Two thoughts on Clegg’s Manchester speech (1 of 2): how not to repeat the tuition fees mistake

Nick Clegg’s pitch to the Lib Dems’ local government conference in Manchester yesterday was given the kind of build-up that seems to be an inevitable part of leaders’ speech-making. Nick was going to ‘deliver hard truths’ to his activists, ‘issuing a warning’ that we shouldn’t return to the safety of opposition, and urging us instead ‘to embrace the future’. That’s the way you get journalists’ attention, y’see.

But the billing wasn’t so very wide-of-the-mark. Nick Clegg did in fact offer the party a stark choice. And as the vigorous comments thread on my post yesterday attests, it hasn’t been met with universal acclaim from members.

Personally, I thought it was a pretty good, pretty powerful speech. I’m going to quote two sections which caught my eye. First, let’s look at Nick’s section on tuition fees:

Despite that, however, we still made a pledge that, in the end, we could not deliver: tuition fees. Partly because of the compromises of Coalition… Partly because of the worsening fiscal crisis… But, either way, something we should not have done – and a mistake I will not repeat.

So, as we go into 2015, we are going to work harder than ever to produce a manifesto that is practical, responsible and deliverable. With coalitions increasingly likely in British politics, every line in our manifesto will be a potential government policy. And this manifesto will be scrutinised like never before.

I’ve been crystal clear with David Laws since the day I asked him to coordinate this process: I want the manifesto to set out our ambitious vision for a liberal society… But it must be a to-do list, not a flight of fancy. That doesn’t mean “pre-negotiating” our manifesto – producing a bland, generic set of plans we know either of the other parties could sign up to. Far from it. We can and must fight the next election on a platform of distinct, forward-looking, liberal policies. We must not stifle our vision, our creativity or our boldness with either political or technocratic excuses.

But, building on the approach we took in 2010, we will be even clearer with people about the commitments which are priorities… And the ambitions which we accept may be affected by resources and circumstances. As a party with compassionate instincts, the desire to offer big spending commitments will be as strong as it has ever been… But we will resist the temptation to talk big and end up delivering small. You’re used to this kind of rigour in your day jobs… And as the party agrees the manifesto in the lead up to the election, I need you to get behind this approach.

I saw a number of complaints yesterday that Nick’s self-critique was misleading: our 2010 manifesto was fully-costed, and the tuition fees promise was affordable. Hmmm, only up to a point.

It’s quite right that the Lib Dem 2010 manifesto was fully-costed, and that all spending increases were balanced by identified alternatives (either cuts or tax rises). But — and it really is a big but — our manifesto in no way anticipated the scale of cuts that any party would have had to implement during this parliament. As I wrote way back in April 2010:

No party has yet set out anything like enough public spending cuts to meet their objectives of cutting the deficit. The Lib Dems have produced the most detailed measures, totalling over 25% of the cuts needed; the Tories have identified 17%, and Labour just 13%. It’s fair to say, then, that the Lib Dems are being the most honest and open of the three major parties – but that we have a long, long way to go.

The idea that in the current economic context the Lib Dems would have been able not only to resist higher fees but in fact to phase them out is absurd. It always was absurd. It’s why Nick Clegg tried to ditch the tuition fees pledge by the back door before the last election. Quite why, when he failed in this attempt, he then decided publicly to sign that NUS pledge promising no fees increases in this parliament is one of those mysteries which will still baffles me.

But he is quite right now to say the party needs to “resist the temptation to talk big and end up delivering small” and quite right too to ask all of us to get behind this approach.

* 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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40 Comments

  • The issue in the penultimate paragraph is one I suspect won’t be answered soon, but is very important (I suspect they got spooked by Greece in April but were reluctant to start unpicking the manifesto by then). A more vital question is why, given all this, the party didn’t boot him out in autumn 2010?

  • “But he is quite right now to say the party needs to “resist the temptation to talk big and end up delivering small” ”

    The full fees pledge was actually only our 3rd most expensive (or big) pledge in 2010. And in year one costs it was actually 5th.

    As Martin Tod has pointed out the cost of a status quo position (which would have been perfectly defensible both in general terms and specific to the pledge – and could even have been portrayed as a success) would fairly obviously be zero.

    In terms of actually paying out cash the proposals actually adopted probably involve paying out more cash than our fees policy was costed at over the course of the 2010-15 Parliament. It is a book keeping point that this money will be recovered in future years so doesn’t show as borrowing. However it still needs to be found.

