Election 2015: Lib Dems warn of post-vote 'instability'

Danny Alexander said only the Lib Dems could "keep Britain in the centre ground"

There is "a lot of concern" in the financial markets about a minority government, Chief Secretary to the Treasury Danny Alexander has claimed.

The Lib Dem warned of a Labour or Tory government "on life support" and reliant on the SNP or UKIP.

David Cameron has called a Labour-SNP deal "frightening", though Labour has said it would not enter a coalition.

Mr Alexander also unveiled a reply to a note by his Labour predecessor saying "there is no money left".

Mr Alexander said polls indicated that neither Labour nor the Conservatives would win an overall majority on 7 May.

"So the key question is, who holds the balance, what kind of government emerges afterwards?" he said on BBC Radio 4's Today programme.

"And the markets themselves are showing a lot of concern about the instability that would arise from a government that was lurching vote-to-vote - on life support, if you like, politically - having to look constantly to Alex Salmond or Nigel Farage, who might at any point pull the plug."

He urged voters to consider the effects of such "instability" on interest rates and sterling.

Coalition deal

His argument recalled the coalition deal between the Conservatives and Lib Dems in 2010 in which the parties claimed they had entered government together in the national interest amid market worries about the UK economy.

Asked with which party the Lib Dems would seek to form a coalition after the 2015 election, Mr Alexander said: "Just as we did in 2010, we would talk first to whichever party had the strongest mandate from the British electorate, which in our system is the party which has the greatest number of seats, because clearly that's what's necessary to build a majority."

Danny Alexander warned against a deal between Labour and the SNP or the Conservatives and UKIP

SNP leader Nicola Sturgeon has indicated that her party would work with Labour to "get rid of the Tories" even if the Conservatives finished the election as the largest party by up to 40 seats.

Mr Alexander attacked Conservative election proposals, claiming they were not consistent with the policies pursued by the coalition but instead meant "a massive lurch to the right".

He would not be drawn on whether the Lib Dems would oppose Conservative plans for an EU referendum but said "a self-generated row" about the UK's membership would be "a disaster for Britain".

The Lib Dems have also turned their fire on Labour, releasing a dossier highlighting a report by Morgan Stanley suggesting that an "insurgent party" such as the SNP holding the balance of power could slow GDP growth from the investment bank's estimate of 2.7% this year to 2.1% - the equivalent to £10.7 billion.

'No money left'

In a speech in Aberdeen, Mr Alexander claimed an unstable government could lead to higher interest rates costing households an extra £800 a year.

"The Liberal Democrats have shown we can deliver strong and stable government. We are the only party that can keep Britain in the centre ground, the markets happy and the recovery going."

Labour's Liam Byrne later expressed some regret over the note to his successor

He also revealed he had replied to to an infamous note left in April 2010 by the outgoing Labour Chief Secretary to the Treasury, Liam Byrne, for the first coalition chief secretary, David Laws.

The original note said: "Dear Chief Secretary, I'm afraid there is no money. Kind regards - and good luck! Liam."

Mr Alexander revealed his letter said: "Sorry for the late reply - I've been fixing the economy. The deficit halved, jobs up, growth up.

"That's the Liberal Democrat record. We won't let you - or the Tories - screw it up."