The Liberal-Conservative Coalition is really not so unusual. The only difference from preceding Governments is that coalition politics now covers two parties instead of being held just within the boundaries of one.

Centres of Gravity

If pre-Blair Labour Governments had to accommodate the Labour Left and the Social Democrats, Tory Governments have had to accomodate their own social liberals alongside nationalists and imperialists.

Cameron seems determined to make this new Coalition as strong and as permanent as possible because it is all about 'centre of gravity'. A liberal-minded Tory in a purely Tory Government is not at the centre of gravity and threatens at every moment to be ousted from the Right.

The addition of other liberal conservatives from the right of the Liberal Democrat Party and a smattering of social democrats counter-balances the atlanticist hard-liners, the radical economic liberals and libertarians and the nationalists in one fell swoop.

The seduction of radical centrists like Will Hutton and Frank Field from the disillusioned social democratic wing of New Labour is unlikely to be the prelude to any further attempt to detach Blairites and pull them to the Right for two reasons.

First, Hutton and Field always were semi-detached, famously frustrated that their ideas, which were heavily courted as New Labour moved towards office, were abandoned as inconvenient within a few years. Their social democratic radicalism sat ill with the special interests who really ran the Party.

Second, the Left are not going to capture the New Labour Party regardless of defeat. This is because the 1996 internal party settlement just won't let that happen, because the Left has been systematically excluded from power for fourteen years and because it is tired and has nothing to say to the public.

The Future Labour Party And The Left

If the Left are not going to capture the Party and a moderate Labour Movement right winger or Blairite (both represented by the two Milibands) is going to lead it for the next four or five years, then there is no incentive for loyalist 'social democrats' to shift lanes - they have probably left it too late in any case.

The best that the Left will get is a raised profile, increased influence and some defensive policy changes from the circle around Jon Cruddas, the rising star of left-wing progressivism.

But this is not the Left as we once knew it - Cruddas is an establishment figure who is sometimes embarrassed by the naive enthusiasm of his activists and whose conversion to Leftism is relatively late (much like Tony Benn's before him).

Cruddas is a very intelligent man - in some ways streets ahead of his right-wing rivals - but he is bound by his own caution and his almost instinctive tribal solidarity, honed in the buggins turn and zen-like patience of union political bureaucracies. He is no populist radical.

In short, there is no Leftist coup in the offing. 'Real' Leftists have few places to go - the rising but marginal socialist alliances outside the party, impotent grandstanding or moderation as the conscience of Cruddas' unstable quasi-movement. Even the street is now the territory of the anarchists.

The New 'One Nation' Ideology

This is why we think that the Lib-Con coalition will last so long as Cameron remains skilled at building up right wing liberal engagement with market economics in return for a commitment to improving the lot of the indigenous poor.

Frank Field is right to imply that New Labour, in its drive for full employment, abandoned the poor of the inner cities - it created jobs which became filled by immigrants. The very poorest of the indigenes not only remained on benefit (at huge national expense) but became increasingly unemployable and 'lost'.

Will Hutton, on the other hand, represents another frustration from the Radical Centre - the fact that the public sector (another huge current and future contributor to the deficit) was allowed to expand inefficiently to create 'full employment' for middle class graduates and white collar workers.

There is a merger here of the conservative fear of serious economic dislocation from excessive expenditures on benefits and of a public sector detached from frontline service provision with the 'moral centre' concern that the country is being stifled by its underclass and the deadweight of bureaucracy.

This is a revolution in the making. It will be painful for those asked to change their ways but it is becoming necessary both because the economics of state-subsidised full employment no longer work if ever they did and because the misery of the underclass is on the edge of becoming a social threat.

The fear of liberals in society had been that Tory 'compassion' was nothing but a cover for draconian and authoritarian measures against the poor, for creating a faith-based communitarian project that would make Blair's look left-wing and an excuse for class war-driven cuts. Such fears are now being allayed.

The Political Conditions For 'One Nation'

The vagueness of the plans for dealing with the deficit amongst all parties in the run-up to the election would have done nothing to allay these fears without the centre of political gravity being shifted.

A Tory Government in which the centre of gravity had been to the Right of its current Leader would have raised the ghost of Thatcher under conditions (given that at least a third of the country is electorally bound to New Labour) where many would have been suspicious and alienated from the start.

The prospect of a tax revolt from the Right and anarcho-environmentalist street riots from the Left under New Labour would merely have been replaced by a new radical militancy on the Left and growing pressure to break up the Union.

