LibLink: David Laws – The Orange Book eight years on

The latest issue of the Economic Affairs journal contains a number of articles discussing the effect The Orange Book has had on the Liberal Democrats since its publication eight years ago. There are articles by CentreForum’s Tim Leunig and by one of the editors of the book, Paul Marshall, among others. Perhaps most noteworthy, though, is a piece by David Laws – the other of the book’s editors – which “examines the origins and impact of the book, and sketches out future directions for policy development”.

Here are some highlights.

First, Laws discusses why he and Paul Marshall thought the book necessary:

We believed that there were two reasons for such a volume: firstly, to showcase what we considered to be the undoubted talents of the newer generation of Lib Dem MPs and MEPs. Secondly, we both shared a frustration about the existing policy prospectus of the party in many areas. We were proud of the liberal philosophical heritage of our party. But we both felt that this philosophical grounding was in danger of being neglected in favour of no more than ‘a philosophy of good intentions, bobbing about unanchored in the muddled middle of British politics’ (Marshall and Laws, 2004, p. 42). We wanted to ‘reclaim’ our party’s liberal heritage. We felt that the Liberal Democrats had moved too far away from the small ‘l’ ‘liberal’ inheritance of the party, particularly in relation to economic policy and our attitude to public service reform. Bluntly, we believed that the Lib Dems were not sufficiently liberal.

He then talks about the influence the book had after publication:

The book seemed to be selling well, no doubt lifted by all the controversy. But the Party’s Chief Executive, Lord Rennard, joked to me that it was he who was buying up all the available copies, to store them away safely in his garage! Controversial The Orange Book might have been, but there is no doubt it was also influential. By challenging the existing assumptions in theparty, it created much more space for radical thinking. And it encouraged many liberals who had hitherto been frustrated and depressed by the party’s policy messages. While many of the new generation of MPs had their own differing attitudes to proposals in the book, there is no doubt that the more influential MPs were moving policy in a liberal direction. On economic policy, Vince Cable, Ed Davey, Chris Huhne, Nick Clegg, Jeremy Browne, Norman Lamb, Susan Kramer and I were all strongly liberal. On public service reform, the picture was less clear cut, and the forward momentum relied upon a smaller group, which fortunately included the future leader, Nick Clegg.

Here’s what the paper says on how the book paved the way for the current coalition:

The Orange Book was not written in order to make a Lib Dem-Conservative coalition possible, but without the policy changes which the book and its authors anticipated, it is much more difficult to imagine the present coalition being formed and sustained.

The final part of Laws’s essay looks at the future of the Orange Book agenda, first on the economic side:

Firstly, we must keep the faith with economic liberalism, notwithstanding the problems in the global economy since 2007. Free market capitalism, including competition, consumer power and private sector innovation offer the best prospect for increasing wealth and reducing poverty and poor living conditions – including in the developing world.

The state’s direct role in the economy should continue to decline, with the transfer of assets such as Royal Mail into the private sector, and with further action to restrain public expenditure. But at some stage, the real cuts in public spending will need to come to an end, as public sector pay pressures rise, and as we ensure that there is proper funding for services such as health and education, as well as to meet emerging demographic pressures.

But even after the existing fiscal consolidation, state spending will account for some 40% of GDP, a figure that would have shocked not only Adam Smith, Gladstone and J.S. Mill, but also Keynes and Lloyd George. The implication of the state spending 40% of national income is that there is likely to be too much resource misallocation and too much waste and inefficiency. The liberal ambition should be for long-term total public spending growth to be restrained at below the trend rate of growth of the economy – this probably means decent real growth of health, education and pensions spending, offset by most other areas of public spending shrinking over time as a share of GDP.

And on personal liberalism:

On the agenda of personal liberty, there is no cause for complacency. The ‘meddling state’ has been on the forward march in Britain, and there is still much to do to free citizens from well-intentioned but often unnecessary or counter-productive interferences in individual liberty. The present government is seeking to pursue this de-regulation agenda, and it should do so while ensuring that individuals are still protected from arbitrary abuses of power. In other respects, people are clearly much freer from repression and prejudice than was the case just a few decades ago. But there are difficult and controversial areas in need of reform, such as the debate over ‘assisted dying’, where public opinion is considerably in advance of that in the political parties. In a liberal society, the test is not, of course, whether a ‘national consensus’ in such areas can be secured, but whether the state is entitled to interfere with individual powers of determination and expression, and what safeguards need to be in place.

This is just a snapshot of the issues discussed in the piece – also discussed are NHS, welfare and education reform as well as how the Orange Book agenda wishes to reduce inequalities of opportunity. The full piece (as well as the other articles mentioned) can be read here (subscription required).

* Nick Thornsby is a day editor at Lib Dem Voice.

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  • Steve Middleton 14th Jun '12 - 1:52pm

    The Orange Book seems at odds with many aspects of the coalition, for example, Theresa May’s announcement that gives authorities greater powers to intercept digital communications. If that isn’t an example of the “meddling state” and arbitrary abuse of power, I don’t know what is.

