There has been a rise in factionalism across the Liberal Democrats during their time in the Coalition Government – with the Liberal Left, Social Liberal Forum, Liberal Reform and other groups, all promoting their different perspectives. At Party Conference a left/right divide over economics and fiscal policy was very noticeable.
My thesis is that this divide is a serious one which is widening, not narrowing, and without measures to halt the fragmentation, the Party could face problems in establishing a common ‘pan-party’ position at the next election – especially on the economy. Further, I believe that signs of an improvement in the economy may deepen the divide.
The basis for my assertion is that the divide is not based merely on technical arguments over the finer points of economic evidence. It is to a great extent based on quasi-ideological positions -where the facts are made to fit a narrative on one side or the other.
Factionalism has also tended to exaggerate differences. Perspectives now range from laissez-faire ‘market religionists’ to ‘magic money’ ultra-Keynesians’. Some of the latter even argue that the state should distribute free money to the entire population. Will an improvement in UK economic conditions be a victory for fiscal conservatives who attribute low cost UK borrowing to the UK’s austerity programme, or a victory for those who attribute such improvements to monetisation and regional and infrastructural stimulus programmes ?
There is a job of work to be done to better address such a fissure across the party, and to face up fully to the fact that the Party is divided quasi-ideologically on economics. By contrast many in the Party see the leadership as identifying itself with one particular end of the divide. Such work will, I believe, also help us set out a more robust and distinct economic position at the 2015 election, as well as help unite the party.
There is plenty of scope for reconciling opposing views across the party.
Some in the party wrongly interpret Keynes’ prescriptions. Keynes never argued for a general (ie non-cyclical) stimulus to the economy via debt-financed spending. On the other hand pro-Keynesians have been wrongly accused of wanting to put the country at risk of bankruptcy.
Pro-market advocates in the party have tended to assume that businesses are less regulatory-dependent than they really are. They have been accused of wanting to de-regulate the UK back to the 19th Century, despite their emphasis on the ‘quality’ of regulation.
Both sides have been weak on systemic remedies to develop the ‘real economy’ – one side due to an apparent culture of disdain for the private sector, and the other because market ideologists often wrongly assume that markets imply a ‘hands off’ state.
In the real world of commerce and finance the economic battle lines are much more blurred. For example, are measures to make it easier for non-state investors to finance infrastructure really ‘demand measures’ or ‘supply measures’ ?
It is also patently the case that there are many contributing factors to the UK’s low international borrowing costs: eg the quality of UK debt and cash management; the UK’s political determination to keep debt under control; low inflation expectations; expected stability of Sterling; and expectations of a return to trend growth. The Tories’ over-emphasis on the austerity factor alone, and our own party leadership’s perceived support for this mantra, has been like a red rag to a bull to the ultra-Keynesians in the Party.
I want to see the Party working through its differences and coming out stronger and more distinct. I don’t want to see opposing groups fixing the facts around their pre-determined positions. I wish to be a member of ONE party, and not feel obliged to choose between factions. I trust that the leadership will recognise the extent of the problem, and react accordingly.
* Paul Reynolds is an independent foreign policy & international economics adviser, who has had senior political roles in Afghanistan, Iraq, and Pakistan, among other countries across the globe.