Coalition politics? It’s the art of the impossible

Last week’s failure on Lords reform has generated much frothy end-of-term speculation that this could be the issue that triggers the eventual downfall of the coalition. Which doesn’t tell you much, apart from the fact that many in Westminster clearly need a holiday. As Jackie Ashley pointed out in the Guardian on Sunday, neither David Cameron nor Nick Clegg are likely to be willing to see the coalition collapse over this issue.

Of far graver concern to both leaders is the looming question as to whether they can craft a way through the next Whitehall spending review. Ignore the technocratic sounding title – this will be the main event of the next few years. It will determine the scale and distribution of cuts to 2017, and in doing so the nature of politics before the election, the campaign strategy of each party during it, and the size and shape of the state afterwards.

And the one prediction we can already make with confidence about the spending review is that the politically impossible will happen – even if the precise form of impossibility remains to be determined.

To understand why, consider the contrasting imperatives and instincts of the governing parties. The Conservatives are moving to a strategy – outlined by George Osborne in the budget, given full-throated expression by David Cameron in his recent welfare speech, and developed in a more nuanced fashion last week by uber-moderniser Nick Boles MP – that says the only viable way of meeting their goal on deficit reduction is to cut another £10bn from benefits by 2017, especially for the working-age poor (£10bn, that is, over and above the £18bn reduction in the current spending review).

Unless welfare is hit again, so the argument runs, the pace of cuts facing public services will accelerate from the current rate of 2.3% a year to a totally untenable 3.8% (far higher in services outside the NHS, assuming it is protected). It makes for a heady brew: cutting welfare channels anti-scrounger populism while responding to growing backbench calls for more assertive Tory differentiation – and all in the name of fiscal prudence.

In sharp contrast, many Liberal Democrat MPs, as well as the remaining rump of the party’s left-leaning activists, view further welfare cuts on this scale as a bridge too far: a political impossibility. During the back half of this parliament they will be straining to distinguish themselves from their coalition partners as they endeavour to inch closer to an “equidistant” position between the two main parties before 2015. A fresh benefits assault is, to put it mildly, not what they have in mind. Far better, they would say, to fill at least some of the fiscal gap with progressive tax rises (hello, again, mansion tax) and cut higher-rate tax relief on pensions.

To which the immediate Tory response is that further tax rises are off limits. It is just not thinkable to ask a hard-pressed public to stump up more. And in any case it would get in the way of their chosen strategy. First, argue that far-reaching cuts to welfare are the only viable option, the single conceivable way of plugging the gap – and in so doing nurture the most irresistible force in politics: the sense of the inevitable. Second, throw the challenge straight back at Labour: what will you cut and what taxes will you hike? Then repeat it every day until the next election.

True, Labour is exposed. It has an awful lot of ground to cover before it will be in a position to provide full answers on spending and tax, and it is far from confident about the best way to respond to more welfare cuts. Yet despite this, and regardless of Conservative polling on welfare that so buoys their confidence, this is a highly risky path for Cameron to take.

This is in part because of the potential reaction of their already aggrieved coalition partners, but also due to the changing political and media context. Ed Miliband’s position has strengthened over recent months to the extent that the press, for now at least, are significantly more interested in examining whether any given issue will destabilise the coalition rather than the Labour leader. Dramatically upping the ante on cuts to benefits and tax credits could end up shaking an already unstable coalition at least as much as it does Labour.

Which suggests another version of the impossible. If Cameron and Clegg, with their rapidly diminishing capacities to lead their parties to uncomfortable compromise positions, end up check-mating each other on welfare cuts and tax rises, then another seemingly implausible option heaves into view: perhaps there might not be a proper spending review at all, a conclusion pointed to by Nick Pearce of the Institute for Public Policy Research. Instead the Treasury might just decide to roll forward existing cuts for departments for a single year – kicking the can down the road – in order to limp past the election.

In which case the coalition would reduce some internal political problems at the price of revealing to the electorate that it has become incapable of taking the “tough decisions” on public spending, an ability it has spent the past few years arguing is its single greatest virtue. Coalition deal-making would have visibly triumphed over governing imperative. Which is why, of course, this scenario is also said to be impossible.

When it comes to the spending review something – and someone – is going to have to give. Lords reform is not the issue that should be ruining Clegg and Cameron’s summer holiday.

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This article orginally appeared in The Guardian