The social order problems implicit in the New Labour project would then merely have been transmuted across the political spectrum and the State's instinct for authoritarian solutions when it is under pressure would have further alienated liberals and libertarians alike.

Cameron has now shifted the centre of gravity of Government to just where he sits. In doing so, without ceasing in any way to be, fundamentally, a Conservative, he has added something to the usual mix of social order concerns, economic advantage and special interest power plays - 'morality' of sorts.

Not the fixed essentialist morality of the Christian or Socialist fundamentalist but a sense that public sector and benefits reform is not just something to be imposed but is to be a national project in which public sector workers and the poorest are to be engaged as integral parts of the nation.

Rights, Duties & Compassion

Whether this quite works out in this way is another matter but 'compassionate' conservatism is aligned with liberal democracy in wanting power to be decentralised to the community and with the radical centre in having benefits linked to some sense of responsibility that gives people self-respect.

This is not quite the same as the rights-duties rhetoric of authoritarian Blairism and the authoritarian Right. In these cases, a person got a benefit by the grace of the people's Government or the State and therefore had a consequent duty that arose from the grant - it was almost feudal in conception.

Under the new dispensation, there are no rights as such. Self reliance is preferred to dependency and those who are dependent are to be encouraged forcefully into independence while those who serve the public are to be expected to perform their tasks competently and according to contract.

Some left wing Liberal Democrats are clearly discomfited by this restoration of rights to its original political meaning (which is fine for mainstream LibDems) and will, no doubt, drift back into a mildly reformed New Labour Party where social and economic rights are central to its progressive ideology.

Even within the new coalition those like Hutton and Cable with a social democratic mentality will continue to argue in social and economic rights terms and will, no doubt, win a few points to match the concessions made to right wing individualism in other areas.

The point is where the balance lies, that centre of gravity. It now lies firmly in one nation traditional liberal-conservatism, a decisive shift away from the Thatcher legacy of state nationalism and radical neo-liberal economics under which there was famously 'no such thing as society'.

Pressures On The Coalition

The Tory traditionalists may be weakened as are the 'British' nationalists but the Tory economic and Atlantic 'Right' are as strong as ever. They will continue to exert a pull that may eventually tear apart the Coalition under various economic and sovereignty pressures.

It will be hard to hold the line on the Coalition's Left if the scale of the cuts necessary to please the market really do disproportionately hurt the poorest or if unemployment rates start to rise significantly. US demands for extreme action to meet its own needs would also create severe strains.

Differences over Trident have been papered over as a problem made academic by the bipartisan Tory-New Labour support for our native brand of WMD (although New Labour policy may change as the price of Cruddas' influence within the Party and of potential SNP and Liberal Democrat support in the future).

Europe, too, despite noises from the Right, seems to be in abeyance both because it is not core to anyone's interest while the deficit has to be managed and because the matter is truly academic at a time when the 'Greek Crisis' looks as if it might make the Euro and eventually the EU irrelevant.

The political killing ground lies in the area of political reform. Liberal Democrat activists have expectations far in excess of what is possible while the Tory mainstream has drawn its own line in the sand.

The reform issue is unlikely to break the Coalition in the near future but, eventually, especially if New Labour can organise itself out of its instinctive authoritarian habits and offer a credible democratic alternative, the Tories will have to concede or go it alone and ditch their partners.

Our Assessment - the Coalition will survive and even prosper for two years and less certainly for three but it will come under increasing strain on fundamentals as the deficit comes under control, any recovery starts and we get closer to the 2015 Election.

The markets seem to be surprisingly untroubled by current negotiations over who will lead the next Government of the United Kingdom. They know that whoever is in charge will have to follow a programme of cuts and tax rises.

The Timetable

Whatever the different constituencies for the two sides may hope, the two main competitive options are only going to differ on nuance rather than fundamentals when it comes to economics. The same applies to foreign policy. The differences lie on political reform and the type of cuts and tax rises.

There are many potential permutations in the medium term - including another election or a minority Tory government pottering along until its first major vote of confidence - but the most likely outcomes are either a Lib-Con pact or the so-called 'progressive alliance'.

The system has around another three or four days to get itself sorted out. If there are not signs of significant progress by (say) Thursday, the markets will get jittery. No deal at all by the time the markets open next Monday could cause a more serious crisis.

