The Lib Dem conference economy debate: Nick Clegg raises the stakes. He’ll have only himself to blame if he loses

After a weekend of averted rows – nuclear power and ‘fracking’ supported, axeing of tuition fees dropped – today’s debate on the economy will see a return to Lib Dem conference tradition: a dust-up between the leadership and the activists.

A year ago, there was a poorly coordinated attempt by Lib Dem members within the Social Liberal Forum and Liberal Left groupings to get the party to change the Coalition direction on the economy, to bring in an explicit Plan B. It suffered a crushing defeat, with Vince Cable, Steve Webb and Tim Farron all speaking in favour of what the Lib Dems were doing in government. It would, said Tim, be “absolutely flipping crackers” for the Lib Dems to abandon the Coalition’s deficit reduction goals.

Besides, it was pointed out, the Coalition was applying its policies more flexibly, both in response to the economic situation and to Lib Dem pressure. In effect, much of Plan B has happened already, by default and by the back door, as Vince Cable has noted:

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.

And if you don’t want to hear it from Vince, here’s economist Jonathan Portes, a regular critic of the Government’s approach, making a similar point in the New Statesman this week:

… we should give the government credit for not digging us further into a hole by trying to stick to its original plans. Fiscal consolidation has slowed, at least for the time being, and as a consequence it is playing a considerably smaller role in driving economic developments than it did two years ago.

Today Lib Dems will re-visit the debate against a much improved economic outlook. The triple dip recession was averted; the double dip recession has been erased from the economic history books; growth, stronger than was forecast, is returning. Mistakes have been made along the way — most crucially the Coalition’s decision to continue Alistair Darling’s plans to slash capital spending, as Nick Clegg admitted earlier this year — but lessons have also been learned.

The economy motion being debated at 10am – Strengthening the UK Economy (F19) – put forward by the Lib Dem leadership in large part reflects the pragmatism that has defined the Coalition’s approach (which is sharply at variance with the hard-line Tory rhetoric).

The thing that struck me most when reading the SLF amendments to the motion is that there’s little there that an economic liberal like me disagrees with.

Do I think we should have an independent economic policy? Of course.
Do I support increased capital investment and a rebalancing of the economy “away from dependence on unsustainable debt and house prices, towards robust regional economies that raise living standards through sustainable growth”? Yes.
Would I like to “improve the provision for the most vulnerable in society”? Not a difficult one.
And does a liberal like me want to see a shift away from taxes on earned income towards “fairer taxes, especially on wealth and land”? Again, yes.

(I’m more ambivalent about the SLF’s wish to tweak the Bank of England’s mandate. Fine to broaden it beyond inflation, but I’m always suspicious of too good to be true-sounding targets, such as “reduc[ing] the unemployment rate to below 6% creating at least a million jobs”.)

In short, the leadership could — if it wanted to — have worked with the SLF amendments, accepting them at least in part. But instead the decision has been made by the leadership to up the ante, to go to the wire: ‘Nick Clegg has warned his Liberal Democrat critics they would put Britain’s economic recovery at risk and score a huge political own goal if they defeat him in a crunch vote on the economy at his party’s conference.’

Inevitably it’s provoked those who have it in for the leadership, such as the dyspeptic Liberator, to take a pop. More seriously, it’s triggered a row with Vince, who’s happily coming to the leadership’s aid to argue against the 50p higher-rate of tax, but refuses to indulge in this win-at-all-costs squabble on future economic policy. (By comparison he accepted amendments to his tuition fees policy on Sunday while noting he didn’t agree with every line of them.)

My hunch, for what it’s worth, is that the leadership will lose this vote, and that the SLF amendment on the economy will be carried. Why? In large part because Lib Dem members will agree with them, or at least enough of them. In small part, because they’re harmless enough to give the leadership a traditional bloody nose (and to do so, incidentally, without in any way putting the economic recovery at risk). It’s all pretty much unnecessary, a row confected to divide conference and show the leadership toughing it out.

* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

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This entry was posted in Conference and Op-eds.


  • Yup, this is pretty much the feeling in my waters too.

