Ed Miliband has his economic deficiencies but is the Liberal Democrat response adequate?

I’m getting as fed up with arguments about the economy as I was about the quality of the debate in the independence referendum. We seem to be stuck in a yah-boo soundbite fest that is deeply uninspiring.

Ed Miliband’s latest contribution on the deficit was pretty risible if you looked at it in terms of facts. He’s opposed practically every single cut the Coalition has made over the last four years but presumably his “sensible cuts” won’t actually affect anyone. Of course he’s not actually told us what they are, so we can’t really judge. Our problem is that with the way our newspapers and broadcasters work, neither Labour nor the Tories have to be that good to get their message across. Already we seem to be being demoted to an afterthought in most news reports. We have to work ten times as hard as everyone else to grab even a tiny bit of attention.

The nagging worry I have about Labour appropriating policies like our Mansion Tax is that they can then position themselves to say “vote for us, we come without their baggage”. This, I grant you, is pretty much the same as “vote for us cos we’re fairer than them and more economically responsible than them” which seems to be our pitch.

The graphic of the day from the Liberal Democrats was this:

borrow less than labour cut less than tories


Is that really the best statement of our values that we can find?

The language from all parties is all very abstract with little of relevance to real people. You have Osborne with his hyperbolic vision of chaos. You have Miliband mentioning the NHS as though it was some vote-enhancing talisman and you have us being, well, a bit managerial.

What’s wrong with saying something like the following:

We know that money doesn’t grow on trees so we have to be careful with the nation’s finances. There hasn’t been much cash to splash but we’ve made sure we’ve used the power of the state to break down the barriers that disadvantaged kids face – and it’s working. They are starting to close the gap in attainment in school thanks to the extra money we’ve given to schools to help them.  We’ve helped teenagers too by expanding apprenticeships – that’s 2 million we’ve created.

And we could go on to talk about giving people more power by expanding their rights as consumers, by stopping payday lenders taking advantage, transforming the mental health system, massive job that it is to change an entrenched culture.

Nick is getting some of the language right when he talks about how we want to invest in good things while the Tories just want to rack up surpluses and reduce the power of the state.

It will come as no surprise that my favourite graphic of the day from us is this one:

Increasing attainment

That inspires and informs and says what makes us tick much more electively than the grey technocratic stuff. That’s what we need to do to and we need to bring more emotion and passion to the debate.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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  • Clive Peaple 11th Dec '14 - 11:16pm

    Spot on😊😊 at the moment we appear scared and insubstantial rather than the Party with best, most decent achievements and vision

  • Paul Pettinger 11th Dec '14 - 11:51pm

    Glasgow 2013 Conference called on the Party’s economic policy post 2015 to focus on supporting greater investment in people, business and infrastructure – a key challenge following a credit bubble is maintaining investment, because private sector investment collapses, meaning an otherwise even more sluggish, drawn out and painful return to growth – because there isn’t the investment to sustain it. Instead, we are led by a group who don’t respect their Party or many people who voted Lib Dem in 2015, and who instead want to force the Party to broadly stick to and defend the general gist of the government’s failing economic policies, like we’ve gone and built The Bridge on the River Kwai. We are being led by economic and political illiterates, who behind hype and faux exasperation, have fundamentally misdiagnosed the country’s economic problems and whose ‘political strategy’ for this Party is leading it to long term irrelevance. Good achievements in government (let’s not forget pension reform) are not nearly enough to overcome this, and the people who got the Party into this mess – and have had years in which to try and turn things round – are not the ones who can help improve matters. We are currently being forced to play an ever weakening hand. Our campaign should be more challenging and radical – and that it is not is not an accident, but symptomatic of the current direction.

  • I’d say that mentioning the NHS is good for Labour, because the Tories don’t want to mention it and especially don’t want to refer to the whole “No more top-down rorganisations of the NHS” posters featuring the PM’s face. And then the unwanted bill came forth and senior Lib Dems all said everyone should vote for it.

