Opinion: Tax more and spend less

Nick Clegg with 2010 manifesto at Glasgow 2014 by Liberal Democrats

The 2010 election was notable for the failure of the three main parties to spell out clearly how they would reduce the budget deficit.  No-one wanted to scare the voters away.

2015 is already proving different. Nick Clegg has announced that Liberal Democrats would increase taxes by at least £8 billion and bring in a further £6 billion by tackling tax avoidance. There would still be up to £16 billion cut from  expenditure, £12 billion from government departments and £4 billion from welfare. Whilst not exactly a return to Keynesian economics, this is nevertheless a huge step away from the Tory approach which seemed to have dominated coalition fiscal policy. The balance between expenditure cuts and tax increases under Tory plans for the next parliament would be 98:2 whereas we will be proposing 60:40.

For most of this parliamentary term party conference was denied the opportunity to debate the central economic policy of the coalition. On offer to the electorate was the Osborne / Alexander  austerity policy, Plan A, presented as a TINA (There is no alternative). The Labour Party offered a series of variations dreamt up by Ed Balls, hard to dignify as Plan B as they were all essentially  modified forms of austerity. The Social Liberal Forum offered Plan C, but attempts to table motions to give expression to it were blocked.

Finally in Glasgow in September 2013, Nick Clegg tabled a conference motion broadly rehearsing the existing coalition policy with some vague calls for changes. SLF tabled a long amendment, 80% of the text of which was accepted by the movers but the key point of changing the Bank of England’s fiscal mandate was successfully resisted. David Howarth, summing up for the amendment, outlined the dangers of trying to cut the deficit by expenditure cuts alone and warned that worse was to come. Nick Clegg summing up for the motion agreed that deficit reduction would require tax increases as well. Few people noticed at the time and little had happened since to give substance to that opinion. The following morning the BBC asked Danny Alexander which taxes he would increase and Danny gave no answer.

In that same debate in Glasgow, I told Nick Clegg that he was not the lone ranger and should listen to his party. He looked puzzled at the reference but it does appear now that the efforts of the Social Liberal Forum have finally borne fruit. I look forward to the publication of diaries over the next few years revealing the struggles that went on within the coalition, not only between the two parties but between ministers from our own party. Vince Cable may not be the Liberal Democrat economic spokesman in the General Election but make no mistake, Danny Alexander will now have to promote and defend Vince’s ideas, not his own.

Of course, this is not the entire package we would wish to see. Cuts to welfare continue. We would argue for more investment. Yet this is a huge and welcome step in the right direction. Coalition has often been a dispiriting business, but we need to have confidence in our ideas, courage to push them and patience to keep pushing. Rather late in the day the Liberal Democrats are proclaiming they are not Tories and there is indeed an alternative.

Say not the struggle naught availeth.

* David Grace is a Lib Dem living in Cambridge and a long standing campaigner for nuclear disarmament.

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27 Comments

  • Tsar Nicolas 6th Feb '15 - 12:39pm

    Tax more, spend less . . what a wonderful recipe during an economic depression to increase deflationary processes and heap more unnecessary misery on the people.

  • To be fair to Nick Clegg, he may not have understood the reference to the Lone Ranger because the last episode of that excellent TV series was made in 1957, ten years before Clegg was born.
    http://en.m.wikipedia.org/wiki/The_Lone_Ranger_(TV_series)

    In another effort to be more than fair to our dear leader, he had only been in parliament for a couple of years when he won the lottery determined by Christmas Post late deliveries which we quaintly called a leadership election. So he had not had a lot of time to work out how the party works or why as leader listening to the members of the party at conferences is quite important.

    It has become a bad habit of all recent leaders to use conferences to plot against the members. Leaders are rapidly surrounded by “advisors” and “kitchen cabinets” who tell them that their job is to plot against the members, undermine the internal democracy of the party and impress the Westminster Media by how “tough” you can be as leader when for example pushing the cause of new airport runways at Heathrow.