  • Brilliant as always from David Laws. The orange book is excellent and we need him back in the cabinet ASAP

  • Helen Tedcastle 14th Jun '12 - 2:28pm

    ‘The book seemed to be selling well, no doubt lifted by all the controversy. But the Party’s Chief Executive, Lord Rennard, joked to me that it was he who was buying up all the available copies, to store them away safely in his garage!’

    From my perspective, it is a great pity Lord Rennard didn’t succeed.

    ‘On public service reform, the picture was less clear cut, and the forward momentum relied upon a smaller group, which fortunately included the future leader, Nick Clegg.’

    Yes, the party has simply capitulated on top down reorganisation of Health and Education: allowed a breaking up of state education into a bizarre hybrid of centrally-funded academies, unaccountable to local representatives; Free Schools set up by people with an axe to grind – ex-Soldiers, ex-telegraph Journalists (not a teaching certificate between them) ; while remaining LEA schools are bullied and dictated to from on high by Ofsted and Gove.

    David Laws is wrong – Education reforms such as these are not radical but regressive, not right but wrong.

    If this is Liberalism, I’m a banana.

  • @Steve, I’m not really in favour of the new surveillance powers but they are not giving the state any more power; just bringing them into the 21st century. They can already see who you are calling without a warrant so being able to see who you are emailing is a change of type not degree.

  • Bill le Breton 14th Jun '12 - 2:35pm

    Orange Book economic policy is precisely the thinking that culminated in the global collapse and it is why growth in Japan, the Eurozone and the UK remains stagnant.

    Ironically, therefore, the Orange Book philosophy was out of date the moment it was published. It attached the Liberal Democrat Party to a wagon whose wheels were already coming off. It attached the Coalition to the fallacy of expansionary deficit reduction and killed off the nascent recovery in the UK.

    The new capitalism that will emerge on the other side of this crisis will be closer to Liberal ideas contained in the 1953 publication, *The Unservile State* than the discredited economic liberalism of the Orange Book.

  • Yellow Bill 14th Jun '12 - 2:56pm

    For a much different view of what the Orange Book has done to the Liberal Democrats dive into Ed Joyce’ and Lempit Opeks book ‘The Alternative View’.

    The removal from office of two Liberal Democrat leaders were at the instigation of contributors to the Orange Book.

    The subsequent leadership contest was fought between two contributors to the book.

    All cabinet positions held by Lib Dems are by contributors to the Orange Book.

    Something is rotten in the state of Denmark

  • toryboysnevergrowup 14th Jun '12 - 3:34pm

    I very much doubt that Keynes or Llloyd George would have been shocked by state spending of 40% of GDP

    As for resource misallocation, waste and inefficiency perhap Mr Laws might wish to note the problems that we are now facing because of the massive resource misallocation made by the unregulated private financial sector from which he hales and where he presumably wants further deregulation, or is at least noticeably quiet on the matter.

    The sensible debate should be around the form that regulation of markets take – the old Manchester liberal school of deregulation favoured by Mrs Thatcher and unfortunately supported by my Party in a Faustian pact to deliver improved public services has been tried and failed and something different is now required.

  • toryboysnevergrowup 14th Jun '12 - 3:42pm

    Another thing that Mr Laws and other senior figures in the Party demonstrate is an almost negligible appreciation for social democatic political and economic philosophy that in theory at least used to be given lip service within the LibDems.

  • Simon Titley 14th Jun '12 - 4:41pm

    What a depressing article. Despite the events of the past five years, it seems David Laws is blind to the utter failure of neoliberal economic ideology. The theories of ‘efficient markets’ and ‘rational actors’ simply haven’t worked.

    Besides economic failure, neoliberal ideology is also a moral failure, since it assumes that social and political relationships can be replaced by economic ones. This is why there has been so much social disintegration and dislocation, and why there is so much disillusionment with democratic politics.

    I would strongly recommend David Laws and his allies to read this and grasp what is going on:

    The world is on the brink of an historic transformation of capitalism. If the Liberal Democrats cannot or will not see this, and do not formulate an intelligent and coherent response, they will make themselves irrelevant.

    That (and not the expenses scandal) is why David Laws should not return to government.

  • Joseph Donnelly 14th Jun '12 - 5:03pm

    I don’t think David Laws would describe himself as a neoliberal…

    I also don’t understand the obsession with efficient market hypothesis that ‘anti economic liberals’ always bring up. No-one believes/agrees with that hypothesis really on the free market side. To give a bit of weight to this I’ll refer you to what Friedman; hardly a moderate economic liberal….says about it:

    ‘ I don’t believe it. We all know the market is not efficient in a descriptive sense. But that doesn’t mean that the efficient market is not the best approximation if you don’t have anything else to use. …Warren Buffett proves that there’s not an efficient market, and yet Warren Buffett is what makes the market efficient, and both statements are right. If the market were 100% efficient, nobody could make any money making it efficient, and then it wouldn’t be efficient again. So in a way it’s self-contradictory to suppose that there really is an efficient market.’

  • jenny barnes 14th Jun '12 - 5:04pm

    Is it reasonable to treat labour – which necessarily comes with a human being attached to it – and the “natural” environment which of course you only get one of – as things that are best dealt with according to the market. Markets may be many things, but they are clearly social constructions in a way that the environment and people are not. I think it’s absurd to imagine that the only value people and the environment have can be measured by money. The neo-liberal experiment confuses means and ends – assuming economic growth is the end and that everything else is the means to achieve it.