    Now, being someone who works in the NHS and has had the pleasure of being on hold for 40 minutes in order to book a porter from a privately run firm (and they then have another hour to turn up, and if nothing happens, it’s the same company who investigates the issue as organises the porters. I put in at least 3 Adverse Incidents about portering delays and lack of staff in an emergency department because we were covering portering, all of which were never replied to.), I’m fairly sure i’ll be seen as biased.

    Conservatives were going to be seen as desiring to privatise the health service, because it’s what they do. Their job is to basically find pieces of major national infrastructure and then apparently sell then for much less than they are worth. However, don’t people get snappy if you’re selling their heathcare provision to insurance firms?

    There was absolutely no reason that the lib dems shound have votedd for the Lansley Reforms, and there are many reasons for them to have voted against. The majority of the medical and surgical colleges were against the bill, and these are people who should be defining the future of the NHS, based on clinical need and capacity.

    Instead we have a fractured referral system based on GPs (many of whom are leaving) while the health secretary is no longer responsible for the provision of services, yet can still orchestrate the closures of A&E departments throughout the country, or change the law to remove departments if their closure has been judged beyond the rule of the health secretary.

    The Conservatives want rid of the NHS because they are A- convinced that some free market version (that happens to be based on the American system) will work this time, B- are convinced that privatisation is the answer to everything, and all arguments against are apparently some kind of furious socilism.

    Thing is, the Lib Dems all voted for Jeremy Hunt to keep his job, and all voted for the Lansley bill. Both of which seem very un-democratic, in that they were directly against the views of a lot of the people who voted Lib Dem. As I have, since I have been eligable.

    But not next time. The Conservatives may hold the electorate in such contempt that they openly lie about their intentions, but when the LD’s vote for such things, that is when I become a floating voater

  • Graham Evans 12th Dec '14 - 8:04am

    While “let’s move on” may be a cliché”, in reality it is the only practical strategy for the Party. Those who keep on harping back to what they dislike about the role of LD MPs in the Coalition are essentially fighting yesterday’s battles. And as to the claim that “we must learn from history” the problem is that economic and political circumstances change, and what may have been appropriate a decade ago, or even five years ago, is unlikely to be the right course of action today. Sure, we must trumpet what we consider our successes in Government, but we also need to develop a vision for the future which corresponds to the economic reality that dealing with the deficit will be a long hard slog, a marathon not a sprint, that neither marginal spending cuts nor marginal tax increases, nor an acceleration of economic growth will solve the problem. Unfortunately none of the political parties are willing to spell out to the electorate any meaningful details , so the country wil probably continue to drift along with an electorate increasingly disillusioned with the political process.

  • Ultimately, Caron, for us to make any kind of sustainable recovery as a Party, the apology has to come (for pursuing the wrong economic policy, and one that did not fit with our values), and the changes in personnel at the top that will involve. I agree with you that we could use more enticing words to stick within the current economic framework, but we are, as many have said here, deluding ourselves if we really think we are going anywhere without The Big Shift (sorry, The Big Return).

  • Graham Evans – They must in particular spell out that more must be spent to head off various long term problems. I agree with you that we must be clear, however, I fear you are looking back with your solutions. Had the 1945 Government said we haven’t got the money, we would still have been rebuilding from World War 2. We face problems, ecological, conflict, people movement, etc which are international, and will not be helped by a “No can do” approach based on “There is no money” or austerity. Our challenge is how to get the message out there against a media, and many people who want a “There is no alternative” approach. The money and resources must be found and paid for, otherwise we are sleepwalking to disaster.

  • The graphic of the day from the Liberal Democrats was this:
    PICTURE OF SCALES with left side saying “Borrow less than Labour” and the right saying “Cut less than Tories”
    Is that really the best statement of our values that we can find?

    No that is not the best statement of our values.

    But it is a very accurate representation of Nick Clegg’s repositioned Centre Party mealy minded mush.

    It PERFECTLY sums up the ‘Soft Con strategy’ that has been killing the party so that we a flat-lining in single figures a matter of weeks before a general election, in which for the first time in forty years we will not be able to field a full slate of candidates.

