LONDON (Reuters) - Britain’s third-biggest party, the Liberal Democrats, denied on Monday it had ruled out joining a coalition government if no single party won a parliamentary majority at this year’s election.
The possibility of Britain’s first “hung parliament” since 1974 has unsettled financial markets but Liberal Democrat deputy leader Vince Cable said it could be in the national interest “because it will force parties to work together in a way that single-party government won’t.”
He told BBC radio: “We will be very constructive in our approach to it, but we are not engaging in fancy games of working out who does what.”
The main opposition Conservatives are favorites to win the election, expected in May, and so end 13 years of Labour rule.
But a series of polls has shown the center-right Conservatives falling short of the support needed for a majority. The left-leaning Liberal Democrats, who have 63 seats in the current 646-member parliament, could become kingmakers in that scenario.
Investors fear a minority or coalition government would not act decisively to bring down Britain’s gaping public sector deficit, forecast to reach 178 billion pounds ($279 billion) this year or more than 12 percent of Gross Domestic Product.
A poll of economists for Reuters last month predicted a 20 percent chance of a hung parliament, up from 15 percent in a similar poll in October.
The Liberal Democrats denied a report in the Guardian newspaper that they were ruling out forming a coalition if the party held the balance of power after the election.
“We’re not ruling out any option,” Cable said.
The Guardian said the Liberal Democrats would be prepared to support either main party provided they won concessions on their four key policy areas.
The party’s priorities, set out by leader Nick Clegg at a Reuters Newsmaker event last month, are:
— Economic reform. The Liberal Democrats want to shift the economy away from what they see as over-reliance on financial services and promote “green” technology.
— Tax reform. The Liberal Democrats would close loopholes for the richest and introduce a “mansion tax” on homes worth more than 2 million pounds ($3.13 million) to fund tax cuts for others and to take millions out of paying tax altogether.
— Education. The party proposes to put an extra 2.5 billion pounds into schools, providing more money for deprived children.
— Political reform. The party would respond to a scandal over politicians’ expenses by reducing the number of members of parliament and giving voters the right to fire corrupt MPs.
The speculation about a hung parliament has led top civil servants to make preparations, the Guardian said on Monday.
However, the government denied a Guardian report that Gus O’Donnell, cabinet secretary, had distributed secret memos among senior officials on how to handle a hung parliament.
“The cabinet secretary has not distributed this document. As part of the preparations for a general election, it is normal practice for the Civil Service to consider all potential outcomes,” a Cabinet Office spokeswoman said.
Editing by Mark Trevelyan