Having followed the Chancellor’s Autumn Statement and then watched Danny Alexander interviewed on Newsnight on Tuesday I have to say my initial reaction was “oh, what is the point?”. That was a reaction to both substance and process.
The Chancellor’s Autumn Statement, as the IFS analysis demonstrates, hits the poorest hardest and those on middle and higher incomes less hard. Most would call that regressive. I’m sure some bright spark can come up with an argument that if you look at the data from a different direction – on the basis of expenditure not income, for example – then it isn’t regress at all. Be that as it may, how can it be a just strategy to uprate out-of-work benefits by freezing child tax credits – thereby moving a further 100,000 children into poverty – while leaving the tax burden on higher income households largely untouched? It conflicts directly with Government commitments to reward those contributing actively to society because it weakens work incentives. I’m glad that the Coalition catchphrase – “we’re all in this together” – seems to have been retired. We so palpably aren’t.
The Chancellor’s early commitment to so-called “expansionary fiscal consolidation” also appears to have evaporated. It was always nonsense. Research indicates that the strategy is almost always a failure. The cuts happen in the short term. The transition to a private sector-oriented, export led economy can take years – and relies not only on strong export markets but heroic assumptions about rapid labour market adjustment and the nature of capital markets. In the meantime, demand collapses, which destroys business confidence and willingness to invest. You set off a downward spiral.
The Autumn Statement introduced all sorts of small-scale initiatives that wouldn’t have been countenanced under pure Plan A. But are these new initiatives are likely to be effective?
Spending on infrastructure has got to be welcome. But, again, as so much of it relies upon finding a vehicle with which to entice pension funds to invest that won’t happen overnight. Personally I would have preferred greater emphasis upon investing in housebuilding, for three reasons. First, it is easier to get housebuilding projects up and running in the short term. Second, more of the money can be channelled to small and medium sized firms of the sort that don’t tend to control road widening or rail building schemes. Third, with housebuilding there tends to be less leakage into imports than other types of infrastructure investment.
The most obvious question mark is over the idea of “credit easing”. Clearly the Chancellor feels he can no longer rely on the more general approach to quantitative easing. Giving banks the money and expecting them to lend has just resulted the banks leaving the money on their balance sheets. The banks say that the problem is not an unwillingness to lend but a lack of demand for funds. The fact that private sector firms are also sitting on piles of cash and not investing lends support to this view. So the Government is trying a more targeted approach. It is trying to strengthen a specific link in the economic chain. But is it the right one?
As perhaps befits a Cabinet drawing its senior members from banking dynasties, the solution is sought in banking. It is of a piece with the supply-side thinking such as proposals for further labour market deregulation and weakening of planning and environmental protections. Pre-Keynesian classical economic thinking continues to dominate at the Treasury.
We face predominantly a shortfall of demand and a crisis of confidence. If firms faced consumers with money to spend then they would have the confidence to take out loans to invest in production. Offering to guarantee loans for investment when there are no consumers looking to buy is coming at the issue from the wrong end. Walsus’s Law doesn’t hold outside of the world of the textbook.
This isn’t about not wanting to reduce the deficit or the desire to continue unsustainable spending. It is about whether the austerity-driven approach is the way to cut the deficit or whether it is self-defeating. Much has been made of the need to preserve the AAA rating from the credit ratings agencies. We are getting strong signals that the austerity strategy will not sate the CRAs and the rating will go anyway. In the meantime, the long run productive capacity of the economy has been undermined and many thousands of people’s lives have been damaged. Other strategies could well be judged more credible in this context.
Danny Alexander apparently committed the Liberal Democrats on live television to collaborating with the Tories in planning £15bn of cuts after 2015. It was news to me. It appears it was news to many other Liberal Democrats as well, including those in the Parliamentary party. It is pretty incendiary stuff.
There are many positive things that differentiate the Liberal Democrats from other parties. One is its approach to internal democracy, with the leadership there to represent the agreed, democratically decided collective views of the membership. Rather than, for example, the leadership sitting behind closed doors cooking up policies that they want to see implemented and expecting the membership to follow like sheep.
Concerns have already been expressed that being in government is undermining this fine tradition. There were dark muttering about the management of the agenda at the Birmingham conference. Was the leadership trying to stifle dissent around the NHS Bill so as not to cause problems with the party’s Coalition partners? Danny Alexander may well have been pressed into an unwise commitment by Paxman’s persistent questioning, but is this how it is going to be from now on? Are we to discover what party policy is by watching late night television? That would be a very sad demise for a fine tradition.
Alexander’s comments also seem to suggest that there is at least some thought being given to a post-2015 coalition with the Tories. That would be very dangerous territory. Keeping an open-mind about the formation of any future coalition has got to be the appropriate stance.
Equally fundamentally, signing up to the Tory agenda now would remove two reasons for voting for the party. One, the party conducts itself in a more democratic manner than other parties, with the scope for grassroots members having a genuine influence. Two, the substantive agenda is unjust and regressive. So what would be the point? Why not vote Tory and get the real thing?
* Alex Marsh is a member of Bristol North Liberal Democrats and blogs at alexsarchives.org.
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59 Comments
“Danny Alexander apparently committed the Liberal Democrats on live television to collaborating with the Tories in planning £15bn of cuts after 2015. It was news to me. It appears it was news to many other Liberal Democrats as well, including those in the Parliamentary party. It is pretty incendiary stuff.”
Like you, Alex, I didn’t see that “commitment” on live TV, but I do rather think that the reports I have see in various parts of the media (some of them well known for their love of mischief-making as regards the Lib Dems) were essentially “spin”.
The way I see things is this:
1. Original plan is to cut the deficit completely by 2015.
2. Various factors (Eurozone, world economy etc) occur over the last 18 months conspire to make 1. no longer achievable.
3. Rather than make even more severe cuts to achieve 1, the Coalition Government quite rightly accepts that the deficit is unlikely to be completely cut by 2015.