  • Helen Tedcastle 12th Dec '14 - 9:30am

    Good article Caron. I agree with you and John Tilley that the scales graphic is bland and uninspiring. It reminds me of the kind of posters I used to see in Germany for the FDP. RIP to that party by the way.

    The good things we are doing in government like investment for mental health, pale into insignificance in many people’s minds because of the way we behaved in coalition in the early years – allowing Lansley to do his worst, the awful Gove and of course IDS.

    If only we had been more business-like towards the Tories when they were pretending to be compassionate, we wouldn’t have been caught out when they reverted to type. Labour’s latest economic message is pure tactics – the soft-Tory Blairites will love it.

    The least we can do is present a clear and radical message.

  • Paul In Twickenham 12th Dec '14 - 9:39am

    Yes, the party’s economic “strategy” is shambolic, utterly irrelevant, goldilocks politics.

    That appears to be our platform for the GE.

  • @ Graham Evans

    Agreed. The general election looks like being a case of each party saying we will not tell you what we will cut but trust us our approach will be less painful than the others. Danny Alexander should have been returned to the back benches months ago and Steve Webb released to take on Chief Secretary to the Treasury so that he could produce a credible programme for the next Parliament.

  • matt (Bristol) 12th Dec '14 - 10:07am


  • matt (Bristol) 12th Dec '14 - 10:08am

    Sorry, that’s as in Yes, Caron, I agree with you – not, yes, our messaging is adequate – ‘cos it’s not.

  • Paul In Twickenham 12th Dec ’14 – 9:39am
    Yes, the party’s economic “strategy” is shambolic, utterly irrelevant, goldilocks politics.

    VOTE FOR US because we’re not as deadly as EBOLA and we will cost you less than CANCER.

    Economic policy expressed as a slightly less malignant form of chronic disease.
    Imagine the advice to the leadership –” This will bring in the soft con voters. It is a tried and tested formula.”

    Problem is — it was tried and tested in Clacton and in Rochester.

  • Your problem is that for the last four and a half years you have signed off every single one of George Osborne’s policies. Why should the average voter believe you are any different from the Tories on economics?

  • matt (Bristol) 12th Dec '14 - 12:04pm

    And g, the LibDems have NOT signed off on ‘every single one’ of Osbourne’s _intended_ policies, or the taxation system would look a lot different than it does today. This is admittedly hard to communicate, since he is the one communicating the compromise deals worked out, so he dictates the spin and we get no/little credit, yet have still compromised.

  • The Lib Dems of course will borrow less than Labour and cut less than the Tories because they are going to be turfed out of power in an uncermonious heap for at least a generation.

    Whether there is anyone left with the wherewithall to claw the party back to third party status in the short term is now becoming debatable.

    The more people hear from the party ‘Five more years in government for Mr Clegg’ the more they hear ‘Taxi for Mr Clegg’. If the party isn’t going to change the messenger it surely has to change the message as this useless and insulting graphic shows.

  • Joe Otten – Labour have not signed up to the Tory plans, there’s about £50bn worth of difference.

    What I find astonishing is how after the biggest financial collapse in our history we have, as a country, wasted the opportunity to think again about how we build an economy. We’re just going back to the bad old days of governments going to Brussels to defend the city, pumping up the housing market,a renewed credit bubble and fiscal belt-tightening. It’s an embarrassment and reflects badly on ALL 3 parties. You have Will Hutton, who amazingly once wrote a best selling book on economic policy, who weekly bangs his head against a brick wall for investment, innovation, reining in finance and the rest of it but otherwise almost nothing in our mainstream media or political parties. Are the business and financial lobbies now so well entrenched in the political system that no change is any longer possible?

  • Just to say there are actually signs of life outside the Westminster and Fleet St bubble. Here was a discussion from last year at the Bristol festival of ideas. A range of panellists, some I would agree with more than others, but worth watching. Note that at the end the audience is unanimous in its pessimism about where our economy is going:


    Bear in mind that the Bristol festival of ideas (in association with The Observer) is probably quite high on 2010 Lib Dem voters.