    Still it could have been worse, you could have accused him of being Tonto.
    Jay Silverheels, the Canadian Mohawk, would never have forgiven you.

  • Stephen Hesketh 6th Feb '15 - 1:05pm

    David Grace | Fri 6th February 2015 – 12:00 pm

    “In that same debate in Glasgow, I told Nick Clegg that he was not the lone ranger and should listen to his party. He looked puzzled at the reference …”

    David thank you for the post. Just one thing, I’m not sure Clegg’s puzzled look concerned your reference to the Lone Ranger but rather that anyone might have the audacity to suggest he should listen to the party 🙁

  • Eddie Sammon 6th Feb '15 - 1:40pm

    I am fine with the overall change in the emphasis of cuts to tax increases, but I noticed what looked like an anti-small business policy being crept in and we need to stop doing this.

    The policy I talk about is banning businesses from claiming debt interest as an expense. Debt interest costs shareholders money, dividends do not, so they should not be taxed the same.

    There is a big opportunity to get what is left of Labour’s business supporters and even some tory and SNP ones. We care about social justice, but this can be achieved largely without hitting business across the board.

  • Simon McGrath 6th Feb '15 - 2:02pm

    “Whilst not exactly a return to Keynesian economics”
    What on earth do you call running a deficit of £100bn a year if not Keynsian ?

  • David Evans 6th Feb '15 - 2:11pm

    There’s a lot more to Keynesianism that running a massive deficit Simon.

  • Bill le Breton 6th Feb '15 - 3:48pm

    Well done David and well done the Social Liberal Forum.

    However, we must also thank in no small measure Vince Cable.

    Here is how the Party’s own briefing note to the press trailed the announcement, the night before the announcement at the Shard:

    “We will take a balanced approach to finding this £30billion through a mixture of both spending cuts and tax rises, so that across the whole period of fiscal consolidation (2010/11 to 2017/18), the ratio of spending cuts to tax rises will be between 80:20 and 75:25.”

    Note that to achieve those figures which ***appear**** consistent with what Clegg and Alexander had been saying until yesterday, they had to use 2010 as the base year from which the ration 80:20 held. It was a thinly disguised face saving piece of spin.

    The truth is that but for Cable we would not now be fighting an election on this 60:40 ratio or even 50:50 if the stated aim of £8bn of tax rises and £6bn in reduced tax avoidance, and ****up to**** £16bn in spending cuts is taken at face value.

    It is a total transformation of approach from the minimalist state policies and accelerated deficit reduction championed by Laws, Alexander and Clegg to this new and truly Liberal Democrat policy that the SLF and Vince Cable have pressed for over the lifetime of this Parliament – a Parliament which has seen our supporters desert us in their droves.

    It is a good change. It may yet be critical for the country post 2015. But it has taken nearly four years of 10% or less in the polls and a 10% deficit in the Hallam poll to get the Leadership to understand what a Liberal democrat economic policy should be about. Too late for countless councillors, too late for those MEPs and perhaps too late half our MPs.

    What a tragedy that we did not campaign consistently throughout this Parliament for this enlightened approach.

  • Watching yesterdays presentation I again marvelled at the inability of the party to grasp how they come across to people. We are seen as the most unpopular of the parties, (see the Com Res poll last week). Our two most disliked MPS etc are messrs Clegg and Alexander, some even despise them. So who do we produce to present, what are reasonable political ideas, of course Clegg and ALexander, an immediate turn off. If this is the shape of the election to come God help us.

  • The struggle availeth naught.

    Clegg can announce as many policy commitments to the left of the position the coalition has taken, and make the strongest commitment he cares to to implement them should the party be voted into power. The fact is that nobody, inside or outside the party , believes that the party can achieve anything other than at most another role in a coalition. The only chance for Clegg to get in a coalition is with the Tories, and should that happen, he will drop any tax policy because “the people will have spoken”. Any coalition that Clegg gets a chance to be part of will be with even fewer MPs than this time round and so with even less effect. Perhaps he envisages leading a rump party as part of a three party coalition from a seat in the Lords?