    And as I pointed out at the time of the publication of Browne the ecnomic situation when Vince made his annoucement was better than it was projected to be in March 2010 when our Manifesto was published.

    “The idea that in the current economic context the Lib Dems would have been able not only to resist higher fees but in fact to phase them out is absurd. ”

    If that is your position Stephen then get off the fence and say that Vince and Danny are incompetent and should be booted out of their current positions.

    But obsessing about fees distracts from the problems of what Clegg is proposing. The mess up over fees was as much a failure to recognise/manage the politics of it as it was over what was in the manifesto.

  • paul barker 23rd Jun '13 - 3:12pm

    To answer Stevens last question, I would think Clegg signed the “Pledge” to maintain unity. If he had refused to sign The Media would have run with “Libdem Split” stories.

  • Liberal Neil 23rd Jun '13 - 3:19pm

    Presumably the unaffordability of our big expensive pledges was why we also failed to deliver the ‘triple lock’ on pension rises?

    In reality it’s down to priorities and Tuition Fees was a much lower priority for our leadership than other things.

  • Stuart Mitchell 23rd Jun '13 - 3:23pm

    Of course the Lib Dems could have delivered their tuition fees pledge. They simply had to declare it as one of their (very few) red line issues along with the AV referendum. It’s inconceivable that such a move would have prevented a coalition agreement.

    As for your claim that critics of the pledge-break are being “absurd” because the deficit made higher tuition fees inevitable: the opposite is true. The amount of money the government will have to pay out in student loans will exceed the amount saved by a reduced block grant for decades to come, so this will make the deficit worse, not better. See :-

    http://www.if.org.uk/wp-content/uploads/2012/05/False-Accounting_-Why-Higher-Education-Reforms-dont-add-up.pdf

    http://www.channel4.com/news/university-tuition-fee-hike-will-cost-treasury-7bn

  • Our manifesto commitment to phase out tuition fees was affordable if we raised taxes. It was quite legitimate to say that we couldn’t fulfil that.

    The personal pledge to vote against any increase in tuition fees was also affordable. There was no excuse for breaking that, other than that Vince hated the idea of paying the tuition fees of Old Etonians.

    The low economic growth recorded over the last year (and the 2 years to come as it spreads to all 3 years) is partly attributable to the impact of higher tuition fees on inflation and therefore on the deflated calculation of real output.

  • Cllr Colin Strong 23rd Jun '13 - 3:32pm

    Nice try, Stephen but I completely disagree with your article

    “The idea that in the current economic context the Lib Dems would have been able not only to resist higher fees but in fact to phase them out is absurd. It always was absurd.”

    The government could have, if the political will was there, started to reduce tuition fees year-on-year in much the same way the income tax threshold has increased year-on-year.
    It is amazing how money can be found for ministers pet projects!

    Sadly, the political will was not there. When Mr Clegg talks about “tough decisions” I agree with him. But not over tuition fees – that was a stupid decision. It haunts us still.

    Imagine a scenario TODAY with producing literature that points to successes such as REDUCING tuition fees with a clear long term aim of abolishing them. We may not have phased them out completely by 2015 but the POSITIVE narrative is there and guess what, we have held to our pledge.

    Why do I get the feeling that Lib Dem fees policy will change so that it is 100% in tune with what the Liberal Democrats have done in government.

  • John Broggio 23rd Jun '13 - 3:58pm

    “But — and it really is a big but — our manifesto in no way anticipated the scale of cuts that any party would have had to implement during this parliament.”

    Well, that’s an even-handed & unbiased assessment of economic theory. The cuts were a choice pure & simple; the choice of inflicting cuts on the vulnerable instead of subsidies to the rich is another. Shameful.

  • “Quite why, when he failed in this attempt, he then decided publicly to sign that NUS pledge promising no fees increases in this parliament is one of those mysteries which will still baffles me.”
    This sits in a confusingly, long line of baffling actions and comments, from Nick Clegg, including the recent baffling comment that the violent act of a man’s hand on a woman’s throat as being ‘fleeting’ ???!!
    Is it not time to acknowledge that LD’s, may have accidentally elected Mr Bean, as leader of the Liberal Democrat party?