  • Paul In Wokingham 12th Dec '14 - 2:13pm

    @FrankBooth – Are the business and financial lobbies now so well entrenched in the political system that no change is any longer possible?

    The answer to that is “yes”, and in my opinion it is the primary reason why the traditional 3-party model is breaking down: the disconnection between the 99% and the political and business elites is now reaching breaking point.

    Today, we had the unedifying spectacle of Jean-Claude Juncker advising the Greek people that they should not “vote the wrong way” in the event of a general election: a clear message to not vote for Syriza.

    This parliament began with a Eurozone crisis centred on Greece, and it increasingly looks like it will end in the exact same way. We have to wonder just what has been achieved in the intervening years, apart from can-kicking for the benefit of the rich.

  • FrankBooth – Are the business and financial lobbies now so well entrenched in the political system that no change is any longer possible?

    I recommend Donnachadh McCarthy’s new book – ‘The Prostitute State’.

    Here is an interview with the author –

  • matt (Bristol) it doesn’t matter if there were behind the scenes negotiations to water down Tory cuts (which I’m not that sure about, Osborne is no economic fanatic). The point is the Lib Dems have signed off every single Osborne policy that is enacted, and it is that they can’t escape.

    Maybe you should have differentiated years ago?

  • David Allen 12th Dec '14 - 6:25pm

    Graham Evans: “Those who keep on harping back to what they dislike about the role of LD MPs in the Coalition are essentially fighting yesterday’s battles.”

    No, they are fighting tomorrow’s battles. Clegg, if re-elected as an MP in 2015, will astonish the gullible by declaring that the fact that the LD vote recovered from 6% in the polls to some sort of higher single figure in the election proves that his campaign was a great success, that it proves the merits of being joined at the hip to Cameron, and that he intends to rule the party for five more glorious years.

    Of course Clegg, with the help of powerful behind-the-scenes supporters, has seen off his opponents these last five years. I expect he will do it again in the next five years, unless the voters of Sheffield Hallam throw him out. If that happens, the Lib Dem donors will no doubt choose someone else like him to go in his place. And the residual MPs, most of whom know which side their bread is buttered, will go along with that.

  • David Allen 12th Dec '14 - 6:36pm

    Once upon a time, nobody would have dreamed of making promises about the deficit. All politicians would have spoken in terms of the stormy economic seas on which we sail, and of the need for a wise helmsman who can make the right pragmatic judgments to keep the economy afloat, etcetera etcetera. The nautical metaphors sounded a bit corny, but the premise on which they were based was fundamentally sound. The future is unpredictable. We have not abolished boom and bust. We don’t have much of a clue, indeed, when boom or bust are going to happen.

    Osborne changed all this in 2010 by deciding to make very specific, and very bold, promises about cutting the deficit. And what happened? He failed by a country mile to meet his promises. Nothing daunted, he is making even more startling promises for the next five years. That’s the sort of thing you learn at the Bullingdon Club. Act the toff, behave with 110% self confidence, never admit to mistakes, and when things go wrong, always play double or quits. That’s how to impress the gullible.

    Ed Miliband is making the fatal mistake of arguing truthfully but unhelpfully that life is more complicated than Osborne admits, and that he cannot honestly match Osborne for certainty of promises.

    He should not even try. He should say that Britain needs that pragmatic helmsman back, not Captain Concordia steering confidently for the rocks!

  • Graham Evans 12th Dec '14 - 9:32pm

    There has been a lot of talk about the immorality of saddling our children and grandchildren with debt, but perhaps it is time to admit that this may well be the only way to break out of the existing cycle of slow growth and/or austerity. Indeed throughout western Europe pensions for those retired ultimately are, and always have been, paid by those in work, irrespective whether the system is pay-as-you-go or depends on investment returns (achieved in effect by paying workers less than they would otherwise receive) . Similarly health services for the elderly are mainly financed by those of working age. The concept of intergenerational transfers is integral to western societies, but while no one questions the idea of pensions and health services being financed by the next generation, we seem unwilling to extend the concept to, for instance, infrastructure investment, which not only benefits the current generation but usually also future generations. This does not mean that we should give into the demands of public sector workers for pay increases, nor stop the quest for efficiency savings, but it might well mean that we recognise that the idea of eliminating the structural deficit by the end of the next parliament is nothing more than a pipe dream, and that the main role of the Government in terms of austerity is to do just enough to keep the international markets happy.

