Speculation about the likelihood (and outcome) of a snap General Election to break the Brexit deadlock has been rife in recent days. Boris Johnson has been adamant that he won’t call one this side of the Brexit deadline on 31 October. Other commentators believe that a no-confidence vote held shortly after recess might mean he has no other option. The whys and wherefores of how this might play out has been the subject of acres of column inches in recent days. What seems to be increasingly apparent, however, is that even if Labour performs well at an election in the near future, it is more than likely Jeremy Corbyn would have to cut a deal with the SNP, the Liberal Democrats, or both if he wants to form a workable government.
Recent polls show the Conservatives taking just over 30 per cent of the vote in the event of a General Election, with Labour currently sitting in second place on around 25 per cent. Despite the Conservative’s current lead, their polling would not guarantee them an outright majority, potentially opening the door to a Labour-led government.
Labour’s fence-sitting on Brexit has squeezed the party’s vote share, with the Lib Dems the main beneficiaries of Labour’s jumbled message, and the SNP still dominant in Scotland. Boris Johnson’s ‘do or die’ commitment to Brexit has further widened the distance between the Leave and Remain parties, leaving Labour in the middle, and with the SNP and the Lib Dems both hoping to win at least 40 seats should an early election be called. If the SNP and the Lib Dems do achieve this level of success, it will leave them with the greatest number of seats held by minor parties in the modern era, significantly increasing the chances that neither of the major of parties can command a majority in the House of Commons. If these numbers play out, the two parties will be the kingmakers in a post-election fight for control of the House of Commons.
The art of the deal: What would a Labour-led government look like?
A formal coalition between Labour and either the SNP or the Liberal Democrats is much less likely than dual confidence and supply agreements with each party. The SNP’s aversion to voting on matters that do not affect Scotland largely rules out a formal coalition and the Liberal Democrats will be very wary of going into government with a Corbyn-led Labour party, not least because of their bruising experience as the junior coalition partner with the Conservatives between 2010-2015. For the SNP, any deal would almost certainly only involve their support for key pieces of national legislation, e.g. Brexit and key Finance bills, with a similar arrangement made with the Lib Dems to cover votes that affect England. Depending on parliamentary numbers, this could produce a curious outcome where a Labour-led government has a working majority for UK legislation, but not for legislation only affecting England.
If an election occurs before the UK has officially left the EU, a second referendum or even revocation of Article 50 will be top of each party’s shopping list, and a deal with a more Brexit-agnostic Labour party would be preferable to propping up a pro-Brexit Tory party. John McDonnell, the Shadow Chancellor, has now publicly stated that he would be happy to allow another Scottish independence referendum in return for an alliance with the SNP to keep the Conservatives out of power. Theoretically, if the Conservatives were willing to sacrifice their leader and/or grant a second referendum on Brexit, there could be room for an agreement with the Liberal Democrats. However, given the current mood of both the parties, the probability of this occurring is extremely low. Whatever the outcome, both parties will seek to leverage far more than concessions on Brexit and, in the case of the SNP, a route to a second Scottish independence referendum.
The SNP and the Lib Dems are the two most likely partners for Labour to come to a deal with, given the number of seats they can potentially bring to the negotiating table. But, in a closely run election, smaller parties such as Plaid Cymru and the Green Party could also hold sway. Plaid will echo the demands of the SNP and the Lib Dems on Brexit, along with wanting more powers delegated to the Welsh Assembly, potentially as a first step toward full independence. The Green’s support will come at the price of a much more ambitious decarbonisation agenda, although this could tally well with Labour’s plan for a Green New Deal.
SNP policy priorities
The SNP and Labour share a great deal of common ground, largely centred around opposition to austerity – support for the reversal of welfare cuts, increasing public sector pay and tax increases for high earners, so there is scope for the parties to work together. Nevertheless, the SNP has recently made a number of costly commitments in areas such as health and the environment, and any deal with Labour would likely involve ensuring these commitments can be fulfilled. This could be achieved through assurances on the future of the Barnett formula, greater tax-raising powers for the Scottish Parliament and more financial support from Westminster for specific projects.