  • Al McIntosh 23rd Jun '13 - 5:16pm

    Wales – No Lib Dems in government – tuition fees held at £3.5k. Pledge kept in real terms.
    Scotland – No Lib Dems in government – tuition fees abolished. Pledge kept. Lib Dem policy implemented!
    Northern Ireland – No Lib Dems in government – tuition fees held at £3.5k. Pledge kept in real terms.

    England – Lib Dems in government – tuition fees raised to £9k. Pledge not kept. Lib Dem policy not implemented.

    Conclusion based on empirical evidence – Lib Dem policy on tuition fees is affordable – there exists at least one part of the UK that can do it. Tuition fees pledge was easily affordable (in real terms at least) – everyone else has managed to do it. Moreover, success in implementing Lib Dem tuition fee policy or pledges appears correlated with there being no Lib Dems in government.

    The shorter Nick Clegg – If you like our affordable Lib Dem policies or Lib Dem pledges then don’t vote Lib Dem – some other party might implement them, Mine won’t!

  • Malcolm Todd 23rd Jun '13 - 6:15pm

    Simon Shaw
    “In that “economic context”, for the Coalition Government to have reduced or phased out Tuition Fees would quite rightly have been seen as giving a massive subsidy to the middle classes at the same time as imposing cuts which often hit those a lot less well off.
    That is why it was, and is, absurd.”

    Quite right. Just like it would have been politically absurd to cut taxes for the highest-rate income tax payers while cutting benefits and putting up VAT. Which explains why the government didn’t do that either.

  • Malcolm Todd 23rd Jun '13 - 7:02pm

    Don’t know why I’d be selling anything in Hampshire; I think you must be confusing me with someone else.

    Anyway, your argument was about political absurdity. A headline tax rate cut from 50% to 45% not only can be, but quite obviously has been portrayed as the poor and the middle classes subsidising the rich. If it’s the fiscal reality rather than the politics that you want to argue about, then you should apply the same logic to tuition fees. As for VAT — again, the politics of it is appalling whatever the economic reality; but really, the idea that increasing VAT is a progressive measure has been debunked too many times on this site for me to take the trouble of trying to demonstrate it again. It’s just not true.

  • Mark Inskip 23rd Jun '13 - 7:15pm

    Our costed manifesto would have raised more in taxes , for example by the abolition of higher rate tax relief on pension contributions, to help fund tuition fees. As it is I, as a middle class higher rate tax payer, am enjoying twice the tax relief on my pension contributions that lower paid tax payers receive.

    @Simon Shaw – I can’t think of a better middle class subsidy than that, can you?

    The costings in the manifesto showed that this measure alone would have raised about £4.5bn a year against a cost of abolishing tuition fees of £0.6bn in the first year rising to £1.76bn in the fifth year.

  • Caracatus: I think you are right, the Lib Dems in cabinet could have simply dug their heels in over tuition costs (and had it come up a couple of years later, probably would have done). In terms of dirty politics, this would have been effective as all blame on fees could be squarely hung Labour’s neck.

    Of course this outcome would have been worse for poorer students and may have led to greater cut backs in HE. I reckon that rather like PFI, it was done to finesse government spending off the books. I see trouble ahead with the policy but not what to do about it>

  • Stephen Donnelly 23rd Jun '13 - 10:01pm

    @Caracatus : “They don’t get it is not about policy, it is a bout principes. The fact is Clegg share the Tory view that if you beenfit from a degree, you should pay for it. The fact that the benefit of any individul degree is only calculatable in hindsight, passes him by.”

    They ‘get’ that it is about taking responsibility. It is only necessary to pay for your degree when you benefit from it. What is wrong with that.

  • John Broggio 23rd Jun '13 - 11:51pm

    @Simon Shaw 23rd Jun ’13 – 9:40pm

    “Now, if you take a degree and don’t “benefit” from it financially you pay nothing. If you earn a middling salary you pay a moderate amount. If you earn a high salary you pay pay a lot”

    If one earns a high salary, they’ll pay less than those on the middling salary. Why? Because although the individual payments will be greater for those on a higher salary, the overall cost will be far less because they pay off their debt far quicker.

  • Tony Dawson 24th Jun '13 - 8:23am

    @Stephen Donnelly:

    “It is only necessary to pay for your degree when you benefit from it. What is wrong with that.”