  • Graham Evans, I applaud your thinking outside the box – that’s what we need.

    Whether we could live with a permanent government deficit I am unsure. One should not automatically assume the answer is no. Nobody understands how finance behaves well enough to be dogmatic. However, it does sound like a pyramid scheme, doesn’t it? If so, how do we resolve the paradox that there is never a good time to cut the deficit, but, at some stage it has to be done?

  • John Tilley,

    Doesn’t McCarthy’s interview cogently demonstrate that the Liberal Democrats are no longer part of the solution – but have become part of the problem?

    Doesn’t that mean that we now have to walk away?

  • If we consider the failures of our party while in government we should include its failure to assist the poor. Justin Welby the archbishop of Canterbury says that people in the UK shouldn’t be going hungry and it seems that the number of people who face the possibility of being hungry has increased under this government. Nick Clegg said there should be traffic lights added to the sanction regime instead of saying sanctions should be scraped as we agreed at conference only a few months ago. In any government that has Liberal Democrats in it the number of people who face restrictions on what they can do because of their poverty should have been reduced.

    We should be saying that any government we are in next time will ensure that the minimum wage will be increased to its pre-2007 real value and by 2020 it will be have also increased in line with the increase in earnings since 2007. We should be saying that we will change the law to make larger employers employ more disabled people and those with health issues and the long term unemployed because these people are having their freedom restricted. I believe that these people number more than 4 million.

    @ Graham Evans
    “talk about the immorality of saddling our children and grandchildren with debt,”

    That is a problem, because the people believe this nonsense. The National Debt has increased over time and its value can be reduced effectively over time with economic growth and inflation. Government debt does not have to be repaid, only refinanced. Someone buys a government bond and the government borrows from somebody else when the bond has to be redeemed.

  • Alex Sabine 13th Dec '14 - 3:21am

    @ David Allen
    “…How do we resolve the paradox that there is never a good time to cut the deficit, but, at some stage it has to be done?”

    It does seem to be the implicit in the thinking of Labour and many self-styled Keynesians (though not in the thinking of JM Keynes himself) that there is never a good time to cut the deficit. If the economy is struggling, the stimulus taps need to stay on. If the economy is growing at a good clip, what’s the hurry, we can ease up on deficit reduction and we certainly don’t need to worry about the accumulated debt, which is large enough to take care of itself. If the economy is overheating then we must only retrench with the utmost caution to ensure a ‘soft landing’.

    Don’t misunderstand me: I recognise Keynes’s essential insights that there is no simple analogy between the national economy and the household economy, because one person’s expenditure is another’s income; that the economy may not stabilise at high levels of employment if there is a demand deficiency; and that deficient demand can be addressed by counter-cyclical spending, which usually involves running a deficit (though not necessarily – note that depleting a surplus has the same effect).

    The problem with these insights, important and valid as they are, is that in the real world of politics they create a dangerously lopsided set of incentives. It is hardly difficult to persuade people to accept lower taxes and higher spending at any time, least of all when they are feeling the pinch. So counter-cyclical spending is the easy bit. The hard bit is the corollary: counter-cyclical cutting. The incentives for fiscal virtue in sunnier times are minimal.

    We had a near-perfect case study of this imbalance in the 2000-07 period, which meant that when the storm came (to take up David’s nautical theme) the ship was in a sorry state, leaking and full of holes. The IMF estimates that the UK was running a structural deficit of more than 5% of GDP in 2007, and the public debt ratio had been drifting upwards every year since 2002.

    I’m still not sure how many Lib Dems who criticise Labour’s fiscal record in government grasp that its failure was not poor crisis management in its final 18 months, but reckless and improvident policy through most of the preceding decade. When Gordon Brown recently announced that he will be standing down as an MP, some commentators summed up his chequered career by saying that he had been a pretty awful PM but a good Chancellor. But if anything his record as Chancellor is the more lamentable. The pity is that (in 1997-99) he started so well.