4. If that means that £15 million of cuts are now needed post 2015 to cut the deficit completely, then all political parties (including Labour) would logically be “planning £15bn of cuts after 2015”, unless they actually planned to run a permanent deficit. I don’t think even Labour are planning that, are they?
As far as I am concerned, Danny was “stating the bleeding obvious”, but as I said before I base that on what I have read, rather than from seeing the actual TV interview(s).
Indeed, I am now myself in the “what’s the point?” camp. Our left-of-centre voters are moving back to Labour and why would people vote Lib Dem if our policies are going to continue to mirror the Tories’? People will just vote for “the real thing” and vote Tory.
I’ve been supporting the party (albeit critically) since the formation of the Coalition, but I don’t know how much longer I can do so. Our economic policies have done exactly what certain people said: they have reduced demand, increased unemployment and lowered the Chancellor’s tax take which, obviously, is leading to the deficit continuing to rise. Many people, especially Keynesians, pointed out that this would happen if we cut spending too far and too fast. The majority of the UK voted for ours or Labour’s spending plans: only 36% of the electorate voted for Tory plans to cut deep and fast! “Plan A” has failed. We’ve let the Tories get away with their top-down reform of the NHS that they said was not on the cards. We are putting the biggest burden on cutting the deficit onto the backs of the poorest and those least able to shoulder the burden like students and disabled people. We’re told there’s “no money”, but we’re forging ahead with renewing Trident, a possible war in Iran and high-speed rail with tunnels and all while we leave some of our pensioners to freeze in the winter. How can we defend all this for the next three years? I certainly cannot, and if we continue with this approach, there will be nobody left to vote for us in 2015. All the left-of-centre people will probably have moved back to Labour and, like this article states, I cannot see Tory voters voting for us when they can vote for the real thing.
We are not all in this together at all and it really does sadden me that we have let the Tories walk all over us like this. It may take us decades to build up the kind of support we had before we joined coalition. Over 60% of people who voted Lib Dem in 2010 identified themselves as “centre left”. These people are never going to vote Tory and I am afraid they will now never vote Lib Dem again. And can we blame them if we keep telling them “we’re all in it together” while they watch the rich and bankers continue as if nothing ever happened?
It’s time to start thinking about taxing the rich. It’s time to take some of the burden off of the poorest. We are increasing the oppression of poverty which our own constitution forbids explicitly. If we continue to hit our very own electorate where it hurts, they won’t come back for a long, long time…if ever. And this includes Lib Dem voters such as myself who have voted SDP/Alliance/LibDem since the early 80s.
I like Danny. Nice to see a politician being honest for a change.
Simon – watch Danny Alexander on the Tuesday edition of Newsnight and Tom Brake on the Friday edition of the Daily Politics on bbc iplayer. I don’t see how any Liberal Democrat could watch those two interviews and not sympathise with the title of Alex Marsh’s post.
@Richard, Mr. Alexander used to be, before the coalition, a huge campaigner against Labour’s welfare reforms. He warned they were inhuman, mechanical and badly planned. Now that he is in Coalition, he supports and defends Tory welfare reform which is even worse, and has caused a few people to commit suicide.
I don’t consider that very honest at all. We’re better than this, or at least I thought we were 🙁
@Simon – I used the word “apparently” not in the sense “I didn’t see it but I hear this is what happened …” but in the sense “I was watching the interview and it appeared that …” – Sorry if that was misleadingly phrased.
I should probably have been more emphatic – “I was watching the interview and Danny Alexander committed the Liberal Democrats …”. Paxo got him to repeat the point because he clearly couldn’t quite believe what had just been said.
“the substantive agenda is unjust and regressive. So what would be the point? Why not vote Tory and get the real thing?”
It wil be intereting to see what the Lib Dems have to offer to the people of Feltham and Heston on this question – and what the people’s verdict is.
I-player is your friend if you want to find out what your cabinet members are saying. It starts about 14 minutes in, but I think this is the passage:
Paxman – So you are going into the next election promising further billions of pounds of cuts in public spending. That is what you are going to say in your manifesto at the next election?
Alexander – I’m afraid so. Yes
Paxman – I thought your promise was that in the last year of this government you would not necessarily be giving unequivocal endorsement to every government policy.
Alexander – Well as a government we originally set out plans that would meet our targets a year earlier in 2014-15.
Because of the way that economic circumstances have deteriorated we need to make this commitment for future years. So yes, Liberal Democrats and Conservatives will work together in government to set out plans for those following two years. And of course we will both be committed to delivering them.
Paxman – So what’s the point of voting for you rather than the Conservatives then?
Alexander – Well there are a lot of points to vote Liberal Democrat rather than Conservative or Labour. But those are things that we will set out at the general election in our respective manifestos.
Paxman – OK so let’s take the most topical example..
Alexander – .. which isn’t written yet so I can’t possibly tell you what’s going to be in it.
Paxman – Of course. I thought you might say that. But you will be telling us we need to save another 20 or 30 billion pounds somewhere or other. But let’s take the most topical example which is what was announced today by the Chancellor….What was not in that proposal that the Tories wanted to put in but the Liberal Democrats kept out?
Alexander – Which proposal are you talking about?
Paxman – The autumn statement today. All these plans to cut public spending and get the economy back on track he said. What did the Tories want to put in there that you the Liberal Democrats kept out?
Alexander – Well we had lots of debates within the government. I am not going to air those debates in public. We agreed all the measures in today’s autumn statement… (blather continues)
I left the Lib Dems because I couldn’t see how you could have any credibility on an equidistant platform at the next election. Sadly it looks even more that way.
(PS Rachel Reeves wasn’t very impressive on Labour supporting the public sector workers’ strike either)
“Alexander – Well we had lots of debates within the government. I am not going to air those debates in public. We agreed all the measures in today’s autumn statement”
The critical point comes with an inability to differentiate between presenting the outcome of those Cabinet discussions as a compromise which has elements in it which are disagreed with and presenting it enthusiastically as if you agree with all parts of it. Do the latter and you are just an add-on. And politically dead in the water.
