Tax and the election horse trading

This morning we wait for the main parties to sort out who will form the next government. The papers are full of discussion about talks between the Liberal Democrats and the Tories. Those conversations will revolve around electoral reform, one of the central planks of Lib Dem policy and a slightly uncomfortable topic for the Conservative party.
But what of Lib Dem tax policy? A quick review of the manifestos reveals that the Lib Dems are arguably the most radical on tax.
They wanted just a single rate of pensions tax relief; an increase in the basic rate personal allowance to £10,000, a mansion tax of 1% on properties worth more than £2m and a big rise in capital gains tax.
I suspect very little of that would survive if Nick Clegg agreed to join forces with the Tories. David Cameron has signaled he is willing to talk about relieving the tax burden on those that are least well off. But the other policies? Mansion tax and a hike in CGT would both attack the better off while a change in pension tax relief would clash with Tory values on saving and providing for retirement.
Of course, much of this would have come through Vince Cable, the Lib Dem shadow chancellor – so sacrificing these policies would be removing much of Cable’s influence on Lib Dem policy.
The biggest issue though is the economy. The parties are not split on the issue of cutting the UK’s £166bn deficit – but they are divided on the timing. The Tories want to start now with an emergency Budget that would inevitably be seen as an austerity project. Cable is in the camp of those who believe austerity can wait – for now, or we endanger the economy. Would Cameron and Tory shadow chancellor George Osborne give ground on this, or would Cable and the Lib Dems have to give up on their deeply held views about how the economy should be run? Could they do that in conscience in return for a review of electoral reform by an all-party committee?
It all means that the horse trading currently underway has got to be, and should be, about much more than electoral reform.