How will the coalition government come to be defined and judged? Nick Raynsford looks at how public spending cuts could destabilise its equilibrium

Even though we are still at a relatively-early stage in the life of the coalition government, a number of different possibilities are beginning to emerge which lead in, potentially, very different directions.

How the leaders of the Conservative and Liberal Democrat parties respond to these options will be crucial in determining this Government’s future.

Initially, the Government basked in the heady atmosphere of political novelty. The first coalition government for 65 years offered clear signs that even in the traditionally, adversarial British political culture, different parties could come together to form a government – this was bound to attract attention and generally, favourable comment.

But novelty wears off surprisingly quickly, and harsh political choices have to be taken. The results will inevitably define what the coalition is really about, and how it will fare, once the honeymoon period is over.

Initially, it seemed that the coalition wanted to be judged on how it handled the economy. Reducing the deficit was proclaimed as the over-arching objective. While this played well to the Conservative side of the coalition, it posed real problems for the Liberal Democrats, exposing all too harshly the differences between the Orange Book tendency and the rest.

Having to eat one’s words about VAT increases and Draconian public sector cuts so soon after a general election in which the Liberal Democrats campaigned vigorously against the Conservatives on these issues was never going to appeal to large elements in the party. This, above all, explains the marked decline in support for the Liberal Democrats in recent polls.

On the other side, the merits of changes to the voting system which Liberal Democrat leader, Nick Clegg, was able to present as one of his achievements in negotiating the coalition agreement, was always going to play badly with traditionalists in the Conservative party – provoking the ‘Brokeback coalition’ jibe from MP, David Davis. Another of the constitutional reform themes which has featured in government rhetoric – localism – might have proved a unifying force, but the actions of senior ministers across government has shown little commitment to this cause.

So, the Academies Bill is railroaded through Parliament to allow education secretary, Michael Gove, to pursue highly-centralist educational goals, while work and pensions secretary, Iain Duncan Smith, announces swingeing cuts in housing benefit which will have dire consequences on local communities, with scant regard for the concerns of local authorities.

Even communities secretary, Eric Pickles, supposedly the advocate for localism, is not averse to laying down the centralist law when it suits him. For example, on how much local authority officers can be paid, while housing minister, Grant Shapps, hands out the same centralist medicine on councillors’ allowances.

More recently, Cabinet secretary, Francis Maude, has offered an alternative rationale for the coalition in promising to be more radical than Margaret Thatcher.

While many Liberal Democrats would be happy to be described as radical, the association with Tory policies in the 1980s will be much less welcome. In any case, the evidence of radicalism on the part of the new Government appears to be based on ill-thought through gestures, such as scrapping regional planning structures, without credible alternatives to put in their place, or a promise of wholesale top-down reorganisation, as with the NHS, which are wholly untested.

This sort of radicalism is sadly reminiscent of the thinking which gave us the poll tax, not a precedent that will engender much enthusiasm from Liberal Democrat supporters, which brings us back to economic management. As former US president, Bill Clinton, reminded us all in the 1990s, it is the economy which normally determines election results. As the coalition has spent much of its first three months denouncing the policies of its predecessors, it would be logical to expect it to ask to be judged on its own economic record. Am I alone in detecting a reluctance to set this benchmark by which its performance might be assessed?

With the economy recovering strongly in the second quarter of 2010, the coalition might have been able to look forward to continuing growth, and tried to claim credit for it. However, as we all know, the June Budget and the forthcoming Spending Review have changed the picture. They hold out the prospect of deep cuts in public spending and a sharp rise in unemployment.

Chancellor George Osborne may continue to believe, in [one of his predecessors] Norman Lamont’s phrase, that this is ‘a price well worth paying’, but there are not many Liberal Democrats who would want to be publicly associated with this approach. As economic storm clouds gather and the risk of a double-dip recession looks more likely, more commentators will remember the message of the late British economist, John Maynard Keynes, about the benefits of counter-cyclical public investment in such a context.

Despite the fact that Mr Keynes was a Liberal, I suspect we won’t be having many references to his General theory from the Liberal Democrat members of today’s Government. More seriously, if they and their Conservative parties in government are so reluctant to listen to the lessons of history, they are putting themselves and the country at risk of repeating it.

Nick Raynsford is ex-local government minister and MP for Greenwich and Woolwich