We have 650 Parliamentary seats and a party needs to take 50%+1 seat to form a majority government (so 326).

What's happened is that no-one's done this. The Tories have 306, Labour 258, the Liberal Democrats 57, the Scottish National Party 6, Plaid Cymru 3 and the others (mostly the Northern Irish parties) 19.

Yesterday people were talking about the choice between the Tories as a minority government (where they form the government but can't be guaranteed to win every vote on new legislation) and a coalition/alliance between Labour and the Liberal Democrats which would govern as a majority. The problem is that the LibDems have done worse than expected, so that even if Labour and the LibDems join forces, they cannot form a majority government either (they only get to 315, and the Tories can block them with help from the smaller parties).

So the choices are that the Tories govern as a minority government, the LibDems ally with Labour and govern as a minority coalition, or the Tories ally with the LibDems and govern as a majority coalition (with 363 seats).

The problem with this last scenario is that the Tories and LibDems are ideologically opposed on many areas of policy. Most notably, they have radically different ideas on how to handle the economic crisis, and the LibDems badly want electoral reform which Tory hardliners and supporters are vehemently opposed to (though Cameron himself appears to be slightly less hardline on it). The LibDems want reform because they won 23% of the vote but only have about 9% of the seats in Parliament, so introducing a Proportional Representation system will benefit them immensely. The Tories don't want this system because it will screw them over, and may make coalition governments the norm in future elections (whilst at the moment they are very rare). Labour are lukewarm on it, but will do it to hold on to power.

As a result the most likely scenario (though the ground is shifting rapidly; no-one this morning was realistically expecting a LibDem-Tory coalition, and they are at least talking about it tonight) is that the LibDems and Labour govern as a minority coalition and win over the smaller parties with promise of voting reform (which will also benefit them), holding off the Tories in the process. Then, once the system is reformed, a fresh general election will be held, probably in 6-12 months time.

The problem with this scenario is that Gordon Brown's position will likely be untenable, so a caretaker PM who was not voted for by the British people will have to come in (unless LibDem leader Nick Clegg does it, which is a bit tricky given the LibDems' lack of mandate compared to the other parties). And the banks and international community may have a lack of confidence in this set-up, which could have ramifications given the economic situation.

Whichever way you cut it, the situation is screwed. We couldn't have made this any more difficult or awkward if we'd tried.