What's That Coming Over the Hill? Is It a Monster?

Sitting in the office this afternoon feels a little bit like being in the eye of a hurricane. The sound and fury of the election campaign has stilled for the day, and we can enjoy this period of eerie quiet before the storm of coalition building starts tomorrow. How long that storm will rage depends on what voters are deciding in polling stations all over Britain right now. We'll wait and see what they have created tomorrow.

Sitting in the office this afternoon feels a little bit like being in the eye of a hurricane. The sound and fury of the election campaign has stilled for the day, and we can enjoy this period of eerie quiet before the storm of coalition building starts tomorrow. How long that storm will rage depends on what voters are deciding in polling stations all over Britain right now. We'll wait and see what they have created tomorrow.

But the Frankenstein of a coalition which will eventually be shocked into life at some point in the next few days is not the monster I'm most worried about. What's worrying me is the unholy mess left behind by the election campaign: specifically the constitutional questions that have been raised and not answered. This detritus has the potential to cause political and economic turmoil. The makeup of the new government is a trivial sideshow by comparison.

Scotland is the first concern. Whether the SNP play a role in the new administration remains to be seen, but what seems certain is that Scots will have voted in droves for the party and so will have clearly expressed their dissatisfaction with the current constitutional settlement between Scotland and the rest of the UK. At the same time the campaign has shown that the English are not terribly happy either; nor are (some) of the Welsh and Northern Irish. A constitutional quagmire beckons, as politicians attempt to satisfy the demands of all parts of the UK - with a referendum in Scotland currently looking like a neat and elegant solution compared to some of the potential outcomes. The Cabinet Office is going to earn its corn in the next few months.

The second issue is Europe. Admittedly, a Labour-led government might just about get away with a 'no change' attitude towards the EU. But the Conservative promise of a 2017 referendum on our membership, as I've said many times before, poses enormous threats to our economy. At the very least, the prospect of a national vote risks paralysing decision-making for ages. God help us if we actually then voted to leave. Whatever happens today, our approach towards the Union will not be settled until somebody shows some leadership and starts to make a positive case for staying in.

Speaking of leadership, my third worry is that whatever we get as a government will be fragile. For example, a Conservative majority sounds great to me (albeit improbable, to judge by the latest polls), until you recall that it is very unlikely to have more than a very small lead in the Commons and that will mean some real headbangers having disproportionate sway over policy: remember the Major government after 1992? There are too many possible election results which could be announced tomorrow which could leave us with a weak and impotent government, unable to display leadership and grip, and forced to the country again within months.

All of these big issues have the potential to cause business to take fright, deferring decisions and delaying plans for investment. My strong hope is that we end up with a relatively settled government, probably a coalition: a repeat of the last five years would suit me fine - and I still think is the most likely result. That deals with worry number three, but doesn't answer questions one and two. So after this protracted, negative and bruising election campaign, the biggest and most pressing challenges for the new government will be sorting out devolution once and for all and finally settling our relationship with Europe. They are the monsters coming over the hill. Failure to tackle them head on will be terrible news for UK plc.

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