The Social Liberal Forum’s amendments to Nick Clegg’s economy motion – supported by an unprecedented number of voting representatives – seek to ensure that the party retains distinctive, independent economic narrative up to and beyond the next election. The narrative behind Nick’s motion – which, to be clear, has a great deal that Liberal Democrats can be proud of – is clear enough. Here is the rationale behind our amendments.
On housing, the motion highlights government guarantee schemes that are yet to scratch the surface of the housing shortage, and recognises that “house building remains well below historical averages.” The tools it proposes to address the chronic lack of new – and in particular affordable – homes are modest and need to go much further. The SLF proposes that rather than pooling council borrowing limits, they are lifted such that any council with a credible business plan is free to borrow and invest in social housing.
Further, we seek to change the way the Bank of England sets monetary policy. In focussing on inflation, and even with its new ‘forward guidance’ looking at the unemployment rate, the Bank is constrained in what it can do to support investment and growth of incomes – aims that we think should be front and centre in the government’s thinking. So we want the Chancellor to use the power he has under the Bank of England Act 1998 to ask the Bank to tackle weak income growth. This is a key element of a credible economic platform – ensuring that the bank takes the principle of QE and puts real muscle behind measures to invest in long-term growth.
Monetary measures alone will not, however, bring higher wages and greater investment in infrastructure – we need fiscal policy to aid a real recovery we can all benefit from as well. Hence, we seek a rebalanced fiscal mandate, one that focuses on creating more jobs. The flexibility we have called for in fiscal policy matters even more if growth is to return, however slowly – should the deficit be revised downwards in November, Osborne and colleagues might use the slack to close the budget deficit quicker than currently, planned, whereas investing in green jobs would lay the foundations for a more sustainable recovery. To be clear, we acknowledge that the deficit must come down – but that it must do so in a way that supports, rather than undermines, a real rebalancing of the economy and a material boost to living standards.
Ultimately we are calling for an economic strategy independent of the compromise position reached as a necessary result of governing in Coalition with the Tories. Adopting that compromise as our own stance going into a General Election, on such a key matter, is not what a democratic, independent, radical party is for. We have our own values, our own judgement on what a stronger, fairer economy looks like – and where the Coalition’s record is not taking us down that road, we should be bold enough to say so.
* Prateek Buch is Director of the Social Liberal Forum and serves on the Liberal Democrat Federal Policy Committee
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19 Comments
Interestingly, Mark Carney said today that the government’s austerity programme (or “fiscal adjustment”, as he put it) was a drag on growth
“Adopting that compromise as our own stance going into a General Election, on such a key matter, is not what a democratic, independent, radical party is for. We have our own values, our own judgement on what a stronger, fairer economy looks like – and where the Coalition’s record is not taking us down that road, we should be bold enough to say so.”
I have nothing more to add. The amendment will have my vote.
Let’s not kill it with good intentions though!
A sensible and reasoned approach to having an independent position on the most important issue of our times. The leadership would do well to consider agreeing to the amendments without a fight. Thanks for all your hard work, Prateek.
” In focussing on inflation, and even with its new ‘forward guidance’ looking at the unemployment rate, the Bank is constrained in what it can do to support investment and growth of incomes”
How does higher inflation help promote the growth of incomes ?
Inflation pushes fixed income pensiones into poverty and they can’t do anything about it. It will undoubtedly also be bad for their mental health as they see their life’s savings eroded away, knowing things are only going to get worse.
QE does tremendous damage to some people for an unproven and very weak argument that it causes economic growth. People think seeing assets prices rise will be good for confidence, but the price instability is bad for business.
Are the public happy about price rises at the moment? No, maybe the asset-owners, but not the world’s poorest.
PS, one of the main arguments for QE is to prevent a downward spiral of deflation, with the economy picking up the argument for it is even worse.
You also call for more borrowing in order to boost the economy. I agree cutting things too fast is bad for the economy and doesn’t give people enough time to adapt, but investing in a load of new projects and schemes is unnecessary and unsustainable, in my opinion.
You also say that you want an economic narrative that is distinct, but you mean distinct from the Conservatives, not distinct from Labour.
Clegg’s economic motion is based on centrism, kinder than the Conservatives, but more responsible than Labour. That is distinct.
Right, I think that should be it! :D.
“Eddie Sammon” I think the presence of *any*economic strategy represents differentiation from Labour right now.
The most important problem we face is that virtually no voters are crediting us with anything as regards economic management, which is outrageous and needs redressing.
According to Yougov this morning, only 4% of voters trust us with handling the economy best. This is disastrous, unjust and putting out our economic message on bread and butter issues is one of the most urgent tasks we face, or we risk total marginalisation in 2015.
The SLF amendment has my full support!
“The SLF proposes that rather than pooling council borrowing limits, they are lifted such that any council with a credible business plan is free to borrow and invest in social housing.”
I’d be worried about who would end up bailing out councils that got into too much debt – likely to be Labour ones. My guess is that it would be general taxpayers nationally.
I wonder what Eddie means by ‘responsible’. Clearly at the moment it could mean our leaders really are thinking of practical ways forward, but there is usually more than one such way. All too often in the past 50 years I have heard conservatives say that their way is the only responsible way and it is not true.
It is not irresponsible to claim that we can improve on Clegg’s motion. Thus, we should not rely so much on lending for housing and we should seek to build social justice into our economic policy i.e. spreading growth and employment sustainably around the country and across the whole population. Last night on newsnight a leading commentator said that QE and other recent moves by government had benefited the rich and big companies only. . For too long governments have relied on helping these people and Labour did that in a big way by its reliance on the financial sector; all this is done in the hope that those at the bottom will benefit from the little that then trickles down to them. That is not the way to run a fair economy.
Nigel, I respect that some people don’t think “responsible” is the right word, but what I mean is not a tax and spend party like Labour, or a slash and burn party like the Tories. My point is to highlight that the Social Liberal Forum’s calls for distinction actually make the party less distinct because it abandons equidistance and cuddles up to Labour.
I am also glad you highlight that a leading commentator on Newsnight pointed out that QE has only benefited the rich. I have been saying this for a long time and it is surprising to see the Social Liberal Forum back it. Not only does it only benefit the rich, but it attacks the poor, and no one seems to want to challenge this argument.
Simon asks, “How does higher inflation help promote the growth of incomes ?”
The answer (perhaps obscurely for the non economist ) is Hot Potatoes.
Eddie, and the counterfactual for £325 billion of QE is?
It certainly would not have been lower interest rates (the low rates reflected the market’s view of low growth prospects) . Sure, the stock market would have been much lower, so how would that have helped your pension? And lending would have been EVEN lower, how would that have helped? With the resulting expectation of lower growth why would firms have invested – so how would that help? And with people fearing lower incomes and even employment spending would have remained stagnant or lower, so how would that have helped?
Japan is at last powering ahead and the main ‘arrow’ in their new Government’s policy? QE.
Of course their purchases under QE are far more broadly defined that were ours, but that is not to argue about throwing the baby out with the bath water. QE could fund housing investment by social landlords..
Bill, my problem with QE is that it definitely hurts people for very questionable economic benefits. I don’t want to go into more detail because it will derail the discussion. We can discuss it further another time. 🙂
Julian. – you omitted the words ‘with a credible business plan’. Certainly that rules out many Labour councils such as Reading, which for years has overspent and now has debt that was £200 million when I was last a councillor, and is probably significantly higher now.
Hi Gareth
Fair enough – point conceded, so long as it does indeed rule out Labour councils like Reading!