@Keith Day
Thanks for that; I hadn’t seen or read that previously.
If that is indeed the “offending” passage, then I think the analysis in my first post above was spot on.
I think there are two components to the argument (i) is seeking to cut the deficit at this point in the cycle the right strategy (ii) if yes, how should that be done. It may be that all political parties continue to believe that (i) is correct but then the issue is (ii). I would have thought that even if liberal democrats propose an adjustment to the deficit of the same order as the Tories the route to achieving it in terms of the balance of taxation versus cuts, what is taxed and what is cut would look completely different to the one favoured by the Tories. That is where there must be differentiation. And that is why we shouldn’t be signing up to a common agenda now.
…………Why not vote Tory and get the real thing?………….
Why not? Every time I listen to Danny Alexander speak I understand why the Tories voted him near the top of their “Love List”….I’ve heard his interviews praised as ‘honesty’. If that is honesty then count me out as a LibDem;
Paxman…”What did the Tories want to put in there that you the Liberal Democrats kept out?”
Alexander…”waffle”, “waffle”…. Not one ‘bone’ to throw to those who supported his “Pre-Election promises”
Does any self-respecting LibDem believe that, had our leadership offered even token opposition, the promise of action on ‘child poverty’ might have been left in? Instead we had Alexander, on the BBC PM programme, actively defending the broken promise….
It makes me ashamed!
@jason
“Paxman…”What did the Tories want to put in there that you the Liberal Democrats kept out?”
Alexander…”waffle”, “waffle”…. Not one ‘bone’ to throw to those who supported his “Pre-Election promises”
What Danny reportedly did say was “Well we had lots of debates within the government. I am not going to air those debates in public.” – which is exactly what he and any other Minister should have said.
It shouldn’t be about “bones”. In fact the Party needs to realise that too much “bone throwing” carries electoral downsides.
…………….What Danny reportedly did say was “Well we had lots of debates within the government. I am not going to air those debates in public.” – which is exactly what he and any other Minister should have said……….
Which is exactly my point! Why vote LibDem? there are enough ‘shades’ within the Conservative party to encompass DA…
BTW… What is your opinion on the ‘child poverty’ issue?
What nobody has mentioned above is the convention of collective cabinet responsibility.
As a back-bencher you are free to speak your mind. As a cabinet minister, you are free to speak your mind within the confines of cabinet discussions, but when you present the cabinet’s decision to the outside world you must speak as one. If you want to speak out against the government, you resign.
What our manifesto will contain next time around is a different matter, though. Paxman knows the score and was stirring. (What else would you expect?)
@jason
So what else should a minister (never mind a Cabinet Member) say in response to that question?
Cabinet collective responsibility exists for very good reasons. Isn’t that obvious?
@Ann Keelan
Completely agree, both on Cabinet collective responsibility and Paxman’s stirring.
Simon Shaw
If that means that £15 million of cuts are now needed post 2015 to cut the deficit completely, then all political parties (including Labour) would logically be “planning £15bn of cuts after 2015″, unless they actually planned to run a permanent deficit.
Of course you are implying that the permanent deficit (that we have had since the 18th century) can be cut completely by making cuts in spending. That the long standing reality of a permanent deficit is somehow abnormal ? That our priority should be to reduce spending rather than to increase growth ? That this “permanent deficit” should be our number one priority in Government and it’s not just a smoke screen to enact policies that cut public services, take from the poor and unemployed and run the country in what could be described as a typically Conservative way ?
If these things are “logical” to you then I commend you for reading the script well. You repeat the Government line almost perfectly.
Of course removing the “permanent” deficit through spending cuts would be an achievement beyond the ability of previous Governments and I have yet to see any evidence that it would work at all. In fact the evidence so far seems to suggest that such a policy does not work and is in itself not at all “logical” , but is actually a fallacy…
Unless of course you have any evidence that sufficient and sustained cuts in spending do in fact bring about a zero deficit ? rather than a sharp decline in growth which itself creates the need for yet more borrowing ?
@Barry George
“Of course you are implying that the permanent deficit (that we have had since the 18th century) can be cut completely by making cuts in spending.”
We haven’t had a “permanent deficit” since the 18th century. In fact we have had a budget surplus within the last 15 years.
I’m not sure I understood your argument, but does that major error of fact on your part fatally undermine it?
We haven’t had a “permanent deficit” since the 18th century. In fact we have had a budget surplus within the last 15 years
Playing semantics again Simon ?
This country has had a permanent debt since the 18th century . We didn’t finish paying the USA for what they gave us in WW2 until September 2006.
Surplus or deficit … Makes no difference .. We are a nation in debt and have been permanently so for 300 years
If you fail to understand my point then I am afraid I cannot help you… The questions were simple enough.
It does seem as though your polarised view of the world is becoming increasingly isolated here on the public side of LDV . I do hope your point of view is not so solitary in the members forum.
l also don’t understand your need for bold type , I wonder if you believe that somehow enhances your argument ?
” September 2006″ should read “December 2006”
@Barry George. You are right that this really is quite simple but you have not come close to understanding it. We have a huge public spending deficit. That is the difference between income and expenditure. Debt is the accumulated deficit. It is OK to have debt if you can finance it; we cannot finance the debt because we have a huge spending deficit. Every Labour government ends in a financial mess partly because of a belief in macro economic pixie dust solutions. Danny Alexandre committed the Liberal party to fiscal realism. we are doing that because it is right, not because it is popular.
Ok Stephen I will make the leap with you…
Any evidence that the solution will be found by cutting expenditure rather than by spending to increase growth ?
You say it is the right thing to do so surely you have evidence that such a plan will work ?
It’s just that the Autumn statement kinda gave me the impression that the cuts were not working and we now need to borrow even more money ? .. Sorry for being simple. Its just that these cuts seem to be hurting a lot of people but it appears they are having a negative impact on our borrowing.
Plenty of pain but a negative gain.
