What happens next?

As the dust settles on the most unexpected election outcome for decades there is now a huge amount of political and associated economic uncertainty. We look at some of the questions thrown up by the combination of a poor Conservative campaign, the second hung Parliament inside seven years, and an apparent renewed political acceptance of a socialist agenda.

What will the new Government look like?

The mathematics of Parliament mean that a ‘real’ working majority can be achieved with just 320 seats, as the Speaker and his three deputies do not vote and Sinn Fein will not take up their seven seats. The Conservatives won 318 seats (including the speaker) so take him and his Conservative Deputy off that total and they have 316 votes in Parliament, so 4 short of a majority.

As incumbent, constitutionally Theresa May had the first chance of trying to form a Government. It is entirely possible that the Conservatives could try to run a minority Government, making individual deals with parties or MPs to support them on particular pieces of legislation as they arise. However, this is not very stable and the reality is that most of the other parties will not want to do a deal with the Conservatives (look what happened to the Lib Dems and Nick Clegg after supporting the Conservatives in 2010).

That leaves the only party that would be willing to deal would be the Northern Irish DUP. As such, it makes sense for the Conservatives to seek a longer-term deal. This is unlikely to be a full coalition with the DUP taking Ministerial posts, but instead a ‘supply and confidence’ arrangement, which means that in return for certain policy concessions (more public spending in Northern Ireland? Scrapping benefit cuts the DUP campaigned against?) the DUP would agree to always support a Conservative Budget and to vote with them should any votes of no confidence be called. The DUP have 10 MPs and so added to the Conservatives 316 voting Members would see them have a notional working majority of 12.

That is what is being worked towards at the moment but it is always a possibility the DUP may bid too high and a formal deal fall through. If that happens May will have to try to Govern at the head of a minority administration, with all the instability and unpredictability that means. She will try to avoid that situation at almost any cost but it is possible for her to survive without a deal in place.

Ministerial appointments?

May said during her acceptance speech at her count that she wanted to give the country a period of stability. She is not in a position to offer that much stability at the moment, but there are some things she can do. One was to limit the number of changes to her Cabinet, and indeed she did not sack anyone, introduced just one new member (Michael Gove) to replace Ben Gummer (who lost his seat) and just reshuffled a handful of people around a few departments.

We expect there to be a similar lack of movement in the more junior positions. There are a number of posts need filling due to Members losing their seats but the PM cannot afford to make more enemies at the moment and so a wholesale clear out of junior Ministers in very unlikely. The PM will probably look to the 2010 intake of MPs to fill the gaps, many of whom were upset by their lack of promotion in the previous Parliament, although there may be one or two from the 2015 intake who have shown talent (Victoria Atkins?).

Queen’s Speech and Policies?

The Queen’s Speech has been delayed ‘by a few days’ and will not now take place next Monday (18th June) as planned. Whilst this might be blamed ostensibly on needing to finalise a deal with the DUP, it is also down to the fact that backbench MPs will have demanded to see some of the manifesto commitments amended or dropped altogether. The PM has lost a huge amount of authority and cannot now push through many of the policies that she was previously pursuing almost on her own. Grammar schools and changes to school funding formulae are two policies likely to be dropped.

The Queen’s Speech will be a watershed moment for the new administration – if it runs into trouble from any of its own backbenchers we may see the PM stand down and possible another election very soon. (See below).

Where does this leave Brexit?

This is now the biggest mess of the lot. The Article 50 clock is ticking towards the two year deadline of March 30th 2019, by when a deal must be negotiated or we exit with nothing. The PM called the election to strengthen her hand in these negotiations but she has been weakened. EU negotiators do not know what to make of the election result and, frankly, neither does the PM.

The vast majority of MPs (except the SNP, Green and Lib Dems) have been elected on a manifesto commitment to honour the referendum result. Even Ken Clarke has said he now accepts that the UK has to leave the EU. So it seems clear that negotiations will continue towards that aim.

