Brown could lose and still be PM

By Channel 4 News

Updated on 31 March 2010

Gordon Brown could remain at Number 10 for weeks even if he loses the election, under plans to prevent a run on the pound in the event of a hung parliament.

Special plans are being drawn up by senior civil servants to avoid economic problems if Labour or the Conservatives fail to secure a majority.

Cabinet Secretary Sir Gus O'Donnell is in charge of drawing up the proposals, which it is hoped can lead to a coalition government being agreed quickly.

But Whitehall officials have admitted that the constitutional process is so complex - and the need for economic stability so great - that Brown may stay at Number 10 for weeks if he loses by just a few votes.

Concerns have been raised in The City that a hung parliament will lead to a lack of clarity over key financial policy, such as how to deal with the UK's multi-billion pound deficit.

Despite the plans for a swift resolution, up to 18 days of bargaining could follow the election in the event of a hung parliament.

In a joint press conference today the SNP and Plaid Cmyru hailed the prospect of a hung parliament as a golden opportunity for Scotland and Wales.

They outlined plans to bargain at Westminster for protection of local services, a so-called fair share of funding, new green economies, and for more support for local businesses.

Economic instability
Alastair Newton from Nomura spoke to Channel 4 News about the potential problems for the economy following a hung parliament.

"In all honesty, we get the election results on the Friday after the election we've then got a weekend," he said.

"Hopefully the politicians would have sorted out matters by Monday morning because if we get into the next week without a clear emergence of some sort of stable government I think markets are going to continue to punish both the pound and the UK bond market.

"Our view remains very clearly that markets are likely to react pretty badly to the prospect of a government which could be delayed arriving for some time and when it arrives might not be capable of coming up with the sort of emergency budget balancing sustaining the recovery with a medium term credible fiscal retrenchment policy and actually enforcing those policy changes down stream.

"And markets want that - they've been waiting for this election day, they wont wait much longer."

John Chatfeild-Roberts from Jupiter Asset Management said: "If you're looking at this from the investing view point if you had a wobble perhaps that might be an opportunity to buy a bit more and in the long term probably life will get better.

"As an investor you need to look at the global situation and yes there are economic imbalances out there but there are companies doing well in these sorts of conditions."

Hung parliament: what happens next?
A hung parliament occurs if no party has an overall majority. To gain an overall majority a party needs 326 seats.

In fact, there are no formal rules about who should be asked first to form a government in the event of a hung parliament, so Sir Gus O'Donnell has been preparing a written statement that brings together the unwritten conventions on the matter.

The Cabinet Office has now produced a document, Elections and Government Formations, which desribes the constitutional processes following a general election.

On the matter of a hung parliament, it states: "Where an election does not result in a clear majority for a single party, the incumbent Government remains in office unless and until the Prime Minister tenders his and the Government's resignation to the Monarch."

In February 1974 – the last instance of a hung parliament following a general election – Labour won 301 seats and the Conservatives 297, but the then Tory prime minister, Edward Heath, remained at Downing Street until the Monday after the election as he tried to form an alliance with the Liberals.

It was only when his efforts failed that he resigned. The process could take up to 18 days though.

The Cabinet Office document also states that "the person who appears to be most likely to command the confidence of the House of Commons will be asked by the Monarch to form a government".

The term commanding the confidence means being able to avoid defeat in parliament, in particular on crucial issues like the budget, either through a coalition or by short-term support arrangements with other parties. After the 2010 poll, a new minority or coalition government would probably face its first test in a vote on the Queen’s speech.

Once the political parties have worked out who can command the confidence of the new parliament, the prime minister advises the Queen as to who she should invite to form the new government.

Wisdom has it that the monarch is above party political decisions, but the Queen does enjoy certain "reserve powers" which may be central to the political process in the event of a hung parliament. Constitutional historian Peter Hennessy notes that her powers to dissolve parliament and to appoint a prime minister "are anything but marginal activities".

In case those reserve powers should come into play in 2010, the Cabinet Office, Number 10 and Buckingham Palace will have been planning together for a hung parliament for some time. We know they did in the late winter and early spring of 1974, as well as in the spring of 1992.

An inconclusive poll will therefore test the skills not just of politicians but also of Gus O'Donnell, the cabinet secretary, Jeremy Heywood, Gordon Brown’s principal private secretary, and the Queen’s private secretary, Christopher Geidt.

There will be one new element in the event of a hung parliament this year. We know that Gus O’Donnell has secured the prime minister's agreement that the civil service can support negotiations between the parties. One paragraph in the documentation reads -

"It is open to the Prime Minister to ask the Cabinet Secretary to support the Government's discussions with Opposition or minority parties on the formation of a government. If Opposition parties request similar support for their discussions with each other or with the Government, this can be provided by the Cabinet Office with the authorisation of the Prime Minister."

It may ensure an easier transition than in 1974 when, in the words of the Queen's then private secretary Sir Martin Charteris, "poor Ted" Heath brought to an end "this dicey weekend" and "came round... very, very depressed (to resign)... and the Queen sent for Harold Wilson."