  • Clegg may not get that chance. Not because another coalition government is unlikely — it is now likelier than it’s ever been before, perhaps even more likely than it was in 2010 — but because come May he may well be the ex-MP for Sheffield Hallam.

  • theakes 6th Feb ’15 – 4:18pm
    “…… I again marvelled at the inability of the party to grasp how they come across to people. ….. Our two most disliked MPS etc are messrs Clegg and Alexander, some even despise them. ……….. an immediate turn off. If this is the shape of the election to come God help us…..”

    What is worse, they do it from the top of The Shard….. The worse sort of symbol to people who are poor, or are environmentally aware, or in any way opposed to the international business elite who build these phallic mega towers.

    Skyscrapers like The Shard are symbols of the power of the wealthy 1% .
    It is almost as if they are built to taunt those Londoners who are homeless or are subjected to social cleansing whilst their homes are demolished to make way for more skyscrapers to benefit foreign property developers.

    The ordinary viewer sees two posh white men in ties and cuff-links on top of The Shard with their heads in the clouds.
    They could not have done better if they had been trying to put cross a message of “out of touch and remote”.

  • Paul In Wokingham 6th Feb '15 - 8:12pm

    @JohnTilley – couldn’t agree more about the choice of The Shard. I have always thought that The Shard looks like the replacement death star in The Empire Strikes Back and I find its baleful presence no matter where you are in London (I could see it from the gym in Twickenham) screams wealth, privilege and elitism. A poor choice for a party that claims to want a “fairer society”.

    In terms of the substance of this article, I think that any changes to the ratio of tax and cuts announced now by the Lib Dems will make not the slightest bit of difference to our election results. The die is cast. Clegg and Alexander are inextricably associated with a Tory agenda.

    The only upside is for party activists who might (as Bill Le Breton suggests) see it as a shift in the direction of the party’s economics policy back to a conventional Lib Dem position. That (if true) would certainly be welcomed by many as we pound the streets.

  • jedibeeftrix 6th Feb '15 - 8:27pm

    Will you use this pile of cash to maintain defence at the 2.0% threshold required of NATO members?

  • Tony Greaves 6th Feb '15 - 8:45pm

    If Mr Clegg is the Lone Ranger, Mr Alexander must be Tonto.

    Another £4billion of cuts to the welfare budget? The thought makes me deeply ashamed of our party.

    Tony

  • David Evans 6th Feb '15 - 9:52pm

    Tony, I’m not ashamed of our party, but I am ashamed of our leader. That is why when I read Paul in Wokingham’s comment “The only upside is for party activists who might (as Bill Le Breton suggests) see it as a shift in the direction of the party’s economics policy back to a conventional Lib Dem position,” I shudder. Simply because I think it very unlikely that Nick will give an inch after May no matter what the result (Sheffield Hallam catastrophe excepted).

    I believe he will only be allowed to go if he is pushed and I am no longersure that the left have enough votes to do it after so many have left in dismay and disgust already.

  • Toby Fenwick 7th Feb '15 - 10:53am

    On the £4bn off the welfare budget, the obvious question is “where”? Given that pensioner benefits are included in “wefare”, perhaps it is time for better off pensioners to share the cuts: tv licences and bus passes are a good start, but moving to a double-lock on pensions (ie, higher of prices and incomes) would be much fairer with respect to the working age population.

  • Toby Fenwick 7th Feb ’15 – 10:53am
    Toby — I cannot agree with you that it is “…..time for better off pensioners to share the cuts: tv licences and bus passes are a good start, ”

    Just how much of your £4 BILLION of welfare cuts would you rake in from stopping posh pensioners going by bus and making them watch TV programmes on their iPad so that they do not have to have a TV licence at all?

    I am afraid that your comment does not have a lot of the real world about it. The TV licence is doomed because technological change has made it — “Payment for the honest but stupid”. Watching TV programmes on iPads etc is already quite popular even with OAPs — why pay the BBC for the privilege?