@Barry George
“Playing semantics again Simon ?
This country has had a permanent debt since the 18th century . We didn’t finish paying the USA for what they gave us in WW2 until September 2006.”
Talking rubbish again, Barry?
It is really quite a basic thing to appreciate the difference between annual deficit and the National Debt.
You clearly don’t understand the difference; otherwise you wouldn’t imply that you thought the National Debt could be paid off in full by 2015 or 2017! What a howler!
I think we all make basic mistakes like that, but I always find it best to apologise and correct myself. You would do well to do the same.
In the light of your fundamental error here, and in the absence of any correction from yourself, I really cannot follow your argument.
Simon
You clearly don’t understand the difference; otherwise you wouldn’t imply that you thought the National Debt could be paid off in full by 2015 or 2017! What a howler!
I implied no such thing . It was you who wishes to reduce the deficit and subsequenlty meet our debt payments by reducing expenditure… not me
My question was simple
Any evidence that cutting expenditure will leave us with a surplus rather than simply cripple growth and drive the deficit higher or is it simply a simple an ideoligical belief without any evidence to back it uo at all ?
I guess the latter…
@Barry George
You clearly don’t understand the difference; otherwise you wouldn’t imply that you thought the National Debt could be paid off in full by 2015 or 2017! What a howler!
I implied no such thing . It was you who wishes to reduce the deficit and subsequenlty meet our debt payments by reducing expenditure… not me
Yes you did imply that! Refer to the first two sentences of your posting of 8.03pm.
You have now complicated things by introducing another bit of meaningless gobbledegook when you say this:
It was you who wishes to reduce the deficit and subsequenlty meet our debt payments by reducing expenditure… not me
A few observations:
1. I wish to reduce the deficit, the Lib Dems wish to, the Conservatives wish to and Labour wish to, all by the same amount. The only difference is about the speed. Why are you the one who is out of step with everyone else, when you say you don’t wish to?
2. What on earth does “subsequenlty meet our debt payments by reducing expenditure” mean?
3. When did I say that (not that I know what it means)? The only thing I referred to was “cutting the deficit completely”. I never mentioned debt payments.
Simon
I fail to see how you can not understand the question..
you clearly opened this thread with the statement “As far as I am concerned, Danny was “stating the bleeding obvious”,
That clearly means that you believe that austerity is the correct strategy to reduce the deficit.
Do you have any evidence that such a policy actually works ?
If you do not then you belief is purely ideoligical and far from “logical” as you claim.
What I don’t understand is quite what the fuss is about. What the Autumn statement said and Danny Alexander confirmed on Newsnight is the coalition is going to take longer to eliminate the structural deficit. This surely moves the coalition closer to Labour’s position – who afterall pledged last year (and continue to do so today) that it would half the structural deficit over the course of a Parliament.
Labour were and are planning austerity to last 8-10 years the coalition is now saying seven.
We’re in fag paper territory here.
@Barry George
What I actually said was this:
“If that means that £15 million of cuts are now needed post 2015 to cut the deficit completely, then all political parties (including Labour) would logically be “planning £15bn of cuts after 2015″, unless they actually planned to run a permanent deficit. I don’t think even Labour are planning that, are they?
As far as I am concerned, Danny was “stating the bleeding obvious” “
I don’t know whether you are coming from a “far left” position, Barry, politically and economically, but as I have said repeatedly here, all three main political parties believe that “austerity is the correct strategy to reduce the deficit”. There is some slight difference over speed of reductions in spending, but the difference is far, far less than the impression that Labour try to give – as Dan points out above.
Even after the reductions in spending so far the Government is running a budget deficit this year of over £120,000,000,000. Doesn’t that represent a massive Keynesian stimulus? (I don’t know for sure – perhaps someone who understands economics could comment.)
The UK economy’s problem is that we should never have got into this situation in the first place. For that the previous Labour Government shoulders the major part of the blame.
Apologies – I now notice that above, as well as in my very first posting, I referred to “£15 million of cuts”. That should, of course, have said “£15 billion”.
Simon
I don’t know whether you are coming from a “far left” position, Barry, politically and economically, but as I have said repeatedly here, all three main political parties believe that “austerity is the correct strategy to reduce the deficit”.
Surely not far left to merely ask if you had any evidence that austerity will work… Apparently you do not.
I really have no interest in what Labour would do. They did not get my vote and they are not in Government. So stating that Labour would do similar is of no relevance to me.
As a voter (not an economist) the autumn statement left me with the ‘opinion’ that the cuts were not working. In fact they were making things worse. It left me with a ‘belief’ that economic growth was being stifled by these policies and as a result we would need to borrow even more money…
As you clearly remarked that Danny was “stating the bleeding obvious with regard to the need for extended austerity… I mistakenly believed that you could present me with “evidence” that would justify why it was “bleeding obvious” to apparently stifle growth by removing stimulus
And for that error , I will apologise
Mea culpa
The point is to keep the country solvent. All the difficulties being experienced now are nothing compared to what we’d experience if the country lost the confidence of lenders and had to go deficit cold turkey.
@Barry George
”Surely not far left to merely ask if you had any evidence that austerity will work… Apparently you do not.”
It displays a certain arrogance on your part to assume that all the experts at the disposal of the Labour Party, Conservatives, Liberal Democrats, Bank of England etc are wrong and that you are right. I am not an economist so I prefer to rely on experts who are.
If you are seriously suggesting that the best way to cut the deficit is actually to increase it, then where would your evidence for that be? And isn’t the logic of your position that doubling, tripling, quadrupling the present deficit is the best thing of all? If not, why not?
Would you ever see any part of those borrowings (to cover the deficit) being repaid? If yes, how? If not, don’t you think the lenders might see things the same way?
Putting it bluntly, why, exactly, do you think that Greece’s position is one that we should emulate?
“if the country lost the confidence of lenders and had to go deficit cold turkey”
Which
(1) given the official announcement of a clear direction of travel for deficit reduction (whether over one term, two terms, three terms etc etc) and
(2) the crisis in the EZ = which has made us a safe harbour;
would NEVER have happened.