    There is an argument that people should not take three year subsidised degrees unless they are prepared to accept some element of personal risk in choosing their particular degree course in the first case. That is one of the arguments for a graduate tax rather than a discretionary-repayment loans system. This argument could be heavily mitigated if the state took a bit more interest in whether some sorts of degrees were worth the nation’s subsidy. Then the state might be better-prepared to ‘insure’ the individual’s gamble.

  • Stuart Mitchell 24th Jun '13 - 9:03am

    @Simon
    “The reason that it is politically absurd is that the Government is having to make very painful cuts in public expenditure.”

    So please explain how a system which will cost the government more in the short and medium term (and arguably the long term too – see links in my earlier post) is going to help with the present deficit problem.

  • “The idea that in the current economic context the Lib Dems would have been able not only to resist higher fees but in fact to phase them out is absurd. It always was absurd.”

    I disagree so strongly with this apparent statement of fact I am really struggling to engage with the rest of the article – now one has yet sufficiently explained to me why this policy was so absurd.

    Clegg and Cable lost in trying to change our tuition fees policy (which was cost-able and workable with a few tweaks / an overhaul of our higher education system). They then chose to ditch it at the earliest opportunity, telling people that if they want to access education they would have to pay more money.

    I am not disagreeing that the policy needed to be ditched following coalition negotiations with either party, but it could have been dropped with far more grace at the time, and with an awareness of coalition politics.

  • Gareth Epps suggest that all Lib Dem candidates signed the fees pledge willingly. Not so. Both my wife and I as candidates in Leeds West and Leeds Central were browbeaten into signing the pledge after having made clear our unwillingness to do so because we saw it as a hostage to fortune. I bet we were not alone in this.

    Of course the way the policy was abandoned caused far more problems than the policy itself.

  • Allan Heron 24th Jun '13 - 1:13pm

    Al McIntosh- Lib Dems were in government when tuition fess were abolished. This position has been maintained by the SNP. (We also managed to get STV for local government elections so Westminster is the only unfair elections we are involved with)

    Gareth’s right about the reopening of old wounds, but it’s Clegg himself that seems to be doing this. I’m very supportive of the view that there was little wrong with the manifesto. Tuition fees were given a higher priority by the signing of the pledge so we made a rod for our own backs. As Stephen suggests, I have no idea why Clegg adopted this so wholeheartedly if he was opposed to them. Actually, I do have an idea – Clegg doesn’t have a good strategic or tactical thought in his head. He’s too often caught saying something that will get him through today/this week without thought for wider consequences.

    The tone and the content of the speech suggest he’s learned nothing though. Liberal Democrats have never been found wanting when they are able to take power. Many of them were stuffed by the inane judgements that were made in the first year of the coalition that resulted in electoral decimation.

    Results are improving but only from an extremely low base. It’s often said that we had worse opinion polls in the late eighties which was true. What I also think to be the case is that it will take as many years to recover our position to where it was before. And I speak as a firm believe that the parliamentary performance of the party is linked inextricably to local government performance.

    As you can perhaps tell, I’m no lover of Clegg although I am sympathetic to the many challenges leading a party in coalition involves. However, we do need to beware of the narrative that his supporter put forward about him as some kind of shining knight for Liberalism leading us in the light. This is the man who lost seats in his first election. This is the man who is Deputy Prime Minister because of the quirks of the electoral system. This is the man whose chance of remaining in government will be because of the quirks of the electoral system. That’s not too great when you look at it more closely.

    But remember this is also the man who pledged that our parliamentary strength in his second election as leader would be double what it was when he was elected. We’ll see about accountability when we get to the other side of 2015.

  • Michael Parsons 24th Jun '13 - 3:29pm

    Why would the next government have to continue cuts unless it chose too? We can all see – looking at the continued growth outside EU – that there is no “global recession”, only an austerity produced by an ideological commitment to transfer wealth from social and public control and commitments to private pockets. We are not nfacing the “new realities of the 21st century”, rather resurrecting the injustices of the 1930’s. Public services for private profit are the outcome of our oligarchies feeding frenzy. While money is poured away into bottomless banking slush-funds the criminals themselves are now protected from prosecution by guarantees to prosecute future financial crimes only (the latest “get out of jail free ” Coalition card), but of course we can’t afford to help the disabled, the poor, the unemployed, the students..as well, can we? The billions tossed away on the finance industry, those are our children’s schools, our hospitals, our small farms, and local industry, our pensions, council housing, our development initiatives, our scientific research.. No money? Everywhere but here where we need it!
    Cleansing the UK Augean stable will take more than a small change in political direction and a little PR speech-talk.

