will have fixed-term parliaments of five years, ending the prime minister’s traditional right to call an election at the time of his choosing. There will be a referendum on a new voting system, the alternative vote, which would help the LibDems in particular, whose share of the vote is not reflected in the House of Commons.

An American-style ‘recall’ system will be put in place, under which electorates can demand a by-election to unseat a Member of

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Parliament involved in serious misconduct. Britain’s upper house of Parliament, the House of Lords, is likely to be reformed to a whollyor mainly-elected chamber, by proportional representation.

enhanced, say the two parties, by repealing bills, and stopping unnecessary storage of fingerprint and DNA data, and email and telephone call records.

A register of lobbyists will be created (a move advocated by BursonMarsteller), and major donations to political parties curbed.

A new ‘National Security Council’ will be convened – a mini-cabinet, involving military staff, to discuss foreign policy, defence and terrorism issues.

School reform (including extra funding for poorer schools), a cap on non-EU immigration and a tightening of welfare rules are on the agenda; new environmental taxes, an emphasis on renewable energy, and the refusal of an additional runway at London Heathrow airport, give this blue-yellow pact a green hue.

Energy policy centres on a point of disagreement – the use of nuclear power. Chris Huhne, the LibDem appointed to the energy and climate change brief, is opposed, as are most in his party; LibDems may speak against the construction of new nuclear plants, but will abstain in votes. It will not be a question of confidence, says the document – but it is sure to be a point of tension.

Civil liberties, reduced by Labour’s anti-terrorism measures, will be

The new government David Cameron’s new cabinet contains five Liberal Democrats. It has just four women – a lower proportion than the outgoing Labour cabinet, and lower than Mr Cameron’s former shadow cabinet. This is due in some part to the need to accommodate the LibDems, who lack senior women MPs. There is one member of an ethnic minority – Baroness Warsi, who sits in the House of Lords. She is one of only two peers in the new cabinet.

Five further ministers will attend cabinet, but are not official members.

The team includes two former Conservative leaders – William Hague and Iain Duncan Smith – a former Chancellor, Kenneth Clarke, and a further member of the last Conservative government, Liam Fox. Liberal Democrats are to be represented at ‘every level’ of government, and so will take a number of junior ministerial portfolios.

David Cameron Nick Clegg

Con LibDem

Prime Minister Deputy Prime Minister (responsible for constitutional and political reform)

William Hague

Con

Foreign Secretary, First Secretary of State

George Osborne

Con

Chancellor of the Exchequer (finance minister)

Kenneth Clarke

Con

Justice Secretary, Lord Chancellor

Theresa May

Con

Home Secretary, Minster for Women and Equality

Con

Defence Secretary

Liam Fox Vince Cable Iain Duncan Smith Chris Huhne

LibDem Con LibDem

Business, Innovation and Skills Secretary Work and Pensions Secretary Energy and Climate Change Secretary

Andrew Lansley

Con

Health Secretary

Michael Gove

Con

Education Secretary

Eric Pickles

Con

Communities and Local Government Secretary

Philip Hammond

Con

Transport Secretary

Caroline Spelman

Con

Environment, Food and Rural Affairs Secretary

Andrew Mitchell

Con

International Development Secretary

Owen Paterson

Con

Northern Ireland Secretary

Danny Alexander

LibDem

Scotland Secretary

Cheryl Gillan

Con

Wales Secretary

Jeremy Hunt

Con

Culture, Olympics, Media and Sport Secretary

David Laws

LibDem

Chief Secretary to the Treasury

Lord Strathclyde

Con

Leader of the House of Lords

Baroness Warsi

Con

Minister of State without portfolio

Overall, the plan is, as William Hague, one of the Tory negotiators put it, ‘the bulk of the Conservative manifesto mixed with the best of the Liberal Democrat manifesto’. It is centred on freedom, fairness, and responsibility, claimed Mr Cameron and Mr Clegg, who both described the government as ‘Liberal Conservative’.

Next steps Will the experiment work?

Despite the plan for fixed-term parliaments, some are already predicting a new election within the next two to three years.

Coalition politics is unusual at Westminster (although common in the devolved assemblies in Scotland and Wales, and on local councils) – as the suspicion is that differences will emerge and lead to a split.

David Cameron and Nick Clegg, however, are keen to display unity – and the personal chemistry seemed good at their first joint press conference at 10 Downing Street.

Although the parties will still oppose each other – including in one election that was delayed from 6 May due to the death of a candidate – there is much integration: five LibDem cabinet ministers, and LibDems at every level of government.

Yet at Westminster and beyond, there are dissenters in each party: a small minority of right-wing Conservatives wanted the party to govern as a ‘purist’ minority administration, and could cause trouble due to concessions to the LibDems on taxation, political reform, or Europe.

The Liberal Democrats’ base includes many people on the centreleft, and many voters backed the party in an attempt to stop a Conservative government. Labour in particular will be looking to attract these LibDems to its own fold – although Mr Clegg will hope that by proving themselves in government, they can build support once again. If they do, they may truly break the Lab-Con stranglehold on British politics.

So how likely is a break-up of this marriage of convenience?

Significantly, the new government will enact a law to state that fixed-term parliaments can only be broken with a vote of a ‘supermajority’ of 55% in the House of Commons. As the Conservatives have 47% of the seats, their support would be needed to bring forward the next election: so even if the coalition falls, Mr Cameron is likely to stay in place until 2015, even if only as a minority government. In theory, a parliament could remain in place, even though it has no confidence in the government and refuses to pass any laws.

Meanwhile, Labour will re-group in opposition. David Miliband, the former Foreign Secretary, has announced his candidacy for the leadership of the party, as has his brother, Ed, the former Energy and Climate Change Secretary. Ed Balls, the former schools secretary and a protégé of Gordon Brown, is likely to stand too.

In its favour, the party is not disliked to the extent the Conservatives were in 1997 – indeed, on 6 May Labour won back many local councils. Yet it does face a long road back to power at Westminster, especially as the only major opposition party.

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