(UPDATE [6/12/17]: It looks like talk of a firm deal between the Tories and the DUP was premature. Downing Street now says that talks are still ongoing.)
Theresa May will indeed be staying in Downing Street, for now at least. According to the Daily Telegraph, the Conservatives and the Democratic Unionist Party from Northern Ireland have agreed to a ‘confidence and supply agreement’ that will allow the Tories to govern as a minority government.
This means that the DUP will support the Government on matters of confidence as well as appropriations votes. On all other matters, the Tories will need to obtain the DUP’s support on a case-by-case basis. It’s basically the bare minimum to keep the Government in power.
The alternative would have been a formal coalition agreement like the one that united the Tories and the Liberal Democrats from 2010-15. But in this case, a coalition would have been problematic. Under the terms of the Good Friday Agreement, Westminster needs to be able to mediate between Unionists and Republicans, and it would have been extremely difficult for them to perform that role if the DUP were part of the British Government. Also, the fate of the Lib Dems may have been a cautionary tale for the DUP–after faithfully sticking with the coalition for five years, they lost almost all of their MPs in the 2015 election.
The vote on the Queen’s Speech is the first test of a government’s viability, and the DUP’s support means that the Tories are likely to overcome that hurdle. But the Government’s long-term stability is far from certain. The DUP have the Tories over a barrel, and they could easily use their advantage to wring concessions from the Government at every opportunity. And if history is any indicator, they will do just that (it’s worth remembering that James Callaghan’s government fell in part because he balked at the Ulster Unionists’ request for a gas pipeline to Northern Ireland). But any concessions to the DUP run the risk of alienating Tory MPs from English constituencies.
During the election, May said she could be counted on to provide strong, stable government. Those words are likely to come back to haunt her. Even with the DUP’s support, the Government’s majority is only three, so it will be excruciatingly difficult for the whips to secure the passage of anything even remotely controversial. In the absence of a viable alternative administration, another early election seems all but inevitable.