  • toryboysnevergrowup 14th Jun '12 - 5:24pm


    I think Friedman’s quote is the answer to your own question. Even though the neo liberals ( or at least some of them) now accept that the efficient markets hypothesis stands up to scrutiny they still think that it is the “best approximation” to use to infomr their political thinking which is that markets are best left alone.

    There is a long strand of economic and political thinking including Liberals such as Keynes and many social democrats that have never accepted this view, even though they still accept that markets have a very important role to play as least worst resource allocation mechanism around . There are genuine debates as to how markets should be regulated – particularly since the fashion to do so hasn’t been around for a while – but in order to join that party you do at least need to accept the need for such regulation.

    And don’t think that the problem is just the financial sector e.g. did you know that the prices of commodities have on average fallen by c25% from a year ago – bet you haven’t seen much of that yet in your weekly shop at Tescos.

  • Richard Shaw 14th Jun '12 - 5:38pm

    ‘The Orange Book’ has taken on an almost mystical life to its critics. People who agree with all or parts are derisively referred to as ‘Orange Bookers’, as if some formal party group or cabal. Some members verge on apoplexy, bemoaning the publication itself of a collection of essays as destroying their idea of the party, rather than engaging, debating and winning the arguments. If ‘Orange Bookers’ are the dominant force it is not through conspiracy, but because of the lack of success for those who disagree through the above means.

    As a relatively new member I found the book very informative and stimulating to read while I was learning more about the party and policies, and welcome this new assessment of its impact.

  • Joseph Donnelly 14th Jun '12 - 5:47pm


    Neither I (nor I suspect Laws) agree with Friedman on lots of things, the usage of him was just an example of how someone who’s considered an extreme free marketeer does not agree with efficient market hypothesis.

    The basic idea is what you say yes; that markets are better at distributing wealth and protecting liberty than government generally. The point I was making is that that is a VERY different view than ‘markets are perfect and make no mistakes’ which is essentially efficient market hypothesis and its frustrating to constantly see those who are maybe no economic liberals equating all free marketeers with believing that when barely anyone does.

    Again, I suspect Laws does want regulation of markets. The problem with the quality and style of debate on this forum and broadly within the party is that the moment you support anything remotely free market you are labelled a neoliberal and as I’ve said I very much doubt David Laws can class as such. I’m not even particularly sure what the term means.

    If you’ve read the Orange Book its hardly free market fundamentalism; its mostly practical steps to reforming public services and the like, while still retaining a large amount of government intervention. As is mentioned in the original post, one point Laws makes is that a state at 40% of GDP is very high (it is in fact higher now). The fundamental point I’m trying to make is that saying that 40% of GDP is too high is not being a neo liberal or a free market fundamentalist but from the language used in these forums you’d think it was. I shudder sometimes to wonder how big a state you have to support in this party before you are a socialist and not a liberal? The debate just seems skewed the wrong way for a liberal party. No-one wants a nightwatchman state but I don’t understand the principled resistance to a slightly smaller state, in the North-East the state is about the size it was in Soviet countries!

    Do you honestly think Keynes would have called someone a free market fundamentalist for wanting a state slightly smaller than 40%? I suspect he would have been on the other side of the argument to that.

  • “The liberal ambition should be for long-term total public spending growth to be restrained at below the trend rate of growth of the economy – this probably means decent real growth of health, education and pensions spending, offset by most other areas of public spending shrinking over time as a share of GDP.”

    These three areas – health (17%), education (12%) and pensions (19%) account for around half of all current government expenditure of circa £730 billion. To offest real spending growth in these areas requires shrinking of the other major components of public sector spending – welfare(15%), defence(6%), debt service (7%), protection (5%), transport (3%) and central and local government services (16%).

    Weeding out “resource misallocation and waste and inefficiency” from these rump expenditures is a duty of government in managing the public purse. However, we have yet to see any convincing evidence (quite the contrary in fact) that delivery of public services is more efficiently undertaken by private sector managers.

    This perhaps leaves welfare spending and transfers as the principal target for reductions in the size of the state, That may be a laudable aim, if it is accompanied by a policy of engendering full-employment and sustainable growth in real wages. If however, it is accompanied by a return to the consumer-debt fuelled economic expansion that led us into the financial crash, then such policies are doomed to failure.

  • Joseph Donnelly 14th Jun '12 - 10:05pm

    @Geoffrey Payne

    The idea that we have a ‘radical free market small state philosophy’ is frankly laughable.

    The radical neoliberal policies of this coalition government will reduce the size of our government to that not seen since….oh 2004….that well known period of anarcho capitalism….

  • The Orange Book/Britain After Blair showed significant inconsistency in its message

    Webb argues for using the state to encourage particular family norms

    Teather argued that “families should be as independent as possible”

    Clegg argues “Principle 1. Stop perpetual revolution”

    Cable argues “Mao Zedung may have been a tyrant but his concept of permanent revolution contained the crucial insight that state bureaucracies will always ossify”

    Webb argued that “staying at home to look after a child is ….. frequently looked down upon”

    Laws argued for “creation of a culture in which work is seen as the approporiate avenue after a threshold age”

    Webb and Laws, Teather and Oaten represented very different wings of the party. The Orange Bookers never met as a group hence the fact that the message is in places inconsistent.