Darlings plan satisfied (1) and (2) would have happened whoever got elected.
It is a CHOICE to try and reduce the deficit in FOUR years !!
One which acts as a convenient smokescreen for Tories (and their Orange bookie cousins) to undertake a 19th century style radical hollowing out of the state.
Well, I’m sure this looks very incendiary at first glance, but when you think about some of the huge policy gulfs separating the Tories from the Liberal Democrats, agreeing with them in broad terms that we need to save £20bn early in the next parliament really isn’t anything to be worried about.
I mean, lets look at one of the huge gulfs as an example – the nuclear deterrant.
In the next Parliament, the Tories want to buy a new one. Because Great Power and stuff.
In contrast, the Liberal Democrats by and large consider the existing one to be a relic,. And I think we’re pretty much unanimous in saying that the plan of buying a whole new one is just silly.
So, even if we go with the most watered down policy possible for the Liberal Democrats to hold, ie no replacement, but life extension for Trident, there’s many billions of pounds that we’d save and they wouldn’t right there.
Let’s move on to an easy tax policy difference.
They want to cut inheritance tax for reasons we’re probably all clear on, we want to bring in land value tax to hit the hedge funds and corporations that now hold the majority of British real estate in an effectively dormant state. So, their policy in fact adds to the deficit, ours reduces it while penalising asset-hoarding, promoting growth and driving efficiency.
Basically, without getting too sidetracked by The Land, I’m trying to point out that being signed up to £20bn of deficit reduction in the next Parliament is not by itself a problem considering the completely different priorities the two parties have, both in terms of targets for reduction and things that should be sheltered from it. In fact, being signed up to a general policy of balanced budgets across the economic cycle (by which I mean that the Keynesian deficit that should be built up in downturns must also have a credible repayment strategy attached) is a key part of what makes the Liberal Democrats a party I want to be associated with.
All I’ve got left to say is that our MPs and Ministers must find more time to articulate the Liberal Democrat argument to the public and media. They must not be afraid to declare openly that the post 2015 situation is that the two parties are separate. No single manifesto for 2015.
Latest polling / swing predictions indicate a Lab majority of 30 odd, and LDs getting about 10 seats. It’ll be interesting to see if there’s another council election meltdown in May 2012. On those numbers, it really doesn’t matter what the LDs say about coalition.
In answer to the original question: policy would be more even more regressive without the LibDems influence?
Is it, perhaps time to adopt a faux scouse accent and suggest that posters “calm down Barry, calm down Terry”?. Could we then possibly then have a debate about the obvious massive value to the Liberal Democrats of kicking chunks out of each other in this public forum?
Simon Shaw
Ho ho ho – the temerity to come someone else arrogant (and may I also add smug to that)
I do not know which economist is right – there are so many opinions out there and it is clearly not a rigorously scientific discipline but to pretend that all economists support austerity is ridiculous. I assume you have not had enough interest to read around the subject.
Look at the remarks of Stiglitz, Pissarides, Krugman, Blanchflower etc. They are against the approach of the Coalition and compare it to that of Mellon during the 30s.
Are they right or wrong – I am not able to say from an economic point of view but to me there does seems to be some sense in what they say. You, however, seemed to indicate that there is only one (pro-austerity) view.
Also, stop this bollocks about Greece – we can never become like Greece as we are sovereign in our currency. The problems that would cause are different to those seem by Greece with different solutions.
The debt of Government is different from household debt – when there is no demand in the economy then the Government may have to create it – this is differnet from managing a household budget. Saying that, however, I have a current debt of around 300% (due to a mortgage) and occasionally run a deficit in a particular year (if I have to buy a car for example). Over my economic cycle of 40 years or so I assume I will be in credit!
Tony Dawson
I am not considered by number of the posters on this forum to be a LD as I have only voted in them in every election since I could vote (except for 97).
I still theink the LD as they have presented themselves over recent years , a centre-left liberal party as being the closest to my views. I also believe in getting rid of the nuclear deterrent, removing tuition fees (or reducing them to a nominal value such as in mainland Europe), sensible decriminalisation/ legalisation of certain drugs, investment in the science of sustainability etc)
I see none of thos beliefs currently being promoted by the Coalition so will stay opposed – Alexander epitomises this
@bazsc
“Ho ho ho – the temerity to come someone else arrogant (and may I also add smug to that)
I do not know which economist is right – there are so many opinions out there and it is clearly not a rigorously scientific discipline but to pretend that all economists support austerity is ridiculous. I assume you have not had enough interest to read around the subject.
Look at the remarks of Stiglitz, Pissarides, Krugman, Blanchflower etc. They are against the approach of the Coalition and compare it to that of Mellon during the 30s.”
No, I don’t have “enough interest to read around the subject” – certainly when all three major UK parties as well as the Bank of England agree about the necessity to cut public spending and the deficit. I never “pretended that all economists support austerity” – just those working for, or listened to by those 4 bodies.
As an analogy, I haven’t read much about Climate Change because I am happy to accept that the 95% of scientists active in the area who are “experts” and who agree on the topic actually know what they are talking about.
Incidentally, don’t you think there is a certain “smugness” in throwing up a list of names, none of whom I (or 99% of the population) have ever heard of, i.e. Stiglitz, Pissarides, Krugman, Blanchflower and Mellon? Or possibly you just made them up to try and catch me out (shades of Stephen Potter and ‘Gamesmanship’, perhaps)?
Simon Shaw
That last post has left me reeling a bit.
You called someone arrogant to say when they asked for evidence that austerity works. Instead of giving an answer you made a glib statement about everybody thinking that austerity was the way forward and calling them arrogant to suggest otherwise.
