A few “political open goals” have been facing the Lib Dems recently, from the firing of Christine Jardine from the front bench (covered wonderfully by Lib Dem Voice’s own Mathew Hulbert) to Unite the Union suspending Angela Rayner over Labour’s lack of open support for striking bin workers.
We can now add another open goal to the list: Labour’s embrace of “trickle-down economics”.
As reported by The Guardian, Rachel Reeves plans to scrap regulations introduced by Gordon Brown, Keir Starmer’s predecessor, to mitigate the impact of the 2008 financial crash on households. Chaitanya Kumar of the New Economics Foundation has criticised the move, calling the situation Groundhog Day, questioning the decision to expect the financial sector to do “most of the heavy lifting in terms of growth”.
We’ve seen how Prime Ministers have fared with trickle-down economics in recent times, with former Prime Minister Liz Truss being removed from office after less than 50 days in power for introducing a budget that sought to scrap banker bonuses, abolish the top rate of income tax, and reverse any increase on corporation tax.
And trickle-down economics has shown to be devastating for poorer citizens and families, with research suggesting from 1989 to 2019 in America, the top 10% and 1% of households benefited more from it than families in lthe ower quartiles, and the top 1% becoming $29 trillion richer, with barely any “trickle down” to lower owners.
As Labour chases the mirage of trickle-down growth, the Liberal Democrats must take a stand and seize the opportunity to be the voice of the people. We know that actual growth comes not from another failed experiment in trickle-down economics but from investing in people, in public services, and resilient communities, and acknowledging that responsible regulations protect ordinary people from future financial shocks. Our party must hold this government accountable, challenge the economic amnesia of 2008, and show that a better, fairer way is possible.
* Jack Meredith is a member of the Welsh Liberal Democrats and an active campaigner and canvasser with Swansea and Gower Liberal Democrats. His writing focuses on democratic reform, social justice, trade unionism, economic democracy, and the institutional foundations of effective government. He has written for the Fabians, Lib Dem Voice, Liberator, Nation Cymru, Bylines Cymru, and Centre Think Tank.
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24 Comments
I admire your optimism, Jack. It would be good if it was correct, but I rather think actual experience between 2010-15 revealed a somewhat different DNA.
Apologies for the spelling errors on this one!
Maybe you are right but it feels like quite a reach to me. One policy is not a philosophy.
Meanwhile the Economist published this week that everything in the UK is underpriced so we are a great place to invest. How do we bring that investment in? Investing in people, public services and resilient communities, yes, and by ensuring business confidence, limiting red tape (100,000 page impact assessments etc) and freeing the animal spirits.
The big problem is that there is no trickle down. All there is is hoovering up. Every time any government talks about trickle down you know that either they are lying or they’ve lost the plot.
How many times must we be taken for this same failed ride? One might have hoped that with Liz Truss we would have seen off this nonsense, but no, Ms Reeves must try it again. Why she can’t just raise taxes, esp on the wealthy. However difficult it might seem, it is surely more sensible than this?
Thank you to Jack Meredith for this clarion call. I’m just finding it difficult to get beyond those who the gods would destroy they first make mad!
“Trickle down” is a left-wing trope, a straw man. It’s the direct opposite of what actually happens in the real world: opportunities trickle down and wealth trickles upwards, if at all. Many economists have explained this over the years, but non better than Thomas Sowell in his book, “Basic Economics: A Common Sense Guide to the Economy“. Here’s the relevant section…
‘Thomas Sowell on the “trickle Down” Myth: Workers Are Always Paid First and Then Profits Flow Upward Later – If at All’:
https://www.aei.org/carpe-diem/thomas-sowell-on-the-trickle-down-myth-workers-are-always-paid-first-and-then-profits-flow-upward-later-if-at-all/
@David Raw. I do think it is time, 10 years after the end of the period in government, to stop looking back. Just 5 of the MPs elected in 2010 are still in parliament and 2 of them have just been re-elected after 9 years in the wilderness. That means that 67 of our current parliamentary team out of 72 were not involved at all in the 2010-2015 government.
Surely they deserve, at the very least, the benefit of the doubt?
Jeff does have it right in saying Trickle Down is ” the direct opposite of what actually happens in the real world”. We’ve all seen that its more like “Trickle Up” in recent years. The ultra wealthy have increased their wealth and the rest have struggled.
