Steve Richards: AV doesn't make up for rabid cuts

Cameron can live with the referendum. Neither he or Osborne worry about a minor change in the voting system

Party leaders are always promising referendums, but rarely hold them. There is eternal speculation about electoral reform, but the voting system never changes. Nick Clegg challenges both orthodoxies. Under his auspices, next May the first national referendum will be held since 1975 and its subject is electoral reform.

Already there is a mountain of speculation about the likely impact on the coalition. Some commentators predict the demise of the coalition in the immediate aftermath on the grounds that if Clegg wins he will grab the prize and make a run for it. If he loses his party will have no motive for staying put. Others suggest that the mutual self- interest of the governing parties will sustain them whatever happens next May.

I am firmly in the latter camp, even though senior Liberal Democrats speak to me of the party's "deferred anger" over the coalition's extreme approach to public spending cuts. They suggest anger is delayed until the referendum. But those who assume that Clegg will walk out afterwards misunderstand his view of the coalition and its economic policies. Clegg is in a similar position in relation to his party as Tony Blair was over Iraq. Blair used to go around telling his colleagues: "It's worse than you think. I believe in the policy." Clegg is known to have told friends after George Osborne's Budget: "The good news is I'm not a patsy. The bad news is I believe in the Budget."

Incidentally, I praised Osborne for declaring in his Budget that he would protect capital spending, a sensible priority. Yet such is his Thatcherite zeal he has announced a U-turn and plans to cut capital spending too. Business leaders are rightly concerned. Quite a few of them are also worried about the way Britain's manageable deficit is being portrayed as a monster that must be slayed at all costs in time for Osborne to present a tax-cutting Budget shortly before the next election.

Still Clegg is with Cameron/Osborne and will not walk away unless his party forces him to, which is not altogether impossible. As far as the referendum is concerned, Clegg will have no reason to walk, win or lose. Cameron has already delivered his side of the deal, giving the go-ahead for the poll while astutely linking the change to a boundary review of constituencies that will benefit the Conservatives. No government knowingly announces constitutional reforms of which it will be a victim. This one has not done so either.

Cameron can live with the referendum. The big project for him and Osborne is the economy and the reform of public services in which they hope their so-called big society replaces the state. I doubt if either will be too disturbed by a relatively minor change in the voting system while Lib Dems support their ideological crusade.

Or at least some Lib Dems. Each party has undergone something of an identity crisis in recent years. As Labour leader, Tony Blair spoke of a new era of political cross-dressing. For someone who could be modestly self-deprecating, he had a genius for extrapolating from his own rootless politics to an entire global phenomenon. As a result Labour is unsure whether it won three elections because it had a leader who was not on the centre-left, or whether England is now a more progressive country that is ready to hear a message a millimetre to the left of Cameron.

The new Prime Minister tests his party too, in a more limited way. Of the three parties, the Conservatives have most to cheer. They have a government pursuing a Thatcherite economic policy they have been dreaming about for years. But Cameron is not a tribal leader. His agility in the immediate aftermath of the election, when he made his brilliant moves to form a relationship with the Lib Dems was no surprise. A few years earlier he asked Greg Dyke to be the Conservatives' candidate for Mayor of London in alliance with the Lib Dems. Dyke was a Lib Dem. That was an argument in his favour, as far as Cameron was concerned.

Some of Cameron's closest colleagues in No 10 much prefer the current arrangement to what would have arisen if they had an overall majority. Clegg's main policy adviser, Polly MacKenzie, is regarded with particular enthusiasm in No 10 as the two sides explore common ground.

Not surprisingly the discovery of vast swathes of terrain in which they dance together has traumatised a significant section of the Lib Dems and gives them an identity crisis that is bigger than the one faced by the other two. Previously their distance from national power obscured divisions. The result of the election and the subsequent formation of a coalition bring them to the fore.

The divide is the most important in British politics and extends beyond the Lib Dems. It is over economic policy and the role of the state. As some of Cameron's allies recognised long ago, there was no gap between them and Clegg on the central issue of the economy, public spending and the role of the state. On the other side of Clegg's party are those who are closer to being social democrats. Social democracy has tended to prevail in the past as far as the Lib Dems are concerned. Throughout the 1990s Lib Dems led calls for increases in public spending and higher taxes to pay for them. Many now share Labour's worries about Cameron/ Osborne/Clegg's hunger for a small state.

The Lib Dems have done us a favour by highlighting the defining divide in politics. All the others are red herrings. Debates about civil liberties and Europe are important but transcend party affiliations. Labour was Eurosceptic in the 1970s while the Conservatives were pro. The roles were subsequently reversed. A former leading figure in the National Council for Civil Liberties is currently acting leader of the Labour Party. A former Conservative leader, Michael Howard, was a strong supporter of ID Cards. The currents vary and do not define party boundaries.

On economic policy and the role of the state there is, with some blurring and important space for nuance, a clear centre-left and a centre-right position. Some Lib Dems are on the right. Others are on the left. The irony of Clegg's position is that his coalition deal makes a change in the voting system possible, but in highlighting the divide over economic policy makes reform a little less urgent than before. The era of multi-party politics has shown that the pivotal choice in relation to the economy is still between two distinct positions and not three or four.

s.richards@independent.co.uk

For further reading: 'The Return of the Master', by Robert Skidelsky (Allen Lane, 2009)