What has not been commented upon a great deal is the effect on foreign policy of the final outcome. There is only a hair's breadth difference between Conservatives and New Labour so any 'nuance' must come from the emergence of the pro-European Liberal Democrats and the Scots and Welsh Nationalists.

Perceptions of Sovereignty

It is common knowledge that David Cameron has relatively little interest in foreign policy. His concern with domestic issues means that he has virtually handed over this area to the Churchillian 'post-imperial' elements like Hague who revel in statecraft as once did Tony Blair.

Both New Labour and the Tories are Atlanticist to the core. Both are persuaded towards UN reform in favour of rising powers. Both have a 'thing' about Iran and Africa. Both support the two-state solution in the Middle East. Both are committed to overseas aid as a moral principle.

The difference lies over Europe and a particular perception of sovereignty. Mandelson's vision of power is subtle and relies on influence through a trans-national elite leadership as if the country was an important subsidiary of a major conglomerate. The Tories believe in UK plc as a separate entity.

Tory euroscepticism is not now driven by the fear of English votes moving to the Right but is embedded in the rising generation of libertarians. Surely this in itself might push the Liberal Democrats into the arms of New Labour?

The Tories & Europe

The failure of UKIP, various English nationalists and the BNP to make a mark is only partly a matter of taste - the intelligent English and British nationalists have become sophisticated and retaken the Tory Party from its base. The image of Europe has also changed on the centre-right with Lisbon.

Once there was a vision, closer to Mandelson's, where national economic interests were intimately bound up with the creation of a massive single market. This enabled mainstream Toryism to embrace Maastricht but Lisbon has been an integration too far.

Appreciation of the single market model has been replaced by a greater fear that economic federalism will end up killing the goose that lays the United Kingdom's 'golden egg' (the City of London) and that integration demands will severely damage British, or rather English, culture.

This is why it remains possible for the Liberal Democrats, despite the risk of alienating much of the rest of the English population, to shift from the Tories to New Labour if they do not get a major concession that gives them a prospect of electoral reform before the next election. But will they?

Europe, The Liberal Democrats & Labour

Europe is central to the world view of the older generation of Liberal Democrats. Cameron's euroscepticism will cause them to bridle as Europe integrates under the guise of saving the Euro in a way that makes it increasingly difficult for a Tory Government to accommodate change.

New Labour is infinitely more pro-European than the Tories, seeing it not as competitor for influence within the West but integral to a West that is lead in part from London and wholly in partnership with Washington. It is just a variation on a shared Atlanticist theme but an important one.

New Labour's Manifesto was supportive of European social protection legislation (a core trades union demand), supportive of enlargement and supportive of the integration of EU anti-crime, anti-terror and defence operations with NATO. The concession of a referendum on the Euro was merely tactical.

But, other than Europe, foreign policy is less important to Liberal Democrats than to either of the other two parties who, paradoxically, given all their debates over sovereignty, are heavily beholden to the joint security arrangements with the US that make Trident such an expensive white elephant.

What the Liberal Democrats offer is a softer approach to issues of war and peace, assertive in defence of human rights and opposed to WMD but not necessarily adopting the 'hard' Western view that the exercise of forward military power is the means to guarantee rights and democracy.

Since many of the Labour Left and certainly the Scots and Welsh nationalists share these views, are more suspicious than nearly all Conservatives of Atlanticism and are more instinctively pro-European, the idea that the Liberal Democrats can 'tame' New Labour in an alliance has its attractions.

The State Carries On Regardless

The State (the Crown), after fifty years of Atlanticism, is relaxed. It is confident that 'plus ca change'. The nuances may be different but the core of the next Government will still be embedded in a vision of the West, the UK at its heart, a post-imperial vision of global influence under the wing of America.

The Liberal Democrats are scarcely revolutionaries, merely replacing America with Europe as the focus of attention within a values-driven conception of a 'progressive alliance' and softening the means to attain the same values-driven ends in either model.

The questions this week are whether these differing nuances in foreign policy are going to be at all central to the decision whether to take one path rather than another in the formation of the next Government and what each 'model' may mean in practice.

Our view is that they will play a role in the negotiations but they are far from central. The big economic decisions (including Trident and the Eurofighter) are going to be driven by market factors and it is probable that Tories and New Labour would combine to save the central core of Atlanticist policies.

The Liberal Democrats know that they cannot do anything about the Tory position on Europe and the best that can be done is to fight the big battles through referenda rather than on the floor of the House.