The point about paying the workers first is a non sequitur. It doesn’t follow that this makes everything fine. We can say the same about slave owners having to feed their slaves first. This is not to say that workers are all modern day slaves although some unfortunately are.
In any case many, if not most, increases in wealth come from increases in asset values. No payment of wages is necessary to increase the value of land.
Actually, there won’t be any growth. There hasn’t been any since about 2008. Why not? It’s the amount/cost of energy needed to get energy (ECOE) rising. What we could do is stop doing stupid things, like building more roads, and start doing things that make life better and coincidentally use less energy.
If you want growth you need an easily available, low cost, dense source of energy, preferably that doesn’t emit CO2 when used.
It’s no good going round saying” Do my favourite policy and you will get growth.”
Tories “Cut Taxes & Spending”
LDs “Rejoin the EU”
Labour ” Increase Spending & Taxes”
Greens ” Build windmills”
“That means that 67 of our current parliamentary team out of 72 were not involved at all in the 2010-2015 government. Surely they deserve, at the very least, the benefit of the doubt? ”
Those 67 (as well as those returning who) saw what the Lib Dems did in Government and may well have decided they want more of it. Certainly they will be well used to defending our party’s record in the Coalition on the doorsteps.
@TristanWard. In my extensive experience of door knocking I can tell you that the coalition is rarely if ever mentioned. Those few that do raise it, mostly diehard Labour supporters, will not be convinced of its merits whatever you say. So I imagine the current parliamentary party have little experience of defending it on the doorsteps. The attitude of most people I know in the party is that, without the certain of an act introducing PR, we would be completely mad to entertain any kind of coalition again, unless we were the senior partner. We have only just recovered from the thrashing we got in 2015 after the coalition. Even if the parliamentary party were tempted into some kind of deal – and without PR I seriously doubt they would be – the party at large has to agree any such deal at a special conference. Good luck trying to sell a coalition that doesn’t include as a precondition adopting STV for all UK elections. And, in my view, that would mean passing an Act of Parliament before the coalition is formed, so that our would be partners cannot renege on it later.
Actually Tristan, I think you are mistaken when you say “Certainly they will be well used to defending our party’s record in the Coalition on the doorsteps”. Certainly at the time, and for the decade following, our involvement in Coalition and was a huge disaster for the party and as a consequence for our country. Indeed we came close to total annihilation as a parliamentary force, with our share of the vote being routinely well below 10%, and our MPs down to as low as 8.
However, the reason for that dire performance changed over the years. Certainly from the moment it became clear that our leaders were going to break their promise on tuition fees, the core vote we had carefully built and nurtured under Paddy and Charles collapsed totally, and all activists had a very hard time justifying and defending what happened. However, the collapse from 57 to just 8 MPs things people’s view of us changed fundamentally from being untrustworthy to just being irrelevant.
Now thanks to the Tory collapse we are relevant once again, but the downside is bigger than ever. In 2022 and 23 we were phenomenally lucky that five winnable by-elections came up in the perfect order and the four wins raised our profile substantially, just before Reform became noticeable. They then split the Tory vote perfectly for us in 2024, but with very few winnable by election seats available to raise our national profile for 2029, further progress will be very hard work.
@David “with very few winnable by election seats available to raise our national profile for 2029, further progress will be very hard work.”
It’s a bit early to write off most seats as unwinnable in a by election. We have a habit of winning unlikely seats when we believe in ourselves.
All real refugees are welcome, but some of these newly disgruntled Tories and Labour supporters are trying to muddy the waters. The author wants the Liberal Democrats to behave like the Labour Party he wishes existed: redistributive, anti-finance, and ready to tax elite wealth. But this misreads both the Lib Dems’ actual position and the structural reality: the wealth he wants taxed is no longer within national reach.
He assumes elite capital remains governable by domestic policy, and that regulation and political will alone can discipline finance and deliver fairness. In reality, wealth today is fragmented across jurisdictions, shielded by legal structures, and indefinitely deferred. No single state, no matter how well-intentioned, can meaningfully tax or redirect it.
As Macron has shown, the only credible way to engage capital now is to attract it. When wealth is mobile and legally untouchable, the fantasy of taxing it into submission collapses. Macron grasped this early: he cut corporate taxes, scrapped wealth levies on financial assets, and levelled with the public about what the modern state can’t do. But he didn’t retreat, he reinvested. Through public capital, targeted incentives, and institutional strength, he made France the top destination for foreign investment in Europe. The Lib Dems share that logic.