    Ed Joyce

  • Little Jacky Paper 14th Jun '12 - 11:37pm

    Joseph Donnelly – ‘I don’t understand the principled resistance to a slightly smaller state, in the North-East the state is about the size it was in Soviet countries!’

    Can I perhaps put this another way? This is not a question of principle, rather it is a question about the distinction between politics and govenment.

    I would suggest that at the moment the Conservatives are NOT winning the grand political argument on cuts, rather they are winning it on the deficit. You may, of course, suggest that I am splitting hairs, but I think that the difference is significant. The Orange Book to some extent took on something of a life of its own. It has been some years since I read it but it is indeed hardly the neo-liberal tome it has become painted as. Indeed, with respect to the authors, I have a vague recollection of finding parts of it rather boring and uncontentious.

    My point is that we can argue from a genuinely liberal political (to my mind) perspective for deficit reduction and smaller states. But that in itself is not sufficient in government. The OB was written at a time quite frankly of rather comfortable opposition – now where the cuts fall and who they fall upon are as important as the principle and the – dare I say it – ideology.

    The treatment of banks is a high-profile example. But what about the hum-drum – say housing benefit and its effects on BTL landlord incomes? Or fuel payments to wealthy pensioners? These questions then lead on to rather tougher questions like reducing house prices and rents (likely to go down like a brick) and means tests vs universality. A smaller state is all well and good at the level of an abstraction and at the level of permanent opposition. But the party has moved on.

    A smaller state is one thing – whose smaller state is quite another. It is not unreasonable to ask why the young need high fees to go to university whilst the old get a triple lock on income regardless of six digit house price inflation. To be clear, I make no value judgment here on those policies, I simply say the question of, ‘whose smaller state,’ can not be dismissed or left to the other parties any more. And of course that may well be no bad thing.

    Indeed I find the scope of Laws’ thinking strangely limited when he says, ‘this probably means decent real growth of health, education and pensions spending, offset by most other areas of public spending shrinking over time as a share of GDP.’ So what, the only people who need to look to the state are the sick and old? What about the unemployed? Can people not save via the private sector for old age? What about housing? Transport? (as an aside here, the drop-off in the number of young who can drive is truly worrying and much underreported).

    Whose small state matters. And, of course the day may come when queues form at the doors of another bank and the people in that queue will look to the state, not the private sector, for salvation. I have no principled resistance to a smaller state per se, but that surely carries with it the notion that there will be losers and decisions that will be electoral-political in consequense? Indeed, at the risk of controversy, I personally would not have protected the NHS from cuts had I been chancellor – but I would not want to have to explain that to patient lobby groups.

    Let me be clear again – this is not a partizan political comment, similar points could likely be made about other parties. Saying that OB liberalism is about a smaller, smarter state is all well and good insofar as it goes – but I would have hoped that the tuition fee protests had brought an end to this sort of idealistic hope that voters will take it on the chin in the name of deficit reduction.

    The OB was an interesting political agenda for opposition, but its limitations are real. Of course much the same could be said of other political books over the years. An OB second edition would be of value, but only if it says whose smaller state. A much tougher test, but it is one I personally hope is taken on. Not least because government is tough.

    Good luck to you.

  • So Joseph, your sense should tell you, the main change since 2004 has been additional money going in to mitigate recession and support banks etc. So what you are saying is we wish to go back to Thatcherite, or possibly lower than Thatcherite levels of services. Your obsession with actual %ages of tax burden seems bordering on the obsessive, and it seems you miss the wood for the trees.

  • Joseph Donnelly 15th Jun '12 - 12:45am


    I’m not actually that obsessed with %’s (although I wonder if you presuppose something by wondering if my obsession borders on obsessive….) I was only using them to counter some of the extreme hyperbole coming in this thread.

    You yourself have fallen into this trap by using the term ‘Thatcherite levels of services’.

    The reason percentages are useful is because it gives us a bit of perspective. You may disagree with the deficit reduction programme; you may think an economic stimulus would be useful or perhaps we should do it slower. You may even believe that public spending should be higher than it currently is!

    I have no problem whatsoever with those arguments, they are genuine, I may disagree but they are genuine arguments.

    What I do take umbrage at is the suggestion that you are some kind of crazy libertarian free market fundamentalist if you think state spending could be reduced to the level it was at in 2004.

    People in this thread have called supporting this radical small state philosophy, libertarianism, free market fundamentalism, neoliberalism, thatcherism and more.

    The usage of %s is just to illustrate how ridiculously over baked this language is for the situation.

  • Anything published by the Institute for Economic Affairs is bound to be ideology-ridden, hate-the-state nonsense.

    That high profile Liberal Democrats should be making contributions to its journal is a matter of the gravest concern.