    And what was it that Lib Dems criticised him for on the eve of the Millennium? Being too much of an Iron Chancellor, and “racking up surpluses”. Doubtless Keynes turned a little in his grave…

  • Neil Sandison 13th Dec '14 - 12:43pm

    Our arguement should be that political dogma does not encourage investment,create real jobs or pay for real services
    balanced ecomonic management creates a stable economy able to cope with the fluctuations of international markets
    putting all your eggs in one basket for example like the tories did with the financial services sector in the eighties led to 2 recessions. Over subsidising low paid work as Labour did led to a benifit dependency culture and a large deficeit which harmed the current recovery.and has directly led to big savings now having to be found from the public sector.
    Liberal Democrats should argue for a sustainable economy based on sound social market principals.

  • david thorpe 13th Dec '14 - 12:55pm

    the liberal democrats havent had a real response for the past five years….thats why we are in trouble..we didnt foressee the recovery as osborne has-so get no credit for it…and now are afraid to say anything in case it marginalises us…not realising that the previous incompotence of thsoe who frame our economic policy has already made us a marginal voice on the economy..

  • saddling our children and grandchildren with debt

    I cannot see that ‘borrow more and more’ can ever be the solution for one of the wealthier medium sized nations in an open free world. Someone has to generate the products and the producers need to be recompensed. The borrow more strategy can work in two ways: either by closing borders so that the country has to grow and produce its own or by leaving borders open, inducing an increase in imported goods, but not properly recompensing the producers; in other words by keeping the third world poor so that we can continue to enjoy cheap goods and a privileged life style. Neither are sustainable nor Liberal strategies.

    Labour likes to encourage those who have bought into the idea that economic illusionism is sustainable; this dishonest attitude has been the basis of their criticisms of the governments struggles with the consequences of catastrophic public and personal debt in the UK.

  • David Allen 13th Dec '14 - 5:51pm

    Alex Sabine,

    Yes, Keynes would have rightly argued that in order to be able to run a deficit and hence stimulate the economy in a depression, you should also seek to run a surplus during boom times so that you do not build up long term debts. You are also right to point out that “in the real world of politics (Keynesian insights) create a dangerously lopsided set of incentives. … counter-cyclical spending is the easy bit. The hard bit is the corollary: counter-cyclical cutting.”

    In Keynes’s time, boom and bust could be seen as a “natural” oscillatory form of system behaviour. Thus for example, a downturn in trade resulted in zero demand for new ships, while an upturn caused a rush to buy new ships, and hence shipbuilding was “naturally” a highly cyclical enterprise. If we think that it is that sort of natural oscillatory behaviour that is the dominant cause of boom and bust, then your economic prescription, essentially that it is imperative to repair the roof when the sun is shining, makes good sense. But is it?

    The boom of 2000 – 2007, when you rightly criticise Gordon Brown in hindsight for not running a large surplus, was not a natural oscillatory boom. Ironically one might argue that Brown’s famous claim to have abolished boom and bust did contain a tiny element of genuine understanding. We were certainly not simply at the mercy of natural boom-and-bust oscillation. Instead, we were reliant on an unholy combination of Ponzi-like schemes – the dotcom bubble followed by the housing finance bubble – alongside a Chinese takeover of Western markets based on bargain prices, and hence major short-term benefits to the West who will ultimately be the victims.

    The bust of 2008, therefore, was not just a normal oscillatory downturn. It was the collapse of the latest bubble (housing finance) with no other bubble ready to replace it. (Unlike the dotcom bubble of 2000, which was soon forgotten, because of the emergence of the housing bubble!).

    Six years later, nobody has found a solution, other than reviving another bubble or restarting artificial stimulation. Thus we have the dilemma. Austerity clearly does not work. Stimulus economics also looks pretty tarnished, and indeed, Keynes’s talk of paying workers to dig holes and fill them in again now sounds suspiciously similar to bubble economics.