What form will that Brexit take? Already there is speculation that the election result will be interpreted as the death of ‘hard Brexit.’ Yet this cannot be assumed. As well as a hard core of Conservative MPs determined to press ahead with leaving the Single Market, all other Conservative MPs stood on that same manifesto pledge. Moreover, in the last few days John McDonnell has broken ranks and stated that Labour believes Brexit must mean leaving the Single Market if it is to honour the spirit of the Brexit vote. (Indeed, he has to say that as he cannot renationalise all the industries he wants to without leaving EU state aid rules behind).

However, it is even more complicated than that. Ruth Davidson pretty much saved the PM’s bacon by winning so many seats in Scotland and she has previously pushed for a ‘soft’ Brexit, sometimes saying the UK should remain in the Single Market and saying more often that freedom of movement should be preserved (which implies some connection to the Single Market). Other backbench Conservative MPs like Nicky Morgan, Dominic Grieve and Anna Soubry are likely to also make the case for a softer Brexit. Likewise, Labour backbenchers like Chuka Umunna, and front benchers like Barry Gardiner, will also press for a softer deal.

Both sides are already lobbying hard through the media and it is unclear who will win. There are enough Conservative MPs on both sides of the argument who feel so strongly about the subject they could resign the whip and, given the mathematics of the Commons, bring down the Government. The situation is likely to become clear only after the Government has started to formally negotiate with the EU and reports back on progress in a few weeks.

Leadership election?

Her own MPs are furious at the PM for the election result (and their own reduced majorities). It matters not a jot that she increased the Conservative vote across the country to the highest level since 1979: she lost the overall majority the Party held and has allowed Jeremy Corbyn to turn himself from Mr Bean into (if not Stalin, to reverse Vince Cable’s quip about Gordon Brown) then at least into a potential PM. By comparison, the PM is now seen as having gone from being Margaret Thatcher before the campaign to Gordon Brown now: wooden, unable to communicate, a bad campaigner, and displaying a stubbornness to admit doing anything wrong.

Most Conservative MPs will want May gone. However, they also want a brief period of stability so that proper leadership campaigns can be mooted by potential candidates, and deals done accordingly, as well as a full analysis of the General Election results carried out to determine just what exactly has happened.

As such, she is likely to stay on short-term, unless she tries to carry on as if nothing bad has happened, as she did in her initial post-election interviews on TV. In that case, Conservative MPs may feel they have no option but to get rid of her and take a leap into the unknown.

Another election?

History suggests we will not see an early election. There is no appetite for another poll amongst Conservative MPs, many of whom recognise the momentum is with Corbyn and that the Conservatives will lose seats if another election is held anytime soon. It is almost certain, however, that May will not lead the Party into another election, whenever that may be.

There is a small chance an election could be called this October but that leaves little time for the Conservative Party to get rid of May and elect a new leader, let alone give time for that new leader, whoever that may be, to set their own agenda and communicate it to the public.

Normally a March or May election next year would be the best bet, with a new Conservative Leader (Boris? Davis? Green? Rudd?) at the helm and trying to push a more positive agenda.

However, we have to remember the Brexit clock is ticking. Can we afford another election and more time taken out of the negotiating period? That pushes us back towards either an October election (so whoever wins can press on with negotiations from hopefully a stronger position) or allowing May to negotiate Brexit, or at least making substantial headway, before replacing her and calling a new election. Of course, it is possible another election could result in another hung Parliament and even more uncertainty, which perhaps suggests the latter option.

Meanwhile, what about Labour and the other opposition Parties?

Amazingly, Corbyn has come out of the election as the most secure of all the Party leaders. His hitherto critics, at least most of them, will probably now make themselves available to serve on his front bench team and whilst he will continue to receive criticism from some quarters, he will probably have an easier ride in future. Unless, that is, he tries to go even further to the left: that might well trigger resignations from more moderate MPs already uneasy at the policies being pursued, even if they have seemed to be popular with large parts of the public.

Tim Farron looks under threat as Lib Dem Leader, with both Jo Swinson and Vince Cable likely to covet his job and feel as though they could strike a better rapport with the country. And whilst Nicola Sturgeon is not under threat, she too has been diminished with the loss of 32 MPs. It was her insistence on pressing for another independence referendum that has backfired and she now faces a rebuilding task north of the border.

If you are interested in a more detailed briefing and to hear more about our Public Affairs Practice, please contact David Park (Partner) at david@nudgefactory.co.uk