Similarly, the Liberal Democrats can make a lot of noise about right-wing posturing on sovereignty on matters of detail and principle and might combine with the 'progressives' to block a particularly obnoxious bit of nationalism (as they would see it) but this need not cause a Government to fall.

Outcomes

At the end of the day, the prize for the Liberal Democrats has little to do with Britain's place in the world and a great deal to do with political reform.

If you add in the chance to influence the Tories towards their own avowed 'compassionate' conservatism and a shared agenda on the restoration of civil liberties, there is a lot to be said for a Liberal-Conservative alliance until the next election.

On the surface, the Liberal Democrats may have much more in common with the 'progressive coalition' in foreign affairs than they do with the Tories but we need to dig under the surface of what is going on here.

The two nationalist parties have opportunistically sought to out-flank New Labour to the Left. Their package of measures has included the attack on Trident and on post-imperial interventions overseas but this radicalism is really only skin-deep.

The nationalist parties are simply against the 'Empire' and they want to continue its break-up whereas the Liberal Democrats have only ever wanted to liberalise and humanise it. Indeed, liberal enthusiasm would often extend Empire where pragmatic Tories might justifiably only see the costs.

So what influence would the Liberal Democrats actually have on New Labour's policies in office (in foreign policy)? We would suspect - despite the best wishes of what remains of the Labour Left and the progressive grassroots - very little indeed.

Foreign policy is central to New Labour's positioning and many Liberal Democrats are happier with its general thrust in terms of forward promotion of Western values than they like to admit. The 'real' Left had a more revolutionary take, wanting to liberate the world by liberating the British working classes.

New Labour Right assumptions are not so very different from Liberal Democrat instincts. Both New Labour and Liberal Democrats like big things the country can belong to! They both want them to have some basis in universal values rather than mere statecraft.

The Labour Left, on the other hand, is on its knees. Its progressive elements are very little different from Liberal Democrats and its radical elements are crushed with no hold on either Party or State. The collapse of RESPECT in East London matched the crushing failures of the Radical Right.

The addition of Liberal Democrats and Nationalists to New Labour would be an occasional irritant rather than the cause of major change. If the Liberal Democrats joined the 'progressives, it would be for political reform, electoral advantage and civil liberties - not for a sea-change in the British State.

In other words, here, as with the Tories, foreign policy is a second order consideration in any negotiations. The Liberal Democrats in office with New Labour are unlikely to be at the heart of external State policy unless given greater prominence in Europe.

The current negotiations, like the election itself, are primarily about domestic reform and domestic crisis - how to rebuild confidence in the system to weather major cuts and tax rises. They are not about foreign policy. In that area, expect business as usual constrained by lack of cash.

Last night's election result, with perhaps only another forty or so results to come in as we write, has its grim aspects - the potential for weak government, administrative incompetence, the collapse of momentum for change and the serious threat of a loss of market confidence in the country.

The Momentum For Change Collapses

Our last analysis stands with one exception - the last seven days of the election did not prove as tense and exciting as we had expected. The momentum for change ended ....

If anything, the election became dulled, as if the two both challengers, Clegg and Cameron, feared that they would lose their assumed leads by becoming more exposed to questioning. They allowed New Labour the leeway to rally its coalition.

Cameron was probably wise to do this but Clegg's lack of flair and drive in these last days allowed too many people to wobble back home to their respective tribes.

It would have been a high risk strategy but a determination to follow Vince Cable in telling the truth about the economy and setting clearer terms for a coalition might have made a difference but we will never know.

The technical analysis of the results is available in many places on the internet and we generally recommend the BBC. It is solid, experienced and non-partisan but it is also a little restricted in what it can say about the 'meaning' of events. As usual, we will try and abstract that meaning ourselves.

The Conservative Achievement - The English Party

The Conservatives' achievement was actually quite remarkable, given their position only three or four years ago, but they have still not established themselves a truly national British party.

All three of the petty 'nations' have remained in the hands of others. The question often arises why the Tories cling to a Churchillian British Imperial perspective instead of seizing the post-imperial moment for an English Parliament where 'conservative' values would become embedded in the bulk of the nation.

In fact, the Tories know that appearing to be 'British' increases their acceptability to the English and it maintains their hold in the non urban and suburban South. Yet it is an internal contradiction that leaves it caught between two stools, not truly national in either a British or an English sense.