Energy and transport infrastructure investors will be particularly interested in the SNP’s commitment for Scotland to reach net-zero greenhouse gas emissions by 2045 at the latest – the toughest environmental targets in the world. To achieve this, money will need to be made available by the Scottish government to support an ambitious rollout of electric vehicle infrastructure alongside efforts to significantly decarbonise the electricity generation sector. While Labour will be reluctant to allocate too much cash to Scotland that the SNP can take credit for and given their own spending priorities, bolstering the fight against climate change should be a winnable argument for the SNP.
Scotland has also recently seen its health care bill increase rapidly; the 2019-20 health budget is set to increase by 3.4 per cent in real terms and will account for nearly half of the Scottish government’s overall spending budget. Scotland’s Auditor General has said the extent of the SNP’s health spending would mean real-terms spending cuts in other areas as the Scottish government faces a more than £1 billion shortfall over the next three years. The SNP’s price for supporting a Corbyn government may be that more money is made available to the NHS in Scotland to spare spending cuts elsewhere. This could be welcome news for those operating in the pharmaceutical and health sectors as the SNP will look to continue their investment in health infrastructure and staffing.
Liberal Democrat demands
Parliamentary mathematics mean that any confidence and supply deal may also have to include the Lib Dems. Jo Swinson, the new Lib Dem leader, has ruled out a deal with a Jeremy Corbyn government. This could be read as a tactical stance ahead of any negotiation, though the Lib Dem’s extremely poor showing at the ballot box after their coalition with the Conservatives may mean Swinson’s position is one of party-preservation. The Lib Dem priority is undoubtedly one of stopping Brexit, but there are other policy areas where they will seek concessions, should they come to an agreement with Labour.
Much of Labour’s recent policy platform has been based on nationalising key elements of infrastructure, including water, rail and energy networks, to provide what they envisage to be a better deal for consumers and to increase environmental protection. The Lib Dems are not natural supporters of state monopolies, and Swinson has publicly criticised Corbyn’s nationalisation plans, which suggests Labour may have to water down these commitments in the event of any deal between the parties. This may not involve a complete abandonment of the nationalisation agenda, but the Lib Dems could force Labour to restrict their nationalisation plans to facilitating a more localised approach to utility provision, which would fit in well with their wider devolution ambitions.
Another area where the Liberal Democrats could seek to force change would be by demanding greater devolution to the regions. More powers for ‘metro mayors’ and traditional county councils could have important implications for how local infrastructure spending decisions are made. For example, if other elected mayors were given the same powers as those allocated to the Greater Manchester Combined Authority, it would give them much greater scope to raise and control funding to support locally directed infrastructure projects, opening up the possibility of more spending in areas such as transport and housing.
Labour’s compromise
The conundrum for Labour will be how much moderation of their agenda they are willing to accept as the price of power. It may be that when the results are in, Labour only requires the support of either the SNP or the Lib Dems and can play one potential partner off against the other, protecting much of their policy platform. The SNP is currently warmer to a deal than the Liberal Democrats, and it could be that the Lib Dems will only enter into a deal with Labour if Corbyn steps down; this may seem an unlikely outcome at the moment, but some in the Labour Party may see it as the perfect time for him to make way for a new leader.
If a deal is not possible, Labour will be forced to govern as a minority government (providing it is the largest party). Because of the various alliances that could be built on the issue of Brexit, it is possible the party could sustain itself long enough to recalibrate the Brexit process towards a second referendum. Beyond this, it will be difficult for a Labour government to pursue its radical policy agenda without an outright majority. Both the SNP and the Lib Dems will be willing to support Labour on some issues, but it would effectively give the two smaller parties a veto on any legislation they did not like the look of, which could mean Labour having to push on with a severely diluted set of policies. If this proves to be unsustainable, another election will have to be held. This would be the first time the two elections general elections had taken place within 12 months since 1974.
In any negotiation, Labour will be in an uncomfortable position. The left of the party, in touching distance of power for the first time in several generations, will need to seize its chance or risk losing it forever. The Lib Dems and the SNP will be well aware of this and will seek to extract the maximum possible concessions from any negotiation. If Labour does take power, it could come with several (billion) strings attached.