    Back in the postwar years, boomtime was genuine. Real people had real demands for the new fridges, washing machines and TVs which technology was now able to produce. Business could boom without the aid of an army of advertisers demanding the annual purchase of replacement smartphones. That, it seems to me, is what has now changed. Boomtime can now only be created by artificial stimulus, by pressure to consume, and by creation of bubbles. Oh, and by the way, boomtime also kills the planet.

    All this suggests to me that there are more importnat things for governments to do than simply balance their budgets. A deficit, if tolerated by the markets as ours clearly has been, may not be a great problem. Stopping runaway spending on things which destroy the planet, and directing it towards things that will rescue it, seems more crucial to me!

  • Stephen Hesketh 13th Dec '14 - 7:55pm

    I’m sure I am not the only one to see heavy droopy eyes and a down turned mouth in the graphic. And these features pretty much some it up … boring and sad.

    As John Tilley states: “But it is a very accurate representation of Nick Clegg’s repositioned Centre Party mealy minded mush and that it PERFECTLY sums up the ‘Soft Con strategy’ that has been killing the party.

    For those who haven’t followed the link in John’s post to Donnachadh McCarthy’s new book – ‘The Prostitute State’, I highly recommend doing so: http://www.theecologist.org/Interviews/2151062/the_prostitute_state.html

    LDV should be contacting Donnachadh McCarthy to write a piece for our website. A powerful and compelling analysis of the present dangerous democratic deficit.

  • Stephen Hesketh 13th Dec '14 - 7:57pm

    or even SUM it up … when can we have a preview/ ~5 minute correction button?

  • @ Alex Sabine

    It is good to see someone put the Keynesian position even if there were mistakes in the history. Starting with the history – the Labour government had a budget surplus in 1999, 2000, and 2001.

    When looking at demand deficiency we should also consider the number of people unemployed. Today there are 4 million, but this includes those who are unable to work for health reasons and those who are not claiming benefit. The claimant count was just under 1 million in 2001 and the total unemployed was about 1.5 million. Both unemployment levels increased from the end of 2004 until the economic crisis. Economic growth was 2.2% in 2001, 2.3% in 2002, 3.9% in 2003, 3.2% in 2004, 3.2% in 2005 and 2.8% in 2006 and these are not the maximum growth rates that the UK can sustain. To cut the deficit from 2004 would have been the wrong policy. Therefore Gordon Brown should not have been trying to achieve a budget surplus because the economy was not overheating, it had spare capacity.

    The structural deficit didn’t exist until the financial crash. It is not a stable thing it can change. Recently it has been increased because of poor wage growth. Therefore if wages and productivity increased the structural deficit would decrease. The public spending ratio may have been increasing from 36.18% in 2002 to 39.4 in 2006, but it fell in 2007 to 39.08% and in 1986 it was 40.76% after falling from a high in 1975 of 48.20%. Therefore historically the ratio was nothing to worry about especially compared to the levels in the mid 1960’s, 70’s and 80’s when it was over 40% and of course the over 50% levels during the world wars. The national debt ratios were 29.34% in 2002 (down from 41.93 in 1997) and 34.85% in 2006. But again compared to the historical levels nothing to worry about. The ration was above 100% from 1748 to 1753 (not a time of war), 1756 to 1859 (between 1813 and 1826 it was above 200% and it didn’t get below 40% until 1893), and 1918 to 1961 (between 1945 and 1948 it was above 200%).

    It would be great if politicians and those in the media told the public again and again that the national economy is not like a household economy.

    As low wages are one of the causes of the structural deficit, we could blame Gordon Brown for increasing the state subsidy for those on low incomes by introducing Tax Credits in 2003, but there were already subsidies in the system – council tax benefit and housing benefit. Why can’t economic liberals and social liberals unite around the need to increase the minimum wage and so increase wages and reduce government spending to those on low wages?

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  • David Garlick
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  • Zachary Adam Barker
    "In his early career, Rasmussen was a strident critic of the welfare state, writing the book From Social State to Minimal State in 1993." What does this have...