The full text of his speech to the Royal Commonwealth Society on Liberal Democrat tax policy and also the party’s approach to global cooperation is now up on his website:
This is a time of crisis for Britain, and for the world. The banking collapse will lead to a global recession; that much is now certain. And its implications will be profound.
The very model of capitalism that America has promulgated for generations is now being questioned. The rise of China, India, Brazil and oil-rich Gulf States will be accelerated by a prolonged American recession. And instability and conflict will be driven by the shifting of global power, and by the need for resources – food, water and energy.
Global cooperation is the best – I believe the only – answer to these problems. The only way to dig our world back out of recession. The only way to create the growth, trade, and international rules we need for a fairer, greener, safer planet.
I am an internationalist to my fingertips. I’ve spent a huge amount of my working life in Europe, engaged in multi-lateral projects and negotiations. And with a half Russian father, and a Dutch mother, internationalism is quite literally in my blood. Nothing will turn me away from the belief that we are – all of us – better off acting together…
It is beyond debate that we need a “new Bretton Woods”. The Bretton Woods institutions have a somewhat chequered history but they have on balance, been of benefit to global development. Now they need to be remade for the 21st century.
Let’s start with the IMF. Its funding structure needs to be modified, and its resources increased substantially…
The World Bank needs similar reforms to the IMF. Transparency and resources are key to its success, and should be at the root of reform.
But there is one further change that must be made to both organisations. The world’s economic centre of gravity is moving. Decision-making in the future has to reflect this. India, China, Brazil, Venezuela, South Africa. It is absurd that these countries have been excluded for so long while the old gang try to keep things between themselves…
But there is a caveat. Many of these powers – notably China, Russia and some Gulf States – have questionable, or worse, records on human rights, freedom of the press and the rule of law. While the rise of new powers is unstoppable, we need to do all we can to strengthen liberal and democratic values as it happens…
Finally, of course, there is the UN. Any number of experts and commentators would agree: it is deeply flawed. But the barriers to reform are so high, I believe we must work with it as it is, and not seek institutional change.
Instead we should do all we can to strengthen the UN as it is. Here again, the more positive approach taken by the new US president will help give a clear signal to the world.
Once reformed, these institutions can play a vital role in the creation of a new model of global capitalism:
sustainable, fair and green. Where finance plays a vital role, but as servant, not master.The global financial system is truly staggering in scale. The notional value of all outstanding global contracts at the end of 2007 was $600 trillion, some 11 times world output. That’s a phenomenal change – the scale has increased eight-fold in the last 10 years. This behemoth of finance needs regulation to match.
And on tax:
It is a time for ambition. An opportunity to fundamentally rebalance Britain’s unfair tax system.
Real tax cuts – big, permanent and fair – for the people who need them. Funded by making the wealthy pay their fair share, ending the special exemptions and loopholes they’ve profited from for so long.
Liberal Democrats would reduce basic rate income tax by 4p in the pound. That would give nearly £1000 back to a worker on £30,000 a year. Funded by four changes.
One: ending upper rate pensions relief – so the wealthy don’t get extra pension help from the tax man. Two: taxing capital gains at the same rates as income. So bankers and executives can’t get away with paying 18% tax while their cleaners pay 31%. Three: green taxes to protect our environment. And four: tackling the scandal of corporate tax avoidance – a subject I’ll be addressing in a speech tomorrow.
This is an opportunity for a new, fair tax system. And an opportunity to change the way government spends money, too.
Gordon Brown has doubled public spending. £18,000 a second. And his faith in big government means even at this time of international crisis, he’s still going to spend our money on IT systems that don’t work, identity cards, and surveillance databases.
Liberal Democrats will change this. We are identifying £20bn of government spending that can be redirected to our priorities. We need to redirect spending to the things that people really need in a recession: homes for hard-pressed families; good child care, so that people can go out to work; and training for people who have lost their jobs. And, if there’s money to spare, the rest will go to deepening and extending our tax cut plans.
You can read the full speech here.
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14 Comments
“We are identifying £20bn of government spending that can be redirected to our priorities.”
Interesting how Clegg’s emphasis has changed in the last two months.
Could it be that he has realised the danger that the two sets of tax cuts will be confused, and that the 4p cut will be tarred with the brush of public spending cuts?
Interesting also that there’s no mention of increasing government borrowing (as far as I can see), after his comments in support of that last month.
Is he trying to position the party so that it can attack Labour for increasing borrowing, and the Tories for not cutting income tax?
I think the confusion was (and people please correct me if I’m wrong) that we always planned to identify £20bn and redirect to our priorities – inc the 4p cut in the basic rate.
The confusing issue is then the attempt to find another £20bn of waste to reduce public expenditure by, with the intention that we may be able to fund further tax cuts for the less well off.
