Be warned: we’re under starter’s orders for the general election. Today, the Lib Dem leadership sets out its plans on the economy for approval by the party conference this autumn, striking a neat balance between a strong defence of the Lib Dem record in government and a recognition that much still needs to be done to get the economy growing.
The motion to be debated in Glasgow in September can be found at the foot of this post. Tabled by Nick Clegg, Vince Cable and Danny Alexander, it ‘reaffirms the Liberal Democrats unwavering commitment to getting the public finances under control; recognises the flexibility the Coalition Government has already demonstrated; and outlines bold steps to stimulate jobs, growth and investment within the existing fiscal mandate.’
Or, to put it another way: the Coalition’s been a lot more economically pragmatic than the rhetoric of its supporters/critics would suggest, and the Lib Dems will keep the good bits and ditch the bad bits. As Vince Cable put it in his seminal New Statesman essay four months ago:
The government has happily deployed Keynesian techniques where feasible – as in its counter-cyclical fiscal policy. It has been sufficiently pragmatic to allow the fiscal consolidation to drift from four years to seven. The question throughout has been how to maintain the confidence of creditors when the government is having to borrow at historically exceptional levels, without killing confidence in the economy in so doing through too harsh an approach.
Here at LibDemVoice, we’ve noted before the emergence of the party’s 2015 election ‘triangulation’ strategy (Stronger economy, fairer society) promulgated by Nick Clegg’s strategy advisor Ryan Coetzee — what Mark Pack has referred to as the ‘tough but tender’ David Owen approach. As John Kampfner pointed out yesterday:
Mr Clegg’s focus groups and strategists indicate that there are votes to be had from the soft left and soft right if the Liberal Democrats present themselves as a “sensible”, non-tribal party that tempers the worst instincts of the two big forces.
That’s the message of this motion… Worried the Tories will cut too far, too fast and hurt vulnerable people reliant on social security? Worried Labour will flunk the decisions needed to keep public spending under control and cut the deficit? Then the answer is a government with Lib Dem influence to get the balance right. It’s a clear message, and one you’ll hear repeated consistently for the next two years. At which point we’ll find out if it’s worked.
Specific measures the party will be promoting will bring a smile to the faces of those Lib Dems who’ve long called for greater emphasis on capital spending to kick-start the economy. However, it promises all these pledges will be met within the existing fiscal envelope:
- developing a comprehensive strategy for 16-24 year olds;
- allowing councils to pool borrowing limits to increase house building;
- expanding the British Business Bank; increase RBS lending to businesses;
- and making the Green Investment Bank fully independent.
It’s striking to me how much of the emerging Lib Dem policy is being echoed by Labour. I’ve noted before how Labour’s economic policies — tax-cuts for the low-paid, a mansion tax for wealthy property owners, cuts to wealthy pensioners’ benefits — have started to mimic the Lib Dems’. Here is another clear example of convergence: a focus on capital investment combined with a continuing reduction in revenue spending on services.
In his letter to party members this weekend, Nick Clegg will again take the fight to Labour, saying:
We will remain committed to balancing the budget, now and in the future. Labour’s fantasy that you could eliminate the deficit by borrowing billions more is just that: a fantasy. But we can be more creative and innovative in the drive for growth, and with your endorsement at conference, we will do so.
But the reality is that Lib Dem economic policy and Labour economic policy is converging — at precisely the moment George Osborne is making every effort to shore up the Tories’ right flank.
The party itself is understandably eager to talk up the distinctiveness of its approach, with a senior Lib Dem source commenting:
“It shows that the Liberal Democrats are the most creative party in pushing new ideas for growth. It’s is a pretty striking move from Nick Clegg and the rest of the party’s leadership. It’s part of Nick Clegg’s drive to position the Liberal Democrats as the only party of the centre-ground in British politics – combining discipline on deficit reduction with progressive, innovative ideas on growth.
“It’s a way of the Liberal Democrat leadership continuing to demonstrate ownership of what remains the biggest issue facing the country – the economy. Nick, Vince and Danny are setting out the party’s position on the economy for our remaining two years in government, the election in 2015 and beyond.
“We need to balance the books but that alone is not enough – we must continue to be restless in finding new ways to create jobs and growth.”
Judge for yourselves… Here’s the text of the leadership’s motion…
Strengthening the UK Economy
Conference believes we should pursue a bold and imaginative economic strategy to stimulate jobs, growth and investment within a strong framework for fiscal consolidation.
