” (Clegg) said: ‘A recession is exactly a time to put more money in people’s pockets.’ “

Once upon a time, a fresh new MEP named N. Clegg set up his office in my area (Rushcliffe). It came unfurnished. Then, just at the right time, my company decided to have a style revamp and chuck out a lot of perfectly good office furniture. So I bought several car-loads at the knock-down staff price, carted them across, and donated them. As I puffed up the stairs with the final load, Nick’s office manager was waiting with a little gift to show how much it had all been appreciated. A bottle of Asda’s Bulgarian Country White Wine….

(Nick, I should add, was away in Brussels at the time, and didn’t know about the furniture. I think the office manager decided to spend his own £2.89 on my present – and no doubt that represented several days’ wages!)

One of the unstated but excellent things in our current economic policies is that they are not tied to the duration of one Parliament. For economic policies which can do lasting good, a one Parliament horizon is wrong. First, many of the lasting changes, like institutionalising a steady, year in-year out improvement in public sector productivity, need longer to put them firmly in place. Secondly, timing of fundamental economic improvements has to adapt to events. What is vital is to not lose sight of where we wish to go in the while navigating through a passing financial storm.

I guess it is unstated, but I had always assumed that when we talk about policy for the next manifesto, we are talking about implementation within one parliament, but clearly the sooner the better. A long-term aspiration on the other hand would be something probably not achievable within one parliament.

My bet is that by the general election in 2010, the recession will be over – although with the data arriving in arrears, it probably won’t be seen to be over. Cameron knows this, but he is using the situation as an excuse for offering nothing more than progressive mood music, so that if he wins there will be no progressive commitments to hold him to.

Nick Clegg told the Northern Echo on Friday:

He said: “I will give £10 to anyone who can explain to me how cutting taxes is not a good progressive thing to do – it’s about lowering taxes for people on lower and middle incomes and making wealthy people pay some more.

http://www.thenorthernecho.co.uk/news/3727893.Lib_Dem_leader_joins_calls_for_N_E_rail_link/

I’m not sure staking the princely sum of £10 on the “progressiveness” of his economic policies conveys quite the unshakable confidence he intended, but then again we know times are hard in the Clegg household…

You can, of course, do what Cameron is doing, and argue that tax cutting is something you would aim to do in the more distant future. That would, at any rate, be less crazy.

However, I would still warn against it. I accept that it should be possible to be able to trim some fat from Labour’s spending programmes. However, the future is not bright. We will need massive investment in greener energy and transport to combat climate change and peak oil – and this isn’t optional, it’s about survival.

If we call for a green “Apollo programme”, while claiming that it won’t cost anything, we will only make ourselves look ridiculous!

Maybe there are no normal times, but if we are thinking about policy for the next manifesto, then we are probably talking about implementation some time between 2010 and 2014, and therefore not talking about today’s economic circumstances.

Now perhaps this does mean there is something a little artificial about all tax/borrowing/spending policy debates. But what is the alternative? To say that all our actions will be dictated by unpredictable circumstances, with no indication of in what direction our initiatives will pull?

Where I have to part company with Clegg is on the absurd premise that current conditions are well suited to cutting taxes. In a recession, earnings and spending both fall, thus reducing Government’s income tax and VAT receipts. A government which then compounded its resourcing problems by cutting tax rates would have to make draconian cuts to public services – and abandon any attempt to take climate change seriously.

If we plan to outflank Cameron on his right, that’s what it means.

It would be a mistake to agree a party policy that is only applicable in a recession, and put that in our manifesto, only to find that the recession is over by the time of the election, and the economy is normal or booming for the whole of the subsequent parliament.

The Tories are trying to sound prudent with their refusal to promise anything, but even they don’t expect a recession to last for the next 6 years.

Vince saw some time ago the basic thing that is wrong – too many of the financial institutions have too little capital. (It is interesting that the consenus of US economists seems to be just catching up with him.) That makes it difficult both for the institutions to trust one another – their reluctance to lend to one another fuels the credit crunch; and to work through the montain of bad and complex debt to be sorted out. There is plenty of capital available in the world’s markets; but a lot of bankers have been refusing to pay the stiff price at which it is on offer. What needs doing is some form of making the bankers take their medicine. How to do that is not a subject for party political statements from any responsible politician, but Vince knows that is the way to go.

That priority task is not tackled directly by the Paulson plan; though it may well help indirctly. A euro-wide plan to sort out complicated doubtful debts would have its merits in the medium term; though national programmes in the euro area will probably be preferred. Sterling is outside the euro; so we do not have the option of joining in a euro area plan if one develops. But each and every European country that needs a medium term plan should be able to produce something better than Paulson has proposed.

The answer to the debt crisis (for that is what it amounts to) is NOT to run up more debt! Like it or not, we must let the second Great Depression run its painfully corrective course and plan instead for the action that will be necessary in its aftermath. Reducing the tax burden for the low paid asap is an absolutely critical first step towards this. Collecting the revenues that governments allow our rotten economic system to freely transfer from public to private hands via the banking and property sectors is the vital follow-up – otherwise, sometime after 2010, the bubble will just start inflating all over again.

Unfortunately, what we now need is an expert with the very different skills of climbing the vertical face of a mineshaft to escape! Vince may also have that capability, but I fear he has not yet proved it.

Will Hutton says we need something like a pan-European modified Paulson plan. I have no idea if he’s right, but he does sound like someone who really deserves to be listened to with respect. And that’s what we need, just now!

Otoh, if the election is 2010, the recession may be over by then.

- tax revenues will fall of a cliff.

- social spending will have to rise

- the PSBR, already enormous will grow

- we’ll need yet more money for market intervention.

Promising tax cuts will look and be exposed as shallow populism. It’ll dominate every leaders interview and press launch. Most voters won’t notice but the mdia clas which frame narratives won’t allow us such an easy pass particularly when we have ben out flanked on the esponsible left by the Tories who are teling the truth – no cash available for tax cuts.

We have two options.

1. quietly drop it

2. have the policy burn up on reentry to he atmosphere in an election campaign.

I can’t hep bu think Vince knows tis in is hearts of hearts. As he has done his magisterial tour of the studios tis last wek he hardly ever mentions the policy.

His only friends left will be a few hysterical right-wing bloggers & the usual libertarian “contributors” on here…

As for our Plan [I wrote as one of Vince's team] I think it will be filed and forgotten once Parliament reassembles next week and normal political life resumes. too much else is happening for anyone to attend to it.

Guido scraping the barrel I feel – he’s long past his best.