Mark Stuart: How the 2010 battle for power could still hang in the balance

This is why Gordon Brown, in a moment of desperation, dangled the

prospect of electoral reform yesterday. If the imminent election produces no clear victory for Cameron, the Prime Minister hopes to cling to power, with the support of the Liberal Democrats.

Next week, MPs will be allowed to vote on whether or not to introduce the alternative vote system (where voters rank candidates in order of preference) to replace the existing "First-Past-The-Post" system for Westminster elections. If this vote is passed, a referendum would follow in 2011.

The possibility of a hung parliament – a situation where no political party has overall control of the House of Commons – has become much more likely because of the rise of third parties (principally the Liberal Democrats, but also the two nationalist parties in Scotland and Wales) and because Cameron has a proverbial mountain to climb if he is to gain an outright majority.

He needs to win 118 seats to gain an overall majority of just one. That requires a bigger shift in popular opinion than any opposition party has achieved since 1945, apart from Tony Blair's landslide of 1997.

Hung Parliaments in Britain are rare in recent times, but not uncommon if we cast our net further back in history: there were two inconclusive elections in 1910, one in December 1923 and one in May 1929. We haven't had such a scenario, however, since February 1974, when Edward Heath's Conservatives won fractionally more votes, but Harold Wilson's Labour Party won four more seats, 17 votes short of an overall majority.

So what lessons can we learn from previous experience?

The first thing is to expect a delay before a Government is formed. It may surprise you to know that if no party wins overall control in May or June, then the party that has lost the election – in this case Labour – can continue to govern until it is defeated in the Commons.

So, in December 1923, Stanley Baldwin's Conservative government stayed on for a full six weeks before losing a vote of confidence. And, in early March 1974, Edward Heath spent four days in negotiations with Jeremy Thorpe's Liberal Party to see if a coalition government could be formed.

In the end, those talks broke down because Heath refused to accept proportional representation for Westminster elections. The Queen then asked Harold Wilson, as the leader of the largest party, to form a minority government.

Such a hiatus is worrying from the point of view of financial

stability. Back in 1974, thanks to exchange controls, the international money markets couldn't withdraw their money immediately from Britain. Nowadays, they can do so in the space of seconds. The one thing that City traders don't like is uncertainty. So expect a rocky few days on the stock and currency markets should no party gain overall control.

It is a common misconception that a hung Parliament automatically leads to a coalition government. That hasn't happened in any of the British cases in the last 100 years.

Instead, a minority government has followed. Coalitions have emerged only as a result of international crises, such as war (1915, 1940) or financial disaster (1931). So, if the Conservatives emerge as the largest single party, then David Cameron is most likely to govern as a minority government rather than getting into bed with the Liberal Democrats.

Another lesson from 1974 is that a defeated Conservative Party did not immediately seek to bring down Wilson's minority government: they refrained from opposing his first Queen's Speech.

I cannot imagine that a shattered Labour Party, and moreover one that is completely broke financially, will have the stomach for a second election in 2010 in the same way as Wilson did by holding and narrowly winning at the polls in October 1974.

So, a minority Cameron government is likely to survive in the short-run at least, as long as the other two main parties don't combine against him on a vote of confidence.

Cameron may have to consider an arrangement with the Liberals, along the lines of the Lib-Lab Pact of 1977. Labour's tiny overall majority of three disappeared, leading James Callaghan to cut a deal with David Steel's Liberals.

The Liberals agreed to support the government on votes of confidence, without actually taking any seats in government. That arrangement was short-lived, and eventually led to Callaghan losing a vote of confidence in 1979.

The jury is out on whether hung parliaments are a good thing. Elections experts like me think they are manna from heaven, but I wonder whether our already broken economy really needs a period of political uncertainty.

Come election morning, it might be better for us all if there was a clear winner.

Mark Stuart is a political writer from York who has written the biographies of Douglas Hurd and John Smith.