Labour explore the prospect of a deal with the Lib Dems

With the general election less than three weeks away and polls suggesting that it’s unlikely any party will win an outright majority, it’s rumoured that Labour are taking a good look at the Lib Dems’ manifesto to see where there’s policy overlap.

The Financial Times (£) have reported that Labour are making these moves ahead of May to see if the two parties could come to an agreement in the event of a hung parliament. Which is no surprise given the state of the race.

A senior Labour figure told the paper that although “There have been no formal talks with the Liberal Democrats…people are reading each other’s manifestos. There is a pretty substantial overlap.”

Meanwhile, Peter Mandelson, who has in the past been one of the Labour channels of communication with the Lib Dems (and who back in January said Labour needed to prepare for a coalition with Clegg’s party) said:

“Obviously Ed Miliband’s first choice would be to have a Labour government, pure and simple, and I would strongly support that.

“But if needs must, most in the Labour party would put the Liberal Democrats way ahead of the SNP in terms of desirable allies.”

Miliband yet again ruled out a formal coalition with the SNP during Thursday night’s challengers debate. Although the nationalists are thought to be the most likely to hold the balance of power during the election, the FT forecasts that if the Lib Dems manage to win 25-30 seats (which would be less than half the 57 they have now) they could also be the party to support either the Tories or Labour in a formal coalition – or through supply and demand.

A source in the Labour Party reportedly told the FT that there is a sense from some within the party that Miliband could head up a minority government supported by the Lib Dems, because the yellows who are most likely to hang on to their seats are from the left. Meaning of course that they’d support a substantial number of Labour’s policies.

Labour and the Lib Dems do have some overlap, both are for more investment in the NHS and schools and oppose large cuts to the welfare budget (while the Tories say they’d cut it by £12bn but have refused to say how). They would clash on tuition fees – in something of a volte face from the last election – as the Lib Dems oppose Labour’s cut.

Another significant area in any negotiation talks could be electoral reform; the Lib Dems want a more proportional voting system, which could be an area for consideration among some in the Labour leadership.

The Lib Dems negotiating team is made up of Danny Alexander, David Laws, Steve Webb and Lynne Featherstone, accompanied by Lib Dem peer Kate Parminter. Although at least two of those MPs (Alexander and Featherstone) may lose their seats on May 7th. While Labour’s team isn’t known, Labour peer Lord Falconer is head of the party’s  “transition” to government team.

However, there is already some concern that a deal with Labour would negatively impact upon Lib Dems’ image, after they’ve spent five years propping up a Tory government. One strategist said: “With the Tories we’re the nice guys. With Labour, we’d be presented as the fiscal hard men, the nasty guys.”

Speculation over this will surely continue in the coming weeks – but we’ll all have to wait until May to see what happens…