Ministers say coalition should enter new phase, with less emphasis on differences, after row over employment law report
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Steve Hilton, David Cameron's policy guru, commissioned a report on employment law which has been rejected by Nick Clegg. Photograph: Martin Argles for the Guardian
The Conservatives and Liberal Democrats have provided Westminster with a masterclass in recent days on how not to run a coalition government.
That is the view of senior Whitehall sources over the handling of the report by the venture capitalist, Adrian Beecroft, into liberalising employment laws. Steve Hilton, David Cameron's policy guru who is a champion of deregulation, commissioned the report because he believes that overly restrictive employment laws are holding back Britain's economic growth.
The Liberal Democrats have taken fright at Beecroft's central proposal: giving employers the right to sack unproductive employees without explanation. I report in Wednesday's Guardian (as does Robert Winnett in the Daily Telegraph) that Nick Clegg has intervened to block Beecroft's main idea on the grounds that it would have a "chilling effect" on the Labour market. The deputy prime minister believes that Beecroft's idea would actually stunt economic growth by making workers so insecure they would stop spending money.
Clegg is understood to have made clear that he would not allow the most controversial aspects of the Beecroft proposals to pass the "quad" – the coalition's key decision making body attended by Cameron, Clegg, George Osborne and Danny Alexander. Government sources say that while there has been a row in Whitehall there has been no bust up over Beecroft among the coalition's most senior ministers. They all enjoy friendly, if not exactly loving, relations. Osborne has also not gone out of his way to press for the adoption of the report because the proposals do not feature prominently on the CBI's list of priorities.
But the positioning over the Beecroft report has given minsters pause for thought on how to run the coalition. This is what one Whitehall source says:
The problem with commissioning something like the Beecroft report in a coalition is that you are effectively inviting people to take up positions. They dig in and nothing happens.
Ministers are wondering whether the coalition now needs to enter a new – and third – phase. In the first phase, symbolised by the Nick and Dave press conference in the Downing Street garden in May last year, the two partners showed their determination to govern together in the national interest.
That came to an abrupt end, triggering the second phase, when the Liberal Democrats suffered a bruising defeat in the AV referendum in May this year. At that point the Liberal Democrats started to differentiate themselves from their coalition partners. Clegg gave the first taste of this approach back in January when he told me that it was right, from "time to time", to remind people that the Conservatives and Liberal Democrats are "separate independent parties with separate identities".
There is growing feeling among ministers that the differentiation strategy may need to be toned down a degree or two. This is what one senior Lib Dem said:
I think we need to be careful this does not go too far. Obviously after the referendum loss in May we needed to differentiate ourselves more than we had. But we do have to be careful. We must continue to look like a cohesive government. The quad works fine. But we have to be careful about the briefers. We cannot have people in Downing Street briefing against eachother. We are not going to be like Blair and Brown.
Hilton may be frustrated that some of the key ideas in Beecroft's report have been junked by the Lib Dems, as my good friend Benedict Brogan has blogged tonight. But the Beecroft report may end up strengthening the coalition. That will increase the chances of the friend he calls Dave making it through to the 2015 election as prime minister.