  • Joe, I note you haven’t addressed the gist of my argument, ie that percentages will depend on context, and you cannot compare 40% in 2004 with 40% in 2012. I don’t necessarily think you are a “crazy free market fundamentalist”, I just think you are not comparing like with like, and have perhaps been taken in by the arguments of fundamentalists. I think by suggesting 2004 levels now in 2012, without even suggesting that a much larger part of the burden should be borne by the better off (and very rich), you are actually allowing a Thatcherite level of services (and in this case lowering benefits to the most vulnerable in an already very unequal society).

  • Just checking JBT – are you a Lib Dem?

  • Peter Watson 15th Jun '12 - 11:17am

    Doe Mr. Laws also think an electoral pact with the conservatives in 2015 is on the cards?

  • Matthew Huntbach 15th Jun '12 - 11:24am

    David Laws

    Firstly, we must keep the faith with economic liberalism, notwithstanding the problems in the global economy since 2007.

    Comrades, we must continue with the Five Year Plan of the Glorious Revolution!

  • Matthew Huntbach 15th Jun '12 - 11:32am

    David Laws

    But even after the existing fiscal consolidation, state spending will account for some 40% of GDP, a figure that would have shocked not only Adam Smith, Gladstone and J.S. Mill, but also Keynes and Lloyd George.

    Oh, for heaven’s sake. We live in a hugely more complex world than those days, which means a requirement for much more infrastructure support. We live many more years, we can keep many more sick people alive. We face environmental issues unthought of back then. All these result in increased state spending. It is something like our own homes where a huge proportion of our income is now spent on things which would hardly be thought of back then, when for most people rent, food, clothing and fuel more or less was all you spent money on.

    This is obvious, it is perhaps the key issue in modern politics. For it just to be ignored, as is done here is either incredible foolishness or incredible deviousness.

  • The cranky element of the left were full of themselves in the 70s (and into the 80s) because they’d had their own way for so long and thought they and their ideas were superior to everyone else. However, the electorate had different ideas and wanted change. Now we see everything in polar reverse – people on the right advocating more neo-liberal deregulation, completely convinced of their own intellectual superiority despite the evidence of the failing, stagnating economy. The likes of Laws will go down fighting, like Scargill, but you would have thought the liberals would have learnt their lesson from the last time they propped up an unpopular government espousing the same failing policies as a remedy to the problems caused by the failed policies.

  • Matthew Huntbach 15th Jun '12 - 11:44am

    David Laws

    Controversial The Orange Book might have been, but there is no doubt it was also influential. By challenging the existing assumptions in the party, it created much more space for radical thinking.

    Radical thinking? Oh, come on. This sort of naive “free market is the answer to everything” thinking was already stale old hat by then. It may have been new and radical and interesting when Keith Joseph and Margaret Thatcher were pushing it here, and the men behind Ronald Reagan pushing it in the USA. But by the time the Orange Book came out it was already exhausted, and this was just before the massive collapse of the financial structure it had led to.

    The reality is that the Orange Book was like a book endorsing USSR style communism as the new radical way forward written in the 1970s.

    A true radical is one who can look beyond current orthodoxy, see its faults, and show some critical analysis of it. Perhaps there are some more thoughtful comments inside the Orange Book, but what is quoted here from Laws is embarrassing. It is becoming very evident he is a third class mind whose reputation for cleverness comes only from repeating parrot fashion the propaganda lines of those who have power and wealth in this world.

    Forward the Glorious Revolution comrades! Now imagine that said by one of those pathetic defenders of a dictator who won power in a coup decades ago and still thinks he is a revolutionary leader, whereas the real revolutionaries are those working for his overthrow.

  • Matthew Huntbach 15th Jun '12 - 1:55pm

    David Laws

    The Orange Book was not written in order to make a Lib Dem-Conservative coalition possible, but without the policy changes which the book and its authors anticipated, it is much more difficult to imagine the present coalition being formed and sustained.

    If you want to destroy the Liberal Democrats, say things like that.

    The coalition was formed because it was the only viable stable government possible from the Parliament resulting from the 2010 general election. If we allow the message to be put across that we could have had something else, more in our party’;s traditions and less in favour of the Conservatives, then we have lost our principle defence against the charges made at us by those who are moving their support away. And there is no evidence whatsoever that we are attracting significant new support. The line pushed by the most virulent Orange Bookers that there was a big latent vote of “economic liberal” people just waiting to come to us if we convincingly swung that way has proved utterly false. We have swung, our poll support has tumbled.

    To make it worse, this line of Mr Laws just supports all our enemies have been saying to bring us down. It completely undermines the argument that the tough economic decisions we have supported are supported through necessity. It backs up those who accuse us of just saying this and accuse us of following these economic lines not out of necessity but out of ideological fervour.

  • Joseph Donnelly 15th Jun '12 - 2:15pm


    I do accept that spending at 2004 levels now will get you a bit less in terms of actual public services because of the amount that has to be spent on unemployment benefit and other measures in the recession that weren’t being spent in 2004.

    The idea that 2004 spending levels in 2012 return us to Thatcherite public spending levels baffle me slightly. For two reasons:

    1) I question what Thatcherite public spending levels are, public spending rose while Thatcher was in office, its a common myth that she slashed govt. spending massively. It rose on average 1.1% over her years in office. I think from memory we’ve only actually had two years in the last 30 where public spending hasn’t risen.