I pointed out that a number of the most respected Nobel prize-winning economists actually disagree with the approach taken viz austerity. These ‘names noone in the public has ever heard of’ know far more about this subject than you or I do I presume. You seem almost to revel in your ignorance
You will also see that I never said they are right – just that they make a persuasive argument that counters yours – I think to state that just because the Labour Party, Tories and LD think something makes it correct is giving them a little too much credit and the Treasury has hardly covered itself in glory. Remember the LD sat on the fence before the last GE (who knows what they really thought) and some senior Labour figures disagreed with Darling (including Ed Balls who for all his faults is a well-educated economist for what that is worth). What was Alexander’s former job again (or Osborne’s for that matter)?
I purpose that before calling someone arrogant and making sweeping statements you actually do a little bit of reading about what these guys say (Stiglitz is particularly interesting and he was one of this that predicted the crash) – perhaps you may have a more rounded view of things
If the Tories, or with different results Labour had run a government under confidence and supply – I believe that the country would be utterly stuffed by now.
“If that means that £15 million of cuts are now needed post 2015 to cut the deficit completely, then all political parties (including Labour) would logically be “planning £15bn of cuts after 2015″, unless they actually planned to run a permanent deficit. I don’t think even Labour are planning that, are they?
As far as I am concerned, Danny was “stating the bleeding obvious” “
As far as ‘permanent deficiit’ goes…Apart from two brief periods (at the end of the 1980s and beginning of the 2000s) the UK has been running a budget deficit since the early 1970s.. Mrs Thatcher/Major, despite N. Sea oil and ‘Privatisations’ ran a deficit for all but two of their 18 years. The idea that Blair/Brown’s public spending were the cause of our current problems ignores the fact that, up until 2008, the historical Tory deficits were higher than those under Labour and to also ignore the hundreds of £Billions paid in bank bailouts.
The Coalition’s obsession with ‘cuts’ (instead of trying to collect the, perhaps, £70Billion in tax scams) means the deficit reduction programme will ensure a rise in in poverty, homelessness and hunger.
@bazsc
“That last post has left me reeling a bit.”
“Reeling”? Really “reeling”?
Rather than suggesting that I do “a little bit of reading” shouldn’t you be suggesting that the Labour Party do that, or the Bank of England?
As you almost certainly know a lot more about economics than I do (not hard, really!), could you help with a question from Barry George, and two from me?
1. (Barry George) “ask if you had any evidence that austerity will work”.
I assume that there is evidence that “austerity” has worked in the past (Canada? Ireland, currently?), although it may depend on what you mean by “worked”. Do you have any evidence?
2. (Me) “Even after the reductions in spending so far the Government is running a budget deficit this year of over £120,000,000,000. Doesn’t that represent a massive Keynesian stimulus?”
Does it? Or does the deficit need to be £200 billion? Or £250 billion?
3. (Me, addressed to Barry George) “If you are seriously suggesting that the best way to cut the deficit is actually to increase it, then where would your evidence for that be? And isn’t the logic of your position that doubling, tripling, quadrupling the present deficit is the best thing of all?”
I am not clear if that is your position too, bazsc, but if it is could you explain why you think the way you do?
@jason
“instead of trying to collect the, perhaps, £70Billion in tax scams”
That’s an interesting figure, jason. How is the £70 billion made up?
Does it, for instance, include the tax relief given on pension contributions? That alone must surely amount to many tens of billions a year.
Simon Shaw
Do you read the posts!
I am not saying whether someone is right or wrong. If you remember it was you that stated that someone else was ‘arrogant’ for thinking there was an alternative to austerity. I pointed out that there are a significant number of world economists who think otherwise – you then proceeded to suggest I made up their names (bizarre!) and also seemed to be proud of the fact you are ignorant of their work.
As to your questions – well they are not particularly well defined are they. Seem to be a bit ranting
The Canada example is not completely relevant to the current situation as it was done at a time when the demand was coming externally. It is too soon to say if Ireland is working. Have a read perhaps you may learn something. It always good to read the other point of view
As to deficit/debt – i would suggest that the Government should use its ability to borrow cheaply to put some demand in the economy and encourage investment in the right areas. This should be coupled with spending cuts and tax rises (particularly on assets) – what that may mean for the deficit I do not know. May be higher in the short-term but good investment should give a return. If things are as serious as said then perhaps we need to go on a war footing and sop end as much as necessary to help us through to the other side. This may be too simplistic but no more so than your comments – it is something I base on my own particular reading of the arguments and the situation. As you seem to be happily ignorant of one part of the argument I would say you are less in a position to pontificate
If you actually bothered to read the OBR documentation then you would see that the Government is actually planning to move (cheap) Government debt onto (expensive) household debt.
http://www.guardian.co.uk/politics/2011/apr/02/family-debt-burden-government-figures
@jason
The idea that Blair/Brown’s public spending were the cause of our current problems ignores …. the hundreds of £Billions paid in bank bailouts.
I’m not sure I follow that, jason.
If a major cause of the current problems and the deficit (around £150,000,000,000 last year and around £120,000,000,000 this year) are “hundreds of £billions paid in bank bailouts”, then that must mean that “bank bailouts” must be still happening – otherwise those deficits would be far lower than they are currently.
So how much have “bank bailouts” actually amounted to? (As opposed to bank guarantees, which would only impact on the deficit if they were called upon)
@bazsc
“Do you read the posts!
I am not saying whether someone is right or wrong. If you remember it was you that stated that someone else was ‘arrogant’ for thinking there was an alternative to austerity.”
It’s clear that you don’t read other posts otherwise you would not have misquoted me. The “arrogance” referred to the belief that the author knew better than all the experts I quoted, as follows:
It displays a certain arrogance on your part to assume that all the experts at the disposal of the Labour Party, Conservatives, Liberal Democrats, Bank of England etc are wrong and that you are right. I am not an economist so I prefer to rely on experts who are.
As to your bizarre complaint that I “then proceeded to suggest I made up their names (bizarre!)”, you would really need to know the works of the excellent 1950s humourist, Stephen Potter, to appreciate my sense of humour when I said:
Or possibly you just made them up to try and catch me out (shades of Stephen Potter and ‘Gamesmanship’, perhaps)?
