Bruce Anderson: Cameron had to risk Tory dismay

After the shock, the pain. Tory MPs and activists spent five years trying to elect a Tory government, not a coalition, and many local Tories loathe Liberals, with good reason. By the time they reach Parliament, most Liberals' worst characteristics have been filtered out, in the same way as London tap water is filtered and for similar reasons. But the average Liberal constituency activist is an angry fanatic, with shallow, thoughtless opinions, utterly unscrupulous on the doorstep, ready to spread any smear and tell any lie.

Yet the Liberal party is now being glad-handed into government by the Tory leader. As a result, there are no ministerial posts for Adam Afriyie, Tobias Ellwood, Mark Lancaster, Ben Wallace and other able, hard-working Tory front-benchers who had all earned preferment, while MPs such as Philip Dunne, Nick Hurd and Brooks Newmark have been given far less than they deserve. Most of them will be wryly stoical. But out in the shires and suburbs, there will be anger at the unfairness of it all.

That reaction is justified, and pointless. As Margaret Thatcher would have said, there was no alternative. In the immediate aftermath of the election, most Tories were in "if only" mode, running through lists of seats where the party had come exasperatingly close, discussing who was most deserving of death under torture, the Ukip leadership or Joanne Cash. David Cameron instantly recognised that there was no time to waste on might-have-beens. He had to work on the basis of the results as they were. So he did, in a decisive and ruthless manner.

Tories who are unhappy ought to think through the other options. Suppose Mr Cameron had refused to negotiate with the Liberals in any but the most perfunctory fashion, insisting that he had the right to form a government. There would have been widespread derision and antagonism, plus desperate attempts by Gordon Brown to bribe the Liberals. Vince Cable as Chancellor? Nick Clegg as Foreign Secretary? Mr Brown would not have felt it necessary to protect Alistair Darling's interests, or David Miliband's.

If this had succeeded, the ensuing government would have made a pantomime horse look like a Derby winner. Even so, it would have been in office, during an economic emergency. If Lab/Libbery had broken down, David Cameron would have been able to form a united Tory government buoyed up by his own MPs' enthusiasm and high morale: by everything except a parliamentary majority and widespread public approval. An early election would have been inevitable. In the meantime, David Cameron might have tried to take tough decisions while using Churchillian rhetoric to mobilise public opinion. We will never know whether that could have worked, but it would have been a high-risk strategy. Instead, David Cameron chose a safer option.

By agreeing to negotiate with the Liberals in good faith, Mr Cameron was able to occupy the moral high ground. If the talks had broken down, he would have been in a strong position, either in forming a minority government or in opposing one. As it is, he is in a stronger position, and so is the country. Britain needs a government with a secure Commons majority. David Cameron was right to use his forceful charm to create political momentum.

Naturally, this will not eliminate all Tories' suspicions. These will focus on two areas where there are grounds for alarm. The first is Europe: the second, tax. Many senior Liberals are federalists, while almost every Tory younger than Ken Clarke is a Eurosceptic. At some stage, that divergence may prove unmanageable, but there is no reason to believe that a crisis is imminent. After all, we already have a crisis. It is called the euro. No one has ever explained how monetary union could work without fiscal and political union. Although the euro-zone has made heroic attempts to defy logic, economics, history and common sense, there are limits. Even if the euro does survive in its present form, the federalists have been thrown on the defensive.

Admittedly, we have heard that before. After every incursion into British sovereignty over the past 20 years, we were assured that this was the end and that the federalists' appetites were now satiated. Every time, those assurances proved worthless. This time, however, it may be different. The euro's problems are bound to consume the EU's energies for the indefinite future.

If David Cameron did not have to work with the Liberals, many Tories would be wondering whether Europe's difficulties could become Britain's opportunity. The Tories were committed to seeking a repatriation of powers, especially those relating to the Social Chapter, but most Liberals would be viscerally opposed to that. There may, however, be one glimmer of hope: Nick Clegg. Mr Clegg is an atheist with Dutch roots who was trained by Leon Brittan. As an atheist, he should be immune to the Catholic social teaching which has had such an influence on European Christian Democrat parties and which is antipathetic to the free market. As a Dutchman, he ought to be sympathetic to free trade and economic liberalism, values shared by Leon Brittan. Leon may be an incorrigible federast, but as a European commissioner, he did a lot to promote competition and eliminate trade barriers.

There are some barriers which ought to be eliminated, before they do even more damage: the restrictions which debar youngsters from obtaining jobs, by deterring employers from hiring them. If the EU had set out to maximise youth unemployment, it could hardly have improved on the current set of costs and legislative inhibitions. The malign consequences are manifest. In parts of southern Europe, and especially Spain, youth unemployment is at socially catastrophe levels. If that is Catholic social teaching, Holy Church has more than one method of inflicting cruelty on young males.

Nick Clegg may not be keen on repatriation. But if he is intellectually consistent, he ought to be willing to press the other Europeans to liberalise their Labour markets before millions of youngsters are condemned to idleness or the black economy.

Tax might be more of a problem. In the 1980s, Professor Arthur Laffer discovered an economic law that really works. He demonstrated – the Laffer curve – that within reason, lower tax rates will produce higher tax yields. If you want to raise more money from the rich, cut the rate at which they pay income tax. They would then spend less time with their tax accountants and more time earning money. In the UK, VAT receipts would rise, as would inward investment. The proposed 50 per cent top rate would almost certainly result in a diminished tax receipts, as would any excessive increase in Capital Gains Tax.

I suspect that Nick Clegg agrees with this, as do David Laws, Peter Mandelson, almost the entire Tory party and – probably – Alistair Darling. But Vince Cable is to the left of both Mr Darling and Lord Mandelson. Like most of the Labour party and all too many Liberals, he values egalitarianism above prosperity. This could be a problem. Tories accept the necessity for taxation: the Government needs the money. But they also agree with Gladstone that money is best left to fructify in the pockets of the people. As one would expect from a man who prefers Gordon Brown to David Cameron, Dr Cable would pick the pockets. Unlike Europe, that disagreement cannot be kicked into the long grass. Its outcome could determine the coalition's fate.