    If you think that is sustainable then make a case for it but don’t hide behind hyperbole that wanting a slightly smaller state is some kind of Nozickian anarchism.

    2) Even if I accept the general point you are trying to make about Thatcherite public services, that they wernt as plump and well funded as during the Blair years (despite actual public spending levels) which may be true. I’m not sure why it is so shocking to think that the Blair spending on public services may have been a tad unsustainable? Again if you want to make a genuine case for a state that is 50% of GDP and more so in the north east then make it but you are trying to fudge the issue.

    I am willing to stand by the %s in this case. I accept that %s are relative to their time and there is a big difference in the macro economic outlook and what a % of spending can buy you in 2012 compared to 2004 BUT I do not think its unreasonable for a liberal to argue that the state is too big at the moment, and that reducing it a little bit to levels that are less than our manifesto commitments would have risen it at elections in the 80s and 90s, is a perfectly valid liberal argument to make.

    The thing I worry about, and the importance of bringing %s in to the debate to give some perspective, is where do some of the commentators draw the line? If the state was 70% would they call for cuts, or is 50% the barrier because on some measures we are past 50% now. Its very easy to oppose cuts because cuts will hurt people in the short term and do cause massive disruption. Cuts can also be done badly and unfairly but what I object to is that there are a bunch of people calling themselves liberal who seem to have an ideological commitment to no cuts ever, I’m just not sure how this is credible.

  • Joseph,

    this recent FT article by Martin Wolf is quite instructive with respect to the relative % of government spending and economic performance Taxation, productivity and prosperity.

    Wolf surmises:

    Firstly, that there is no relation between the share of government revenue and the rate of growth of real output per head (that is, productivity).

    Secondly, that the advanced democracies seem to fall into three groups. The English-speaking countries all having relatively low average tax rates, ranging from close to 30 per cent of GDP to Canada’s 42 per cent. They share this range with Japan, Switzerland and Spain. In the next range come the continental European countries, with tax ratios from 40 per cent to 50 per cent of GDP. In this group, Italy and Germany are relatively less highly taxed and Austria and France relatively more highly taxed. Finally, there are the Scandinavian countries, whose ratios of government revenue to GDP averaged over 50 per cent.

    Thirdly, that the average tax ratio … seems to have no effect on economic performance or relation to the level of GDP per head. In essence, higher avarage tax ratios are simply different preferences for government welfare spending and have little or no perceptible effect on overall economic performance.

    Fourthly, that many of today’s most solvent countries are highly taxed. Indeed, among the eurozone countries shown, crisis-hit Ireland, Spain and Italy had relatively low average tax rates. (They also had fiscal surpluses or negligible fiscal deficits, prior to the crisis.) The heavily taxed eurozone countries are all now relatively crisis-free.

    The conclusion to be drawn is that a tax burden within the range of 30 per cent to 55 per cent of GDP) tells one nothing about a country’s economic performance. It is far more a reflection of different social preferences about the role of the state. What matters far more are culture, quality of institutions, including law, levels of education, quality of businesses, openness to trade, strength of competition and so forth.

    Wolf’s conclusion is that the focus of some commentators on the proportion of taxes to national income and the states share of GDP is misguided; the economic arguments being more a cover for self-interest or ideologically based, rather than grounded in any evidence based research.

    In the UK, through a long period of trial and error, we have developed a consensus around a state share of spending circa 40% of GDP. Our focus should be on the equitable raising of taxes sufficient to both meet this consensus share and pay down debt as a % of GDP, while maintaining at all times an efficient and equitable allocation of that spending in the delivery of public services.

    As Wolf says “What matters far more is the capacity of the economy to offer satisfactory lives for the citizenry. This depends on far more fundamental forces than deficits and taxes, such as innovation, jobs and incomes.”

  • Bill le Breton 15th Jun '12 - 3:34pm

    ‘We felt that the Liberal Democrats had moved too far away from the small ‘l’ ‘liberal’ inheritance of the party, particularly in relation to economic policy and our attitude to public service reform’

  • Matthew Huntbach 15th Jun '12 - 4:49pm

    Tom Papworth

    Presuming that the world isn’t going to get any less complicated in the future, and that it is in fact going to become substantially more complicated, is public spending therefore going to have to rise inexorably? What happens when we reach 100% and the world is still becoming more complex?

    I live next to what used to be the old A2, the main road out of London to the continent. Now it looks like a small suburban road, but up until the end of the last century it was sufficient to take the traffic that needed to go that way. It has now been replaced by a much bigger and more expensive to maintain road. Multiply that by many other things that are paid for by government, and that’s my point. Lifespans have hugely increased, so the sort of government payment that goes to retired people has greatly gone up. Do you think we will reach the point where ALL our money is spent on maintaining roads and paying pensions to old people? That is what you seem to be saying.

