Give and take by Liberal Democrats and Conservatives was key to reaching deal on coalition

Published on Tuesday 11 May 2010 23:24

PRIME Minister David Cameron promised last night he would head "a proper and full coalition" government that would make "difficult decisions" on Britain's future.

• David Cameron is followed in to Downing Street by Liberal Democrat leader Nick Clegg

But as details of the four-year deal with the Liberal Democrats emerged, it was clear that both parties had had to make compromises and put aside decades of animosity.

Once the faint prospects of a Lib Dem-Labour pact had dwindled, the two parties' negotiating teams thrashed out an agreement in a mammoth five-hour session.

The idea was to have a deal in place that would last for at least four years and provide Britain with "strong and stable" government. But in doing so, according to sources, both parties had to make serious concessions.

Gone are the Conservative promises to recognise marriage in the tax system and reduce inheritance tax. But the Lib Dems have had to accept that they will not receive any moves towards "a fairer voting system" beyond a referendum on the alternative vote system, which falls well short of their goal of introducing proportional representation.

• • Key policy differences between the Conservatives and Liberal Democrats

The talks had stalled on electoral reform and it was this, as well as allocating Cabinet roles, that proved to be a sticking point again yesterday afternoon. In return for dropping demands on proportional representation, it seems likely that the Lib Dems will get fixed-term parliaments and Mr Cameron will surrender the Prime Minister's right to choose the date of an election within a five-year period.

According to some sources, there were also "fruitful" discussions on pushing forward reform of the House of Lords to make it fully elected.

There were some areas on which the two parties were already agreed, but the Lib Dems will have to swallow much of the Conservative rhetoric on fixing Britain's "broken society" and put aside their opposition to replacing Trident and nuclear power stations.

It also appears the Lib Dems will have to drop their call for an amnesty for illegal immigrants and support a new points-based system – which may now be put through parliament by a Lib Dem home secretary.

Meanwhile, the price of having the Lib Dems on board has angered the right of the Conservative Party, especially with the prospect of having at least five Lib Dems in the Cabinet, although this was less than the six the party had demanded.

Right-wingers will be mollified by the likely jobs to be given to Iain Duncan Smith and David Davis. But one right-wing Tory connected to the Cornerstone group said: "Much of this is going to be very difficult for some elements of the party to swallow."

He also said that there would be back-bench Tory MPs defying the whip on the referendum for an alternative vote system, despite promises by the party leadership that they would campaign for a No vote.

Meanwhile, many Lib Dem MPs were finding it hard to come to terms with their new political bedfellows. One Scottish Liberal Democrat MP said: "The whole thing is just bizarre."

He said the party had found itself with no choice but to do a deal with the Tories because it had to show that hung parliaments could work or lose the argument in the future on introducing proportional representation. He added that the numbers meant that only the Conservatives represented a possible coalition partner.

But another Lib Dem MP said he had been "surprised at the generosity of the Conservatives" in offering to accept some of the party's policies.

There were areas of agreement, such as on scrapping ID cards and holding a strategic defence review in the near future. Most of all, the parties have agreed to reduce the deficit more quickly than Labour had proposed. And it seems likely that George Osborne, as Chancellor, will introduce a Budget in 50 days, with the Lib Dems' Vince Cable proving the supporting act.

Both parties will also work towards making the tax system fairer and look at the Lib Dem proposals to raise the threshold for income tax to 10,000.

The Conservatives apparently still worry about this because it would cost 17 billion, so any moves in this direction are unlikely to be immediate. However, 6bn will be found to stop Labour's planned increase in National Insurance for those on the lower tax band.

During the election, the Tories branded it "the jobs tax" and the Lib Dems' only query on it was where the money to reverse it would come from. It also seems likely that much of the "surveillance society" will be reversed and there may be a repeal of some anti-terrorism laws, such as the extension of detention for suspects.