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I see most questions are about the election now...sorry to bore you further!
What happens if, for example, Labour win 250 seats and the Tories win 249? Do Labour win, or is that too small a majority?
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For more on marking an answer as the "Best Answer", please visit our FAQ.Assuming there were no other parties, Labour would have a majority of 1 in that case. Since in a "real" election the Lib Dems, Scottish and Welsh Nationalists and the Northern Irish parties would also expect to gain some seats there would be no one party in overall control, so one of three things would happen:
a) Labour or the Tories form a coalition with one of the other parties (presumably the Lib Dems, as they'd probably be the largest) to form a working majority. Compromises would have to be made on policies and deals struck on how government jobs would be shared.
b) Labour or (less likely) the Tories might attempt to form a minority administration. Since they wouldn't command a majority, they couldn't be sure of getting any legislation through the Commons without at least the tacit support of other parties, which would probably lead to...
c) New elections would be called in the hope of getting an outright majority.
In fact, even with a majority of 1, the government would be pretty shaky as they only just outnumber the opposition and would probably seek support from the minor parties. The last Labour government (ie. 1974-79) started out with a very small majority that (thanks to deaths among its MPs) it gradually lost: it attempted to continue with a minority administration with the tacit support of the Liberals and the Nationalist Parties before finally getting voted down and calling a new election (which brought in Mrs Thatcher with a sizeable majority).
It is also worth pointing out that officially governments in the UK are appointed by the Queen, so in the scenario you suggest in your question, the head of state would have to appoint a PM (as she would if a party won an overall majority). I don't think there are hard and fast rules about who this would be, but there would be uproar if the following did not happen.
If a coalition was formed the PM would be the leader of the party with the most seats in the coalition. If there was no coaltion, the PM would be the leader of the party with the most seats.