I can’t help remembering the documentry that the Mp’s made before the election for channel 4 titled “Tower Block of Commons”
Iain Duncan Smith was unfortunately only able to take part in the first day of filming as he had to return home due to his wife’s ill health. Very convinient some might say, but he was replaced with Naddine Dorris.
http://www.channel4.com/programmes/tower-block-of-commons/4od#3051600
The whole Idea of the programme was the MP’s where supposed to live as those did living in council housing on benefits. Naddine was caught pulling a £50 note out of her bra, seems she can not seem to help breaching the expenses rules.
The Liberal Democrat MP, was quick to criticize the mother who spent some of her benefit on tobacco , And called it irresponsible, It was then amusing to see the woman pull up his MP’s Expenses which included Money for an “Iron” and plasma TV’s, his reasoning was, that because he had “2 Homes” It would not be viable to have just the 1 Iron and take it with you each time, Completely missing the point that “Why” should he be claiming for the cost of an Iron in the 1st place at the expense of the tax payer. The Sheer hypocrisy was amazing.
And today we get Naddines article for the Mail on Sunday
http://www.dailymail.co.uk/news/article-2069701/Revolt-PMs-4k-pay-cut-ministers-Cameron-tells-Cabinet-pay-50-gold-plated-pensions.html
Complaining about rises in Benefits and Child Care
“But instead of taking their quota of the misery, the long-term unemployed are being allowed to escape the austerity drive, and funds the country does not have are being squandered on a childcare policy nobody has asked for.”
She goes on to say
“About 40 per cent of two-year-olds in England will receive 15 hours of free childcare a week, at a total cost of £650 million.
Rather a lot of money, one might think, at a time when there is supposedly no money to spend, for a scheme that no one really wants or was asking for.”
Read more: http://www.dailymail.co.uk/news/article-2069701/Revolt-PMs-4k-pay-cut-ministers-Cameron-tells-Cabinet-pay-50-gold-plated-pensions.html#ixzz1fZdEDJpE
Read more: http://www.dailymail.co.uk/news/article-2069701/Revolt-PMs-4k-pay-cut-ministers-Cameron-tells-Cabinet-pay-50-gold-plated-pensions.html#ixzz1fZabUkEt
If you never watched the program before, watch it now, If you want evidence to see how an MP act before an election and after, you need no more further evidence than this show.
Simon Shaw
I have just been reading through your posts again and return to the remark you made about the Labour Party and the BoE reading up more around the subject.
What the BoE think is quite difficult to understand as King seems to be following trends rather than leading. QE is a tacit admission that austerity has to be balanced with demand. My view is that QE in all its forms has been poorly executed as it seems to just go to help the banks and has not found its way to increase useful investment.
As to the Labour Party – as normal they have been craven but I do have some sympathy for them, as I do for the LD on this matter. I disagree with your comments on Cabinet Collective responsibility as i think it is unfair to the junior party in a Coalition. It may be that the LD position is much closer to mine that I give credit for but then who would know. I would like this idea of collective responsibility released for a coalition so we, the voters, have a clearer view of each party’s position.
Before the election I thought the LD and Labour were closer than LD and Tory – this has changed and I am not convinced on the arguments given as to why this was the case. Without knowing the arguments in cabinet it is difficult not to come to the conclusion that they have gone ‘native’
Also, the media has a simplistic approach of treating Government debt like household debt which is a false analogy. There are more subtle arguments being played out in the comments pages but these rarely make the headlines.
The current Plan B in all but name from the Chancellor seems to indicate a fear for the lack of growth that has been argued by opponents of austerity since the election – my view is that the areas chosen by him though are misguided (cut on fuel tax, relaxing environmental regulations etc).
The Governments and the BOE plan for more quantitative easing is just a complete waste of time and money.
All it achieves is the banks get to increase the balance sheets, it does not force them to lend more to business.
Yes there is evidence that some business are not able to get credit, but there is also evidence that a lot of businesses do not want or can not afford anymore credit. There is zero confidence in the market, small to medium size businesses are not looking to invest more during this uncertainty and would prefer to pay down there debt liabilities rather than take on more. The only companies that are expanding are the ever increasing Super Markets and corporations from the FTSE 100, who lets be honest, where the ones who where demanding changes to employment laws in exchange for their public support for George Osborne’s Austerity plans.
The only people who are really benefiting from this Government are the Super Rich and Westminsters Corporate Cronies, all at the expense and hardship of hard working middle Britain, The Low paid and those on Welfare.
Nothing ever changes!
Quantitative easing does not put money into the hand of the consumer, who are the only ones who can restore confidence to businesses by actually having money to spend.
People at the Lower end of the pay scale and those on benefits are the only ones who are more likely to spend any extra available income through necessity, rather than hoarding and hiding their millions in Tax havens which is of no use to this economy and paying down the deficit whatsoever.
So instead of the BOE doing more QE, and shoring up the bank balance, what they should be doing is
1) Returning the Support for Mortgage Interest Payments from 3% back to 6% as it was before this Government came into place, This money is paid direct to the Mortgage Companies, Increasing their balance sheets, puts more disposable income available to the claimant who then has more money to spend on commodities and local businesses. The money has a 3 way benefit which would be far more effective in my opinion
2) increasing Tax Credits and raising the income Tax threshold again for the same reasons.
whilst consumers have no money to spend, there will be no confidence in small and medium size businesses to expand, The private sector is totally incapable of picking up the sheer amount of redundancies being made in the Public Sector, Pushing more & more people on to welfare and making the whole thing worse.
It is important to understand that the money the govt borrows is actually non existent until it is borrowed. That is to say that most of it is magicaly created by the banks(the same ones we had to bail out) out of thin air. We then pay interest on this fake money. Why are we so generous? why pay someone to print money when we can do it ourselves for free? the best bit is that we borrowed money (imaginary money) from the banks to bail out the banks. The whole system is insane.
bazsc: “Before the election I thought the LD and Labour were closer than LD and Tory – this has changed and I am not convinced on the arguments given as to why this was the case.”
