What once was a civil partner-ship between Cameron and Clegg seems to be heading for divorce. The slanging match that has characterised the last few weeks does not bode well for the long-term future of the coalition.
It was always inevitable the AV campaign would generate more heat than light. Opinion polls show the majority of voters are unenthused by the prospect of turning up to vote on the question of reforming the voting system. And it was always likely that tribal party lines would re-emerge during a hard-fought electoral campaign.
There are now many on both sides of the coalition who are openly talking about readiness for a general election. Conservative blogger Tim Montgomerie, who edits ConservativeHome.blogs.com, has written: “Cameron needs to understand that there may be no easy options. It might be a case of going to the country soon, at a time of his choosing or at a time later in this Parliament chosen by a new Liberal Democrat leader. The coalition could soon be paralysed by civil war inside the Liberal Democrats.”
I believe any Government only has around 12 to 18 months to set in train its policies before the Sir Humphrey factor gets in the way and ensures ministers’ diaries are so full of the day-to-day that they become punch-drunk or go native and become less reforming in spirit and ability.
Many have criticised this Government for rushing through policies in its first year. I dubbed it the break-neck coalition but I admired its reforming zeal.
There is a danger that the everyday work of the coalition becomes inoperable following the May 6 elections and referendum campaign.
What would this mean for financial policy?
The autumn is expected to see the set-piece financial reforms of this Parliament, including the scrapping of the FSA, placing the Bank of England in the centrifugal role and the formation of the PRA and FCA. FSA teams are already starting to shadow their new structure in preparation for the changes.
And the Independent Commission on Banking is set to give its final judgement in September, just in time for the Liberal Democrat conference.
Both elements of regulatory reform have been hotly contested between HM Treasury and Vince Cable’s Business Department.
If the coalition breaks down, Cameron may be tempted to continue as a minority Conservative Government. In fact, many of his backbenchers would rather he does this. But this may make key elements of reform impossible to achieve.
Labour would seize the opportunity to block plans to scrap the FSA, plans they have never backed and the Lib Dems may support. Senior Lib Dems are already writing in the national press about the need to build an anti-Tory progressive majority.
The atmosphere has changed. For regulated firms and for the regulator, a long, hot summer awaits.
Iain Anderson is director and chief corporate counsel at Cicero Consulting