They don’t believe the state can be run on unreformed Labour instincts. Instead, they prioritise institutional credibility, strategic investment, and a politics grounded in economic realism – not nostalgia. Fairness still matters. But it must now be earned.
How do you move a mansion, a grouse moor, a football club, or a chain of high street stores? The rich own assets. Some of those assets are mobile. Some aren’t. I don’t believe it is beyond human capacity to devise means of taxing the latter.
@Andrew Melmoth That’s exactly the problem. You’re describing 20th century fixed assets, not capital as it actually operates today. The wealthiest don’t just hold land or shops – and good luck finding any local shops worth meaningfully taxing – they hold equity stakes, derivatives, and asset-backed flows across jurisdictions. The tools we once used to tax fixed wealth don’t touch modern financial structures. The question isn’t whether we can tax a grouse moor or the kilts that shoot upon it, it’s whether that grouse moor is even owned in a way that makes it taxable by the state where it sits.
– Anders Larson
Ok, let’s take a concrete example. The Duke of Westminster inherited land and property worth £9 billion while paying comparatively little inheritance tax. Are you really suggesting that the government lacks the ability to close the tax loopholes that enabled this?
@Andrew Melmoth – link me to his portfolio and we will see.
As far as I can make out, the Duke of Westminster avoided paying inheritance tax because a trust fund was set up to hold the land/property assets, which meant when the (older) Duke died, his son didn’t directly inherit the land/property. Further, the fund was set up more than 7 years before the Duke died – long enough to avoid any inheritance tax on the fund itself. There probably is a case for reforming tax rules around trust funds so they can’t be used to avoid tax in this way. But I’m not sure what form that reform would take or how easy it would be – since trust funds to have legitimate uses not related to tax avoidance, so you’d need to structure any reform carefully to ensure it doesn’t prevent legitimate use of trusts.
@Simon R there were probably many schemes used in combination, some domestic some international. But that doesn’t answser the core problem, which is that even if we could, we wouldn’t get that much and also they would probably switch to more sophisticated international routes or leave. If what we need is investment, which one needs to stimulate growth, then taxing a bunch of estates once, because it will never happen again, won’t do.
– Anders Larson
There is no mystery about how the Duke of Westminster was able to largely avoid inheritance tax. He used on legal structures established by the UK government, which Parliament has the power to reform.
You make a good point about the challenges of wealth taxation in our globalised financial system. Certainly, some assets remain mobile and difficult to tax effectively. But you can’t pack up Belgravia in a suitcase and take it to Monaco today any more than you could in the 20th century. Let’s not let ideology blind us to practical policy options that remain available to governments willing to act.
The Duke of Westminster often comes up. He is one of the reasons why George Osborne brought in tax on discretionary trusts – 6% of the trust value every 10 years – a wealth tax in fact. he also benefits from agricultural land relief which bizarrely our MPs should not be taxed.
Hi Peter, I’m afraid naive optimism, even when so quietly understated, is always a bad start for a party when considering what we all need to do to make sure our party continues to be as successful as it can be in the next 5 years.
Although you may wish to query or even doubt it, the vast majority of seats in the UK are unwinnable for us in a by election in this parliament. Just look at the result in Runcorn and Helsby
2024 – Lab 22k, Reform 8k, Con 7k, Green 3k, Lib Dem 2k
2025 – Lab 13k, Reform 13k, Con 2k, Green 3k, Lib Dem 942.
Of the 650 seats in the UK, we were in 5th position or lower in 327 and another 163 where we were in 4th. I don’t think we have ever won a by-election from 4th place. Of the remaining 142 seats, we hold 72 so no gains there, leaving 70 (or 1 in 10) where we are in with a chance. Since the Year 2000, there have been 80 by elections, so roughly 16 per five year parliament.
That gives us
– a 13% chance of no winnable by-elections
– a 27% chance of 1
– a 27% chance of 2
– a 18% chance of 3
– a 9% chance of 5
– a 6% chance of 6 or more
So when hopefully each of those 2 or 3 winnable seats come up, our by-election team of activists will need to be on the very top of their game and prepared to travel wherever, especially if the seat is Dundee Central 3rd with 6.2% of the vote, Gordon 3rd with 16.7% of the vote, or maybe just maybe Argyle and Bute with 16.4% of the vote in 4th place!
See you there Caron!!