    The flaw in your argument is that whatever is spent on them would STILL need to be spent even if it were not done through the government. You argue that it is bad that people working productively should have some of the proceeds of their effort taken from them in taxation and given to elderly people. OK, so we will not do that and instead tell elderly people to make their own provisions for retirement income through investment. But if this is to work the net result must STILL be some people working and others benefiting. Instead of it going through taxation, perhaps it goes through share dividends which pay the pension, or through the worker having to pay more in housing costs which are transferred to the elderly person who owns rented housing or profits from capital gains and inheritance. Indeed, this is just what is happening. Where is the magic thing your argument claims makes this so much better? What we actually seem to see is a much more inequitable distribution, depending on whether you’re an elderly person who was able to become an owner occupier or build up a pension or whether you were not.

    What is more, it becomes harder an d harder for those at the wrong end of the distribution to have a chance of evening it up. So the divide becomes worse. The end result it seems to me will be a society where one section works as slaves, and the other lives off their slavery.

  • Stuart, surely the importance of the Orange Book is as a cipher, not for the nature or content of any of the essays? The idea that, as David Laws as near as dammit stated in his item above, it is time for the Lib Dems to move to the right economically. To invest any other mythical importance to it seems perverse and inaccurate. When merger took place in 1988, it was acknowledegd by the majority of the Liberal Party that we had taken on part of the Social Democrat tradition. In truth we had already endorsed much of an SD nature. The politics you seem to be pushing doesn’t seem to share the same underpinnings as much of that

  • Simon Titley 16th Jun '12 - 9:08am

    @Stuart Wheatcroft – “The use of the word “neoliberal” is lazy. It’s almost always used as an insult and as such I’ve yet to work out what it really means.”

    Really? This seems to be one of a number of attempts in this thread to limit debate by removing useful terminology.

    You say you don’t know what the term ‘neoliberal’ means. If so, take a look at the Wikipedia page on neoliberalism:

    If the cap fits, wear it.

  • Simon Titley 16th Jun '12 - 9:17am

    @Tim13 – “Surely the importance of the Orange Book is as a cipher, not for the nature or content of any of the essays?”

    Quite. The role of the Orange Book has been almost entirely totemic. Hardly anyone I know in the party has actually read it.

    The most useful thing the book did was to end the taboo on ideological debate that had existed within the party since the merger. This was probably not what the editors intended.

  • For want of a better word the “NEO-LIBERAL*” orthodoxy about the nature of the free-market has collapsed. What remains is some vague notions that the markets are some how efficient.
    They didn’t just fail during the financial collapse. They failed on railways, water and energy because at least in they way theur practiced in Britain it didn’t resul in infrastructure investment. Reservoirs have been drained and sold of in an ever expanding London! Trains price are inflated to discourage customers and the government forced to re nationalise the non profit making bits of the operations to ensure they can run at all. And energy bills through the roof. Not to mention regions that actually had to increase public spending because the new industries and more business friendly policies either failed to materialise or actually took more private sector jobs away from those regions. Market forces were failing badly before the collapse. . And yet we still told that more of the same is the answer.
    The thing is that the separation of the state and the interests of business is a little artificial. Fore example, the mobile phones and computers we all use are byproducts of the massive expenditure on the space program post WWII, No private company ever had the funds to start the space race or for that matter refine aircraft design without huge government support . In truth private enterprise is a by product of national interests.

  • Joseph Donnelly 16th Jun '12 - 6:40pm

    @Simon Titley

    Its not about removing the term neoliberal to limit useful debate.

    Its about people politely trying to point out that most of the people using the term neoliberal don’t have a clue what they mean when they say it and are just displaying their ignorance by brandishing it against Laws.

    If we want to use language like that then we should call social liberals (those on the left of lib dems) socialists. I tend to refrain from doing that and I don’t think its helpful or a fair description of their ideology BUT it is the equivalent of calling economic liberals/Laws neoliberals.

  • Joseph, I assume you are worried that these terms are (or are construed as) insults. It seems to me that Laws’s views are pretty close to neoliberalism, although most references in the Wiki article linked to by Simon are US ones. I looked up economic liberalism, and that seems to fit. I am sure that some sorts of socialism (being a broad church) fits some in the Lib Dems too. But they are not necessarily insults, just descriptions.

  • Some people call themselves socialist when they’re actually cente/centre-left. Some people call themselves centrist when they’re actually left/centre-left or right/centre-right. Some people use the word socialist as a pejorative, some are proud to call themselves, etc. The same label means different things to different people.

    Lwas wants a small state – not just a smaller one. That puts him firmly on the right wing/centre right and is entirely consistent with neo-liberalism. The bizarre thing, to me, is that he thinks he’s coming up with anything original, when the same message has been rammed down our throats for over 30 years. Talk about coming late to the party – just in time for the hangover in fact.

  • Joseph Donnelly 16th Jun '12 - 9:03pm


    I just tend to stick to the view that most social liberals in the party are liberals and that most economic liberals are liberals and that although the party is a broad church we are all essentially liberals and trying to achieve similar things but through different means.

    Once we start accusing people of being free market fundamentalists, socialists, neoliberals or thatcherites we are trying to say that they aren’t really liberals and they and their ideas do not really belong in this party.

    Its a subtle way of trying to say we don’t have to consider David Laws views (or liberal left) because they aren’t really liberal, they are thatcherite or socialist.