You’re not alone in thinking that. As a left-of-centre voter, I always, since the 80s, was lead to believe (by the Lib Dems ourselves) that we are a centre-left party. That is, at least, how the party positioned itself until Coalition was formed. As I’ve pointed out before, over 60% of all Lib Dem voters at the 2010 election identified as “centre left”. And the platform we campaigned on in 2010, a slower deficit reduction than both Tory and Labour, was definitely to the left of the Tories. I know we’re not supposed to be using terms such as “left and right” as Clegg says they don’t apply, but like it or not, most people in the UK who are politically aware identify either as left or right.
I don’t like using the word “betrayal” for our position, but I do believe that doing a 180 on deficit reduction is coming very close to that description. Not because of the 180 itself, but because Clegg neglected to tell the public before the election that he had changed his mind. That is not democratic, is inexcusable, ignored the wishes of many rank-and-file party members and something we should apologise to the public for.
But the fact remains that Osborne and Alexander’s plans are not working. The deficit is growing, more unemployment leads to less demand, less consumer spending and larger benefit costs for the government. Many people pointed this out during the 2010 election campaign, with Clegg himself saying that pulling the rug out from public spending would be suicidal and that the Tories slipping in with a small majority would lead to exactly what has been happening now, riots and all.
We are not Greece. We are not Italy. We have a sovereign currency, we were never in any danger of going bust as the Tories liked to say. Lib Dems who have adopted Osborne’s bloodletting plan need to realise this “plan” is making our situation worse.
We are lowering the nation’s debt on the backs of the poor: that should be, to all Lib Dems, beyond the pale as our constitution demands we work to eliminate the oppression of poverty. Sadly, we are doing the opposite and the millions of left-of-centre voters who gave us their support in 2010 are more than likely never going to come back as long as we are supporting a right-wing, poor-bashing Tory government.
Interesting comments, raising some broad issues.
In the comment I posted on 3rd December 2011 at 6:14 pm I said there were two components to the argument. (i) is it right to cut the deficit now at the speed/depth proposed and (ii) how should it be done (what mix of taxation increases and spending cuts). The issue of differentiation between the parties for 2015 looks like it is going to focus on (ii)
But the points raised by @bazsc are about questioning (i). Broadly speaking all the political parties and the Treasury draw their understanding of the economy from within a very simliar economic worldview. The challenge is that contemporary macroeconomics is pretty badly suited to explaining what is going on, because the models don’t forecast the sort of deep downturn that we’re currently experiencing without ad hoc modifications, many of which are implausible. This is why it is often said that economists didn’t see trouble coming – the models don’t allow it as a possibility.
Given its deficiencies, the status of this economic *knowledge* is debatable (and being debated). Many of the models lack an integrated treatment of the financial system and credit markets – which clearly is problematic given current events. Krugman and Stiglitz, among other high profile figures, have recognised that there is a serious problem here. But they are still working within a particular intellectual paradigm.
There are other more heterodox economists who start from a very different position in understanding the economy who several years ago made pretty concrete predictions that there was going to be a credit crunch and debt deflation. Steve Keen, who was interviewed on the BBC HARDtalk recently, is probably the most high profile. His models draw on Keynes and Hyman Minsky. I blogged about his work here, if you’re interested:
http://www.alexsarchives.org/?p=2320 (Keen insight into the monetary economy)
@Simon Bamonte
“As I’ve pointed out before, over 60% of all Lib Dem voters at the 2010 election identified as “centre left”.”
That’s interesting, Simon, but also rather surprising. If the political continuum used was an obvious 5 point Left – Centre Left – Centre – Centre Right – Right basis, then I would have thought that more than the implied 25% or so of 2010 Lib Dem voters would self identify as “Centre”.
Have you a reference for that survey?
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Thanks.
When Simon and his detractors have put their handbags away, I don’t think there is any real argument about the economics: aggressive deficit reduction combined with external rises in fuel and commodities have depressed demand over the near future leading to a ‘flatlining’ economy and reduced tax take. So Plan A(2) is needed if not Plan B.
But as well as extending the period of reduction of the deficit, some priming of the economy is essential. While we might agree with the Tories on the need for infrastructure investment, their instinct has been to assist their friends in the British Roads Federation, regardless of the need to shift to low-carbon transport. Likewise, they seek to cut Tax Credits for families (which is deflationary and hits those in work on incomes below £30,000)to cover the reduction in fuel duty, while we would seek further to reduce the tax loopholes of the wealthy. And, as T-J said above, to shift the burden of taxation from taxes on the incomes of low and middle income earners (and pensioners) to taxes on assets and property, i.e. taxes on non-portable wealth.
Where Danny Alexander’s position and appearances on Newsnight comes in, is that he gives the impression of either agreeing wholeheartedly with Osborn’s priorities, or of being a ‘boy in a man’s job’ and not worthy to be half of the LibDems in the Treasury ‘Star Chamber’ alongside Nick Clegg.
Peter Chivall
I tend to agree with the points you have made in your post and that the challenges need to met by decreased spending in some areas, increased spending in others (I am with you on the focus on road building) and a review of taxation with a view on taxing unproductive wealth/environmental effects instead of just icing it all onto VAT and income tax.
This is what was being said by those economists I mentioned earlier over a year ago and it is a shame that it has taken this long for the penny to drop – the Eurozone crisis excerpted the problem but it only built on the problems created by the initial denigration of the UK economy (keeping going on about Greece for example) by Osborne followed by the budget announcements of 2010. There is now an attempt for Plan B without calling it so but it seems still to be misguided.
I wish that the LD in Government would drop this idea of collective responsibility – it is fair enough for a one party Government but definitely not so for a Coalition. Clegg must start making it clear where the differences and arguments are – if not the assumption will be that there are no arguments, especially in the face of Alexander’s continued poor communication