Conference welcomes recent improvements in the UK economy, specifically:
1. That faced with the highest budget deficit in post war history in 2010, as a consequence of the banking crisis and Labour’s mismanagement the Government has managed to reduce the structural deficit by a third since it came power.
2. That growth is returning to the UK economy, in the first half of 2013 growth was above forecast and forecasts from the Bank of England and the OECD see the UK growing steadily for the rest of 2013, at a faster pace than France, Germany and the Eurozone.
3. That employment levels are close to their highest ever with over a million net new private sector jobs, helped by a strong package of government programmes to keep people in work.
4. Inflation has now fallen to around half its post recession peak, easing the squeeze on household budgets.
5. That interest rates have been kept under control, in stark contrast to various troubled continental economies.
6. That business confidence has been improving steadily in recent business surveys, and with record levels of company start-ups.
Conference notes the UK’s difficult financial position and recognises the dangers of failing to bring the public finances under control as the Government has set out. It welcomes the flexibility the Government has already shown to promote growth within the fiscal mandate, including:
i. Allowing the automatic stabilizers to operate.
ii. Helping businesses and households through monetary policy characterised by the IMF as “vigorous and appropriate with substantial easing and policy innovations” including:
a. The use of quantitative easing,
b. The introduction of the Funding for Lending Scheme, recently adapted to encourage more business lending,
c. A new more expansionary remit for the Monetary Policy Committee announced in the 2013 Budget.
iii. Getting companies to invest and builders to build through the introduction of £40bn worth of government guarantees for infrastructure projects and a further £10bn worth of government guarantees for new house building.
iv. Getting credit to good businesses including through the Business Secretary’s introduction of a Business Bank.
v. Supporting private sector growth and jobs through; a £2.4bn Regional Growth Fund, that leverages in over £13bn of private sector investment and supports 500,000 private sector jobs; the Green Investment Bank which has committed £700m of its £3bn investment; a £500m Growing Places Fund to help local authorities and Local Enterprise Partnerships in less prosperous areas to build and improve infrastructure; funding over a million new apprenticeship starts.
vi. Taking a vigorous approach to industrial strategy by; promoting manufacturing, expanding science and innovation spending, boosting capital investment in key future technologies, boosting apprenticeships and building on the success of industries such as civil aerospace, wind and automotives through the creation of sector strategies to strengthen key growth industries in the UK.
Conference however notes that the UK’s economic recovery remains fragile, particularly:
a. Despite significant progress since 2010, the UK budget deficit is still forecast be amongst the largest in the EU in 2013.
b. Youth unemployment remains stubbornly high, with close to 1 million young people classified as unemployed.
c. House building remains well below historical averages with less than 30,000 house building starts in the first quarter of 2013.
d. Businesses continue to report severe difficulties in accessing finance from the banks.
Conference reaffirms its support for the Government’s fiscal mandate as it did at Autumn Conference 2012 (Generating jobs and growth in a time of austerity). However within the fiscal envelope conference calls on the Coalition Government to:
1. Take radical action to tackle stubbornly high youth unemployment by developing a comprehensive strategy for 16 – 24 year olds ensuring that all young people have access to the skills, advice and opportunities necessary to find sustainable employment.
2. Dramatically increase the number of houses being built by pooling council borrowing limits, so that councils who want to build more houses but are at their borrowing limits are able to do so. Further to examine urgently whether PSND could be brought into line with definitions of other EU countries so that the liabilities of trading corporations (such as council housing operations) are off balance-sheet, thereby enabling councils with a sustainable business model to borrow to invest in building more homes for rent.
3. Boost lending to good British businesses by expanding the Business Bank so that it can directly support the establishment of a new challenger banks creating more competition and a banking system that is more regionally diverse.
4. Use continued public ownership of the Royal Bank of Scotland to keep its leadership focussed on increasing business lending, and support structural changes and branch sales that increase banking competition
5. Invest further in the UK Green Investment Bank and act now to make it a fully independent institution that can borrow to invest in its own right without impacting on government fiscal totals.
6. To continue to invest in the UK infrastructure by prioritising investment spending in areas such as housing, science and innovation, transport and renewable energy
7. Monitor closely the progress of the Bank of England against its refocused mandate in order to ensure that monetary policy is focussed on aiding growth.
* Stephen Tall is Co-Editor of Liberal Democrat Voice, and editor of the 2013 publication, The Coalition and Beyond: Liberal Reforms for the Decade Ahead. He is also a Research Associate for the liberal think-tank CentreForum and writes at his own site, The Collected Stephen Tall.