  • Mark Inskip 24th Jun '13 - 9:39pm

    @Simon Shaw
    “That may be true on a cash basis, but I assume it is not so on a DCF basis.”
    Under the new tuition fees system the interest rate is derived from the discount rate so you are correct.

  • John Broggio 24th Jun '13 - 10:09pm

    @Simon Shaw 24th Jun ’13 – 11:13am

    Fair point.

  • Peter Watson 24th Jun '13 - 11:14pm

    @Mark Inskip
    Simon Shaw – “That [individual payments will be greater for those on a higher salary, the overall cost will be far less because they pay off their debt far quicker] may be true on a cash basis, but I assume it is not so on a DCF basis.”
    “Under the new tuition fees system the interest rate is derived from the discount rate so you are correct.”
    As is so often the case with the new tuition fees system, it’s not quite as straightforward as that!! The interest rate exceeds the RPI while the student is studying (RPI + 3%) or after graduation when earning more than £21000 (but peaks at RPI + 3% at £42000 p.a.), so the real value of the unpaid sum will increase. However, the rate at which graduates pay depends more upon their income not the size of the loan. Consequently the NPV of their total repayment is much more complicated than simply considering it as a debt or a tax. It appears to me that the highest earning graduates would reduce their costs by repaying early (something that was not originally going to be allowed), and this would make the scheme less progressive than its supporters claim.

  • @Peter Watson
    The BIS uses a standard discount rate of RPI+2.2%. Therefore for those with earnings about £36K the interest rate exceeds the discount rate. For those earning less the interest rate is below the discount rate. And that £36K figure will increase beyond 2016.

  • Peter Watson 25th Jun '13 - 12:16am

    @Mark Inskip “The BIS uses a standard discount rate of RPI+2.2%”
    I’m no economist but I can’t help but wonder if the choice of a discount rate (how arbitrary is that?) introduces yet another complication into determining the true cost of a student loan. But even so, it still appears that graduates with the largest incomes have the opportunity to reduce the cost.

  • I make my living mugging people. In 2010 I pledged to stop but then something or other happened in Greece and I decided I couldn‘t afford it. However whereas I used to give everyone a couple of punches on the nose now I just punch the poorest 30% once and I break the legs of the other 70% (except, of course, if my victim’s parents are rich in which case they just pay me off and their children don’t get mugged at all). I’m sure we can all agree that while I haven’t stuck to the letter of my 2010 pledge my new policy is ’fairer’.

  • @Peter Watson
    “I’m no economist but I can’t help but wonder if the choice of a discount rate (how arbitrary is that?) introduces yet another complication into determining the true cost of a student loan.”
    Using a discount rate to calculate NPV is an extremely well established valuation methodology which dates at least back to the nineteenth century.

  • Peter Watson 26th Jun '13 - 7:16am

    @Mark Inskip “Using a discount rate to calculate NPV is an extremely well established valuation methodology which dates at least back to the nineteenth century.”
    It was not the principle I was querying, it was the choice of a particular discount rate: CPI+2.2% seems pretty arbitrary. Why not RPI or CPI? Why not 0%, + 1% or +5%? When calculating the NPV of a 30 year loan even small differences scale up, and critics and supporters of the scheme could legitimately use different values to exaggerate their case especially when comparing the new scheme with the old one where there was no “real” cost to borrowing money via student loans. And for a graduate wondering whether to pay off all or part of their loan or pay an extra 9% income tax it is another complication.

  • Mark Inskip 26th Jun '13 - 9:55pm

    “critics and supporters of the scheme could legitimately use different values”
    No they can’t – the discount rate is the standard long term discount calculated by the Treasury and published in their Green Book. It is used by all public bodies when using DCF and NPV comparisons.

    It is the real yield on UK index-linked Gilts as determined by examining Bank of England data for the spot yield curve at 25 years to maturity, with a comparison to the average of the redemption yields of the three longest dated index-linked Gilts according to Debt Management Office data.

  • Peter Watson 27th Jun '13 - 12:09am

    @Mark Inskip “It is used by all public bodies when using DCF and NPV comparisons.”
    But is the same discount rate that is used by government departments appropriate for individuals when considering their personal finances? Graduates are not public bodies, and might consider any interest rate greater than inflation as being a real terms cost.

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