David Cameron and Nick Clegg were locked in last-minute talks with senior colleagues and MPs on Monday afternoon as they tried to secure support for a power-sharing deal by the end of the day.
Both the Conservative and Liberal Democrat leaders want to strike a deal as soon as possible to reassure both the public and the financial markets that a stable government can be formed quickly.
Mr Clegg was meeting his MPs in parliament to outline a possible agreement with the Tories, at the same time as Mr Cameron met with his shadow cabinet.
There were still some lingering doubts about whether a deal would be struck or what shape it might take. One MP who emerged from the Lib Dem meeting said Mr Clegg’s proposals had received a “mixed response”.
After the meeting David Laws, a senior Lib Dem MP who has been at the forefront of the talks, said he needed to go back to the Conservatives to “seek clarification” on a number of points. He also said the Lib Dems were still talking to the Labour party about the possibility of a rival deal.
Mr Cameron – who hopes to secure the keys to Number 10 after winning the largest number of seats in last week’s general election but failing to secure an outright majority – is eager to have a concrete proposal to put before his own MPs at a meeting scheduled for this evening. Eric Pickles, the Conservative chairman, said on Monday afternoon that the situation was ”positive and hopeful”.
Mr Clegg believes Mr Cameron should have “first rights” to form a government as head of the biggest party, and both men agree that a Con-Lib alliance offers the best chance for a stable government as the country grapples with a £163bn deficit.
However, grass-roots Lib Dem supporters are eager that their leader does not abandon his commitment to reform of the voting system in any Tory deal. At the same time, traditional Tory supporters remain implacably opposed to proportional representation, arguing that it could consign the party to the political wilderness.
Lib Dem negotiators have been seeking a referendum on a version of electoral reform – the so-called alternative vote – from their Tory counterparts as a sign of Mr Cameron’s intention to carry out more far reaching reforms after time.
They also want the introduction of fixed-term parliaments, which would prevent Mr Cameron from pulling the plug on a Con-Lib partnership by calling a snap election.
Some Conservative MPs said on Monday that they were being sounded out about their support for the alternative vote referendum. A Conservative offer of the alternative vote system would alarm some Tory traditionalists, but it would maintain the principle of the single member constituency: it is not a proportional system, but would help the Lib Dems win more seats in most circumstances.
There was also speculation that any deal, if it was forthcoming, would stop short of a full coalition. Instead, it could be a New Zealand-style “confidence and supply” agreement. This would provide some ministerial jobs for a few Lib Dems, but would limit collective responsibility to agreed programme within those portfolios.
It has also emerged that the Lib Dem negotiating team also met in secret over the weekend with a team from Labour consisting of Peter Mandelson, Ed Miliband, Ed Balls and Andrew Adonis, according to the BBC. Labour has offered the Lib Dems an immediate referendum on proportional representation and a full coalition government should their talks with Mr Cameron fall through. There has also been a tacit promise that Gordon Brown, the Labour leader, would step down at some point.
Sir John Major, the former Tory prime minister, again made the point that the Tories were not “suddenly” going to back proportional representation. But he also said a coalition government with Labour would not have “any kind of mandate”.
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