The £20bns sound the same, but are not.
And neither of them include the one tax switch that would be really sustainable of course.
I would have preferred this article to be split into 2 threads, because I think the most important part of the speech is about the global shift in power from East to West, although inevitably people will want to talk about taxation as well, which we have done at length already.
We are surley entering a new era of capitalism in which the theories of Freidman, Hayak and associated neo-liberals and libertarians have been discredited, whilst the views of Keynesians such as Stiglitz, Soros and Galbraith are now in the ascendency?
However it is also the case that economic growth will continue in China, India, Russia, but there is little scope for it in the west where growth from 2001 to 2007 was based on an unsustainable housing bubble that will not be repeated for many years to come.
The future for the west is relative economic decline and lessening influence in the world. And so the question is; what kind of politics will that bring about?
Geoffrey, how can you possibly conclude that the ideas of monetary restraint have been “discredited” when this entire situation has come about because of the exact opposite – no control of the money supply whatsoever?
GP – AIUI there is just one lot of £20bn. the 4p tax “cut” is paid for by a mixture of increased taxes on the very rich and new green taxes (meaning the overall effect won’t be a saving of £1000 per year but that’s a different point)
Nick is getting his act a little bit clearer at last – though it is still causing confusion, as this thread demonstrates! In my view there is only one £20bn, as Hywel says. Basically Nick has two separate ideas, which sensibly or otherwise he has chosen to present in parallel:
1 – a Tax Switch programme – Paragraphs 1 to 4 of the excerpt quoted above. This changes how we charge taxes, but not how much money in total we aim to collect. It’s a moot point whether this should really be called “tax cuts”. It’s a cut for some and a rise for others. It’s not a “true” net cut in the total tax take.
2 – a Spending Switch (the famous £20bn) programme – Paragraphs 6 and 7 of the excerpt quoted above. This changes what the government spends money on, but not – or not necessarily – how much in total is spent. So, really this has nothing to do with true net tax cuts, either. Or not, at least, until we get to the sting in the tail, the last sentence of Paragraph 7. That says that we might (or might not) actually be able to cut total spending, in which case we might come up with an actual cut in the total tax burden.
Well! What a tangled web we weave. But it does begin to look as if we are not, in fact, practicing to deceive. Things are looking up!
The Tax Switch, of course, was 17 months ago at the end of the Tax Commission process. 4p off basic rate and so on, and revenue neutral by design. So there’s no need to find £20bn there.
The £20bn came in this year and is about prioritizing spending with a vague promise of overall tax cuts, rather than revenue neutral switching, if there was any left after our priority bids.
I think part of the confusion came about because the cost of the 4p cut would be around £20bn (though I see some of the news coverage is advertising it as £18bn). But as people say, that £20bn wouldn’t need to be “identified”, as it’s supposed to come from raising other taxes.
If the apparent downplaying of the aspiration towards additional tax cuts here is deliberate, I think it is a wise move. No one is likely to be impressed by a politician saying “We will cut your taxes if it turns out we can afford it”.
And if the emphasis is on redirection rather than overall spending cuts, it is far easier to answer critics by saying “We are not going to cut public spending, we are going to cut out waste so we can spend more on X, Y and Z”.
This is really confusing people – which is a shame because it’s a great policy.
1 – We want to redirect public spending (the first £20bm) from Labour’s priorities (Trident, ID Cards, Iraq, John Prescott) to our priorities (Police, green transport, apple pie, pupil premia, Shirley Wiliams).
2 – We want to cut income tax and pay for it by increasing capital gains, green taxes and pension relief. This is revenue neutral and leaves the overall tax take the same.
3 – We want (but haven’t done yet) to identify £20bm MORE in spending which can be redirected to some more good things we want and some of which can be used to fund MORE tax cuts, this time lowering the overall size of the tax take.
There’s really no reason the two both had to be £20bn and it’s causing some real confusion but they are different.
Incidentally, I was there last night at the Commonwealth Society and Nick spoke very well and a couple of non-members I spoke to said things like “I was sort of thinking of voting for you but he’s really impressive and now I definitely will.”
Well done.
benjamin
Sorry, but I’m sure that’s not correct.
There aren’t two £20 billions – just one (it was originally – in 2006 – £15 billion, but supposedly £20 billion represents roughly the same percentage of overall spending today).
I don’t think that’s correct Benjamin. But if we can’t be clear on it you can bet that the public won’t be!
Regardless of the arguments about the MiH policy we desperately need to get this communicated clearly and hammered away over and over again – which does to be fair seem to have happened a bit more in recent days.
Oh, by the way Geoffrey, since I doubt very much that you read much of my own blog from the comments you make about libertarians, might I suggest you read a better known one about corporations, free markets and libertarians.