Nick, Vince and Danny lead Lib Dem charge to “balance the books, find new ways to create jobs and growth”

Nick Clegg addresses Birmingham Liberal Democrats conference. Photo courtesy of the Liberal DemocratsBe 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:

  1. developing a comprehensive strategy for 16-24 year olds;
  2. allowing councils to pool borrowing limits to increase house building;
  3. expanding the British Business Bank; increase RBS lending to businesses;
  4. 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.

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11 Comments

  • We can only hope this is not going to be our economic policy for the general election. It should be noted that the wording states, “However within the fiscal envelope conference calls on the Coalition Government to:” Also we should expect a policy paper on this and for it not just to be a leadership motion. However it appears the Policy Committee has no plans to produce an economic policy!

    I question whether there really was a structural deficit in 2010 and so reference to it should go.

    There is really no choice we have to stay within the fiscal envelope until 2016 but afterwards we don’t.

    Why can’t we just state that henceforth we will use the EU definition of Public Sector Net Debt? So why can’t we just increase Council borrowing limits or even scape them? The motion recognises house building is below historical averages so we should be pursuing policies to get them above the historical averages to do something about the housing shortage, not messing about on the periphery.

    If this was an economic policy for 2016-20 I would hope to see something about increasing the minimum wage each year above the rise in average earnings or inflation as a way for companies to pay people more so the government doesn’t have to subsidise wages as much as it does now.

    It would also be a good thing to define what level of unemployment we find acceptable so everyone who wants to work will be able to get a job. Unemployment should be acceptable only when the majority of it is frictional. Once we have a target then we would need other policies to deal with structural unemployment. We can’t leave it to the free market.

    The motion says radical action should be taken to tackle stubbornly high youth unemployment but doesn’t say what this radical action is. Access to advice is not radical. Access to good relevant advice might be, a guarantee to access training to gain the skills needed in the area in which they live might be radical and guaranteeing them a job at the end of their training would be radical.

    We could say we want Jobcentres to visit local employers and identify where they are having trouble recruiting local people and find ways to ensure that those unemployed locally can obtain the skills needed by the local employers.

    Hopefully those going to conference will ensure this is changed and does become radical.

  • The bottom line is that in government the current Lib Dem leadership have proven themselves to be out of depth. We have waited 70 years for this and it has been a disaster. Just let it end now.

  • @Dave
    “The bottom line is that in government the current Lib Dem leadership have proven themselves to be out of depth. We have waited 70 years for this and it has been a disaster. Just let it end now.”

    More 20/20 hindsight. What exactly would you have done with the number of MPs we have and the catastrophic deficit of more than 11% of GDP inherited from Labour?

    Sorry, but you are totally, utterly wrong on this. The Lib Dems went in with an incredibly weak hand and under the worst circumstances possible.

    How precisely do you think we could have pulled off some miracle result? I would be interested to hear your ideas.

  • “How precisely do you think we could have pulled off some miracle result?”

    Why are Lib Dem loyalists so addicted to this kind of straw man rhetoric?

    What kind of answer is it – when someone criticises the competence of the party leadership – to ask them to explain how they would perform a miracle?

    No one is saying a miracle could have been achieved. What people are saying is that the situation has been very badly handled. That can be true of any situation – good, bad or indifferent. Obviously, the fact that the party was in a weak position to start with is no defence whatsoever of the incompetence of the party leadership, which has made a bad situation much worse.

  • Paul Pettinger 13th Jul '13 - 3:39pm

    Vince spoke at the Social Liberal Forum today on the economy, and this motion does not read like it was written by the same man. I know it’s hot today, but I smell something fishy

  • tonygreaves 13th Jul '13 - 5:16pm

    This motion is very depressing. The leadership have forgotten everything the party ever knew about economics and learned nothing. There is nothing here for the future.

    The most depressing thing is that it sets out Coalition policy not Liberal Democrat policy. It seems that they want the next General Election to be contested between the Labour Party with Labour policy (no doubt they will sort one out in time); the Conservative Party with Conservative policy; and the Liberal Democrats with Coalition policy.

    Can there be any greater recipe for political disaster for our party?

    Tony Greaves

  • Daniel Henry 14th Jul '13 - 12:44am

    There were two other motions submitted on the economy.
    Both of them brought interesting ideas to the table.

    This motion merely re-states the coalition programme and tries get coalition compromise rubber stamped as Lib Dem policy. It will not provide any real debate or give delegates any real choice in the direction of our economic policy.

    I really hope it either gets seriously amended or voted down.

  • Andrew Colman 14th Jul '13 - 4:09pm

    Most now agree the economy is broke.The issue is “who” pays to fix it.

    Once upon a time there was a lorry Driver. He was well liked and provided a good service. He had many friends. Living in the same town was a family whose kids had a reputation for being lazy. They often failed to do their homework for example.

    One day, the lorry driver in a bid to keep to his schedule had an accident. He drove into a wall and did serious damage to a house (the house where the lazy children lived)> The costs of repair were going to be high. The lorry drivers friends suggested that the family with the damaged wall should send there kids out to work to pay for the damage. It was time they did some work for a change.

    Q Do you agree with the Lorry drivers friends?

  • @ Danny Henry

    Please post the text of the other two motions.

  • Andrew Colman – that would be a much better analogy if a) the lorry was being recklessly, b) the authorities had failed to enforce speed limits and safety laws, and c) the whole town had been ruined (Lac Megantic?), with hardworking people suffering as much as those you choose to characterise as ‘lazy’ people.

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