    As for bus passes — I am intrigued at the thought that as a result of taking free passes away from the Duke of Edinburgh, Lord Sugar and Mr Abramovich the Treasury will be £ Billions better off.
    How does that work exactly?
    Are you telling me that the buses are full of billionaires who leave their Rolls Royce at home because they can get on the bus for free?
    I have done quite a lot of travelling by bus and I have yet to sit next to one elderly plutocrat.

  • Why not scrap the cuts, bite the bullet and simply increase income tax?

  • Gwyn Williams 7th Feb '15 - 3:09pm

    In 2008 we spent £16bn on “Tax credits” for working families, 6 years later we are spending , despite reducing the upper income limit to £35k , £26bn. Seeing real wages and incomes rise should see a fall in welfare spending which we should all welcome.

  • Toby Fenwick 8th Feb '15 - 2:00am

    John: I’m not claiming bus passes alone cost £ 4bn, but it would be an important symbolic start. Indeed, if I understand the Clegg/Alexander policy launch, it is now party policy. Are you seriously suggesting that better off pensioners- say those who have an income above the median family income- need or deserve these perks?

  • Taking these figures Tories 98:2 Lib Dem 60:40 there is not as much difference between the two parties as it first seems.

    Both parties want the welfare cuts to continue, they both want the poorest and most vulnerable in our society to pay for a crisis caused by the bankers and their mates in the political establishment.

    The Lib Dems *only* want to lump 60% of the coming cuts onto the poorest people in our society and will no doubt ask the non-tax avoiding hard working middle classes to carry the other 40%. Whilst the Tories want to stick pretty much the whole lot on the poorest, instead of *just* 60% of the burden…

    So really, the both stand for (pretty much) the same thing.

    They both agree that the cuts must continue.
    They both agree that the poorest and most vulnerable people must carry the majority of the burden for those said cuts.
    The only debate they seem to be having is over £14 billion in tax rises, tinkering round the edges in an economy the size of ours.

    It is understandable that there is so little difference between them really. Because they both accept the neo-liberal economic model that says international financial markets must come first and that there is simply no alternative to this. What we need is a Syriza party that believes a different economic model is possible, otherwise it doesn’t matter who you vote for, you’re still voting for the same thing which makes voting actually rather pointless.

  • Matthew Huntbach 9th Feb '15 - 11:16am

    David

    Both parties want the welfare cuts to continue, they both want the poorest and most vulnerable in our society to pay for a crisis caused by the bankers and their mates in the political establishment.

    What about Tony Greaves above? Is he not a LibDem?

    Perhaps if people like you instead of condemning the whole party gave some moral support to those of us who are members and are unhappy with the leadership, it might help us achieve more in getting things changed, and getting the party back to where it used to be. It would REALLY so much help our case if we could point to people who support the sort of left-wing liberalism we are about and say “Look, there are people out there who will vote for us if we put across this sort of view”. One of the biggest arguments thrown against us is that all we are doing by challenging the leadership is damaging the party, that there is no real support for our position, that we should just accept the party has changed and put on a united front in support of its new message. I see people like you, who seem to have this Leninist view of political party that it is all about the national leader handing down the party line, and individual members are just non-questioning supporters of whatever is handed down this week, as supporters of Clegg and the Cleggies, working with them to destroy the party I gave so much in the past to help build up.

  • David Allen 9th Feb '15 - 7:26pm

    David,

    “What we need is a Syriza party that believes a different economic model is possible”

    Seriously, I wonder if Syriza would be prepared to “franchise the brand”! A British Syriza would not, of course, make a specific input to the policy on Greek debt, which is the Greeks’ business. However, it could (as you say) stand four-square behind the principle that we need a new economic model. For Syriza-UK, that could mean clamping down on British-associated tax havens, cleaning up our corrupt banks, and listening to Carney rather than Merkel on austerity and deficits. And, won’t Syriza in Greece gain in self-confidence, if they can see Podemos win in Spain – and, perhaps, if they could see a “Syriza-UK” winning votes in Britain?

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