This tension has been brilliantly exploited by New Labour (or rather its Mandelsonian-Blairite version) in building up an 'inclusive' political model that is less ambiguous about its appeal to anti-nationalist British votes in the Celtic areas and in winning over ethnic block votes in the 'English' cities.

New Labour - Ersatz National Interest

The way the swings operated also showed that the 'one nation' concept that had applied at almost any election until the Conservatives alienated Scotland and the bulk of Wales under Thatcher, as well as much of the urban north, is well and truly defunct.

In Scotland itself, there was actually a swing to New Labour with local support for the Prime Minister increasing significantly in his own constituency. If anything, the attacks on him by the national media look as if they strengthened his position and mobilised resentful tribalists into coming home.

Similarly, Battersea may have fallen to the Tories but the neighbouring constituency where a popular Asian could call on the local ethnic vote saw the Labour vote increase.

Yet in the North East, traditional 'English' territory but a Labour heartland, there were swings to the Tories very early in the evening that would have translated into a full Tory Government if they had been truly nationwide.

The pundits were undoubtedly confused throughout the first half of the evening as the swingometers, on which broadcast analysis has depended in every previous election, showed that the exit polling was correct in substance but was no guide to which seats would be won or lost in practice.

The Return Of The Tribal - From 'Class' to 'Identity'

This is the second 'meaning' to hold on to - New Labour's political strategy of using the State and its funds to embed its coalition has worked. Its vote stayed solid as its tribe turned out to vote (indicating that local machines may not be in quite as distressed a state as many have thought).

Key interest groups were able to put their local, ethnic, regional and class interests behind the Party created with great skill by Mandelson, Blair and Brown in the 1990s. New Labour is not only not dead. It has been strengthened.

What is dead is any serious Old Labour or libertarian Left challenge to the dominant order within the Party that was created at the 1996 Party Conference. Dissent is now idle (if it ever was not since 'Partnership in Power') - you are either in or out of the machine.

Given the history of credit crunch, this is the worst that it is likely to get for New Labour until and unless the United Kingdom breaks up or the IMF smashes its coalition by demanding cuts that it has to administer itself in Government. The first is unlikely, the second worryingly more so.

Liberal Democrats - Last Chance Saloon

The third 'meaning' arises from the illusions of those who thought the Liberal Democrats offered an opportunity for change. I doubt whether those high poll results for Clegg were false reads but it was, in fact, a 'bubble' and the Liberal Democrats must take responsibility for not seizing the moment.

By any objective standard, the Liberal Democrats had the most mature approach to the coming crisis (though we advisedly say merely 'the most') but their results were all over the place - wins here and losses there that amounted to no real net gain. Given the expectations, this is a disaster for them.

Elsewhere, TPPR got into a debate about the influence of the old and new media that now seems futile because it appears that none of the media had the influence that they believed they had or might have.

The Clegg bubble was overwhelmed not by media criticism or made stronger by new media support in the middle classes but by the inability of Clegg to exploit his one shining moment in the broadcast sun - he was clearly as surprised by it as anyone - and by the usual mix of fear and anxiety in the street.

The processual message of 'change' needed far more inspiration from the 'change merchants' (who really are only another faction of the political class when you get down to it). Without that necessary sense of drama, Tweedledum-Tweedledee tribalism had an opportunity to recover.

On the one side, Labour somewhat brilliantly exploited the fears of a Tory Government to the 'turkeys who feared Christmas' and brought its coalition back together.

Labour heartlands have never really cared much about refining democracy, plebiscites will do. What we noticed in the social media was a new surge of energy amongst New Labour progressives in those final vital days while Clegg seemed to sit around like a pudding waiting for the diners to arrive.

On the other side, the Tory strategy of advising the wobbling middle that a vote for the Liberal Democrats would allow Brown to stay in office shifted his wobblers back to him and it kept floaters floating with turnout not as high as expected.

If you are not inside the New Labour coalitional machine, you really are outside it and much of the Southern English middle class remains terrified at the thought of New Labour remaining in power. Cameron's team got that argument spot on!

Our Twitter feed was filled with local people unable to make a decision until the last minute with a sort of wobbling between the Tory Establishment and the Liberal Democrat protest vote that seems to have been resolved in different ways in different areas but generally against radical change.

Again, the role of Twitter and Facebook as viral medium needs more research because, if it contributed to the creation of the Clegg bubble, it also contributed to its pricking as caution, fear and anxiety were conveyed back through the system.