  • For what it’s worth I think the term Neoliberal only really works in the context of American politics where it’s used to describe free market Republicans who are not keen on the social views of the Cristian Right. It doesn’t fit Laws because he is actually in the Liberal Democrats and there is no equivalent of US religious politics. , It is basically a misapplied Americanism along the lines of Neocons. Personally I think Laws is an advocate of the flawed economic orthodoxy of last 30 years, , but he is still a liberal, At a pinch Neoliberal could describe Cameron and Neocon Blair but even then only as a sound bite shortcut.

  • david thorpe 17th Jun '12 - 2:03pm

    @ bill le breton
    @The economic collapse happened in the UK precisely because the Orange Bookers were not listened to, Vince Cable was forecasting what happened when the neo-liberals(as opposed to the classical liberalism of the orange book) in Labour were ignring cables warnings.
    Economic liberalims does not, and never has meant light touch regualrtion, thats precisely what its against.
    The principal chapter of the orange book which deals with economic policy is the one written by Vince Cable.
    Vince Cahpter is titled “reclaiming adam smith” and smith was a man who wanted reguakltion, hence his most famous quote about any meeting iof businessment together eventually turning to talk that would lessen the public good1 smith never used the phrase @laissez faire” in relation to economic policy, he used it in his othert great work ” atheory of moral sntiment” afred marshall coined the phrase laissez fare. #

    The ornage book attampts to rpove liberal intellectual ballsts for a party sadly lack such, which is amazxing wjhen the name of the partyconatins the word liberal!

  • Bill le Breton 17th Jun '12 - 4:45pm

    If oil and other commodity prices rise and monetary policy does not change, what happens to output? Or if monetary policy tightens (actively or passively) because of the fear of inflation or actual inflation from increasing commodity prices what happens to output? Then what happens to asset prices? So people start deleveraging and competing to sell assets. And if the monetary authorities fail to ease polcy quickly you go from mild recession to Great Recession (2008).
    Even if you asked them now Laws et al would say monetary policy is loose and certainly they thought it need to be tightened or to stay tight in in 2008 when actually NGDP was plunging.
    That’s why I say that the economics supported by those who were really responsible for the Orange Book caused the Great Recession.
    Then, that their influence on Coalition economic policy and through them on the Governor (and the MPC) undermined the recovery that was in place in 2010.

  • Matthew Huntbach 18th Jun '12 - 1:50am

    Stuart Wheatcroft

    It is depressing, reading this thread, to see how little so many people seem to know about the Orange Book, yet without this translating into either an effort to learn more or into silence

    Well, if David Laws wanted to correct the stereotyping of the Orange Book he should have written very different words to those quoted in the original article. Instead of correcting these misassumptions, he seems to be confirming them.

  • Matthew Huntbach 18th Jun '12 - 2:03am

    Stuart Wheatcroft

    The Orange Book is a collection of essays (not a single work). It challenges many of the assumptions which were dominant in the party at the time (one might uncharitably suggest that it is little wonder that those who liked those assumptions react so harshly to the challenge). Unfortunately, the work is not yet done: many people still seem to think that it is somehow obvious that the state does things more efficiently than free individuals interacting freely (the market). I would argue that setting people free, and allowing them to use that freedom, individually and collectively, to shape the world – and public services too – is a very naturally liberal approach.

    In other words, you are concerned there are still a few isolated areas of resistance to what is now the world’s dominant ideology, and you want to see them stamped out.

    When almost all the press, almost all the people who run our society (businessmen and politicians) subscribe to the way of thinking you are endorsing here, why does it so concern you that there are still a few people arond who disagree?

    We have had over 30 years of government which ran on this basis – why do you so want the Liberal Democrats to say “me too” after Blair made Labour say “me too” to what we used to call Thatcherism? It seems you won’t be happy until all three parties in this country endorse just one ideology.

    I’m happy to acknowledge the arguments that the free market is an important aspect of freedom in general, but these are hardly rare and unusual arguments. I can find them repeated again and again and again in all the major newspapers and political commentary magazines, they seem to have replaced Trotskyism as the ideology young men pick up when they want to appear clever, and as such seem to dominate and push out any other argument in internet discussion.

    So it seems to me the much more important thing now is to work out why it all has NOT worked, why our society going down thos road has led to many people feeling less free than they used to, not more.

  • Richard Dean 18th Jun '12 - 2:57am

    My impression is that the Orange Book is not exactly an easy read, nor does it seem to place much emphasis on keeping the reader awake during the process. I wonder who the intended readership was? It doesn’t seem suited as a communication to the general electorate, nor indeed to the party unless the party wants to remain rather small!

  • This is not the kind of debate which a viable, united, single political party can reasonably sustain, is it?

  • Joseph Donnelly 20th Jun '12 - 12:50am

    @David Allen

    Have you seen the Labour party?! GMB and UNITe trying to kick out progress.

    And the Tory parties Cameron/one nation wing vs old school ukip wing.

    This is nothing.

  • Yes, I’ve seen that Labour have some substantial faction fights amongst subgroups. They are not trivial, but they are nothing like as fundamental as the great divide within the Lib Dems.

    Denialism will get us nowhere!

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