  • ‘The thing that struck me most when reading the SLF amendments to the motion is that there’s little there that an economic liberal like me disagrees with.’

    I think that was the general idea behind them, Stephen.

    To an extent, this battle this morning is about whether the wider party has ANY say, through Conference, at all. If a majority Lib Dem government (pie-in-the-sky, but for the sake of argument) cannot think of ANY changes it would make to the economic policy of a Tory Chancellor in a (let’s face it) Tory dominated Government, then what is the point of the Liberal Democrats. I think Clegg has been silly here.

    He deserves to lose and I hope that he loses overwhelmingly, but I hope that he will accept it with good grace.

  • Eddie Sammon 16th Sep '13 - 10:23am

    The truth is that the recommendation to amend the Bank of England’s targets could create a million jobs, but they would be effectively paid for by pensioners and bondholders. There is nothing free in life.

    At least thousands of pensioners with lifetime fixed sterling contracts would just have to take the cruelty, but there could be a response from Age UK and other organisations.

    The other issue is international UK government bond holders, they would likely respond by ditching their bonds and therefore putting up interest rates. Government’s could respond by printing money, therefore strengthening the pound, eradicating the benefits and just creating more volatility in the global economy.

    It is a shame this reasoned economic debate is not happening, but also partly by fault for being ineffective. In truth, we undertake plenty of policies that hurt certain groups in society, but the problem with printing money is that it is pain with little prospect for long-term gain, unless you are rich and get your hands on the money first.

    Oh and finally, Age UK agreeing with me.

  • @Eddie – good points. It’s important to note that interest rates at effectively zero is not good for everyone. I’m not sure hat widening the BoE’s remit is a wise idea. We would be moving it into the realm of making political judgements.

  • Eddie Sammon 16th Sep '13 - 11:32am

    Mboy, thanks. Yes interest rates at effectively zero are not good for everyone, which is why I think it is time for quantitative tightening, which is the opposite of what this policy would do.

    This policy would have a deflationary effect on bank account interest rates because it would increase the supply of money, whilst having an inflationary effect on the rate that the UK government has to pay for its daily borrowing because of the increased risk that the government will choose to resort to inflating the debt away in the future.

    Why a spike in borrowing costs didn’t happen previously is because the Bank of England chose to save the bond-holders by buying up all the government bonds, therefore keeping our borrowing costs low. The problem with this approach is that it moves an even greater proportion of the cost onto pensioners and savers.

    I need to send LDV a picture and get some articles written! 🙂

  • Amendment one passed, without the first four lines, Amendment 2 defeated. So conference has SOME influence, but Clegg has bought himself more time by accepting most of Amendment 1. But appearing united is more important to conference reps than both of these…

  • “axeing of tuition fees dropped”

    Well, the Lib Dems may have dropped it but it is not going to go away. Never have I seen such a bigger bunch of turncoats in office.

  • Matthew Huntbach 17th Sep '13 - 10:11am

    Once again this is a victory bought at the cost of insult to those who are unhappy with the direction of the party under its current leadership. OK, there are those who actively agree with that direction in the party, but they are still, I think, a minority. There are those who disagree. And there is a big bunch in the middle who don’t really want to think about these things too much, but will generally go along with the leadership, particularly if it plays the game “Support us, or the party gets destroyed”, as it did consummately this time.

    I think, however, that this will be a Pyrrhic victory. The awkward squad who won’t just go along at the leader’s bidding tends also to be those who, when the party is pushed, get down and do the work. If they become so disaffected by this that they wonder why they keep bothering – and stop bothering – the party is lost. I know what’s happened here has pushed the party even further away from the one I was once happy to be actively involved in. It’s moved me from considering whether I’ll still be delivering leaflets for it at the next general election to whether I’ll still vote for it. And if the leadership’s answer to that is “B– off and join Labour, we’ve plenty of millionaire backers who can pay for our campaign, we don’t need activists”, well, so be it. Let’s see.

    I’ve said this now rather than before the debate because I didn’t want also to play that game “Agree with me, or the party gets destroyed”. However, for me at least, it is the final straw. This is not a party that I have any sense of identity with any more.

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