A Very Conservative Election

Taking these three 'meanings' and weaving them into a whole, we have seen something very 'conservative' re-appear in British politics. The British people are not fools. The events in Greece were the biggest story in the media that was not domestic or related to the Icelandic ash.

Every voter knows that we are living on borrowed time in an uncertain world where we do not set the agenda. Two emotions are dominant at such times: fear and a determination to survive. Optimism and imagination, required for reform, are in short supply.

At the theoretical national level, everyone might witter on about the need for strong government but they always mean 'our' strong government. They want a strong government that advantages their interest in the competition with others for a decreasing economic cake.

This is the overall 'meaning' of this election - the two great coalitional tribes have recoalesced at the expense of 'change' and are in a struggle now to control the State's mechanism for taking cash in taxes and redistributing it (or not) for political reasons.

From a market perspective, this is grim because we now have days or weeks in which minority parties with no national mandate may be dictating policies that are either distractions from tough decisions (such as referenda on reform that few now really care about) or expensive.

Meanwhile, not only economic recovery and the confidence of the markets is at stake but social cohesion. The Tories certainly cannot go much further in seducing the liberal centre-left and are under pressure on their radical nationalist and English Right. Losses to the Right cost them some seats.

New Labour has implicitly promised to protect its own but it can only do so if it disproportionately hurts the middle classes and takes the markets to the limits of their tolerance.

Administrative Incompetence - Africa Comes To Europe

Meanwhile, there is one other factor to take account of - the gross administrative incompetence of local government in many areas in their handling of the election.

We have not researched whether the Government in Tehran is crowing over this and other serious allegations of irregularities in ethnic-dominated constituencies but they have every right to do so.

What it really tells us is something we have known and observed for a very long time - that the British administrative system, constructed in the nineteenth century and built up over the decades since, is no longer fit for purpose.

The electoral errors of organisation and judgement are not exceptional but are standard fare yet the chances of reform are minimal under a Lib-Lab coalition because the transfer of resources from the private to the public sector in order to maintain full employment is central to the New Labour coalition.

High regulation levels (largely to meet trades union requirements), morale-damaging risk-averse target-setting (rather than the exercise of judgement) and a refusal to hire and fire on merit or make workers and managers truly accountable on actual results have created the 'turkeys' that cannot be killed.

This would not be a problem in a prospering economy. The 'turkeys' would live because the 'geese' (the private sector) was perpetually laying golden eggs - but the eggs are drying up and some of the geese now fear that they will be slaughtered for turkey feed.

This is really what is at stake in the creation of the next Government - not processual reform.

The question is whether one faction can deal with a massively over-engineered public sector without splitting the Kingdom or having to deal with Athens'-style riots or whether the other faction can hold things together long enough for an otherwise globally important economy to recover and lay eggs again.

If you want to know the real 'meaning' of the election, don't worry over much about the factional struggles in our political elites, look at the markets, look at Greece, Spain, Portugal and Eire and keep a close eye on sterling.

 

STOP PRESS: Nick Clegg has just announced that he thinks that the Conservatives, as the largest party, should form the next Government. This is not a surprise, partly because the Liberal Democrat Party grassroots has hardened its position on New Labour over the last decade.

The price is likely to be a Referendum on electoral reform which should be easy for the Conservative Party to concede so long as it is free to campaign against change.

The likelihood now is of a Tory minority Government taking unpopular decisions but restrained by the Liberals and minority parties and with New Labour both sniping from the side and seeking to detach the Liberal Democrats from the Tories at the first serious sign of a vote of no confidence.

The logic is of a second election within the next eighteen months when either it suits the Tories to go to the country on 'administrative competence' or the Liberals think they have got all that they can from the Tories and can cut some electoral pact with New Labour.

One Liberal Democrat strategy (though 'once bitten, twice shy') is to revisit the approach discussed between Blair and Ashdown but now with Cameron in which key policy changes are matched, later if not earlier, with Government positions for the Liberal Democrats in a key Ministry or two.

We may expect Gordon Brown to stand down or be challenged and there will be no progress on that side until a new Leader is appointed - probably a relatively young Blairite who can 'understand' the needs of the machine.

In terms of policy, the Party will probably try to appear 'responsible' to the middle classes whilst channelling public sector and regional fears of spending cuts to maintain the coalition in shape. It is quite possible for New Labour to be returned with a working majority within eighteen months.

All in all, we have a period of considerable political excitement ahead amongst an anxious public and jittery markets with no clear resolution for some months to come.