The Conservatives seek to frame pretty much every general election (with the exception of “Get Brexit Done”) as Tory tax cuts versus Labour spend.
In 1997, Labour sought to avoid this by ‘shadowing’ Conservative expenditure plans, a trick that Rachel Reeves seems set to repeat in 2024. Hunt’s budget is likely to try to set up the same dilemma by offering tax cuts now, funded by unspecified cuts to public expenditure (meaning public services) somewhere down the line, on the assumption that Reeves – rather than he – will be left to implement them.
Reeves, however, is too savvy a politician to fall for such a trap. While she will no doubt attack the Conservatives for “maxxing out the country’s credit cards”, expect a ‘no answer’ response to questions as to whether Labour will adopt the Conservatives’ tax and spending plans: “we need to look under the economic bonnet” and “kick the economy’s tyres”, accommodated by the best car mechanic hmmm-ing and chin-scratching.
Just as Labour is shadowing the Conservatives so, at this election, the Lib Dems are shadowing Labour. Both parties will rely on the message “we are not the Conservatives” to sweep them to power in their respective target seats, with voters happy to vote tactical to whichever is best placed to unseat the Conservatives locally.
It is a strategy of limited ambition for the Lib Dems, although in the aftermath of Jo Swinson’s disastrous overreaching claim to be running for Prime Minister it is thoroughly understandable. In the context of tomorrow’s budget, however, the party might be wise to go just a little further.
It has already been pointed out by others that the Conservatives’ strategy of offering tax cuts going into the election could fall at the first hurdle, given that the recent polling suggests the public are much more concerned by the state of public services than their taxes.
The Conservatives are banking – perhaps not unreasonably – on there being a gap between what people say and what they do in the privacy of the ballot box. They may well be right (and certainly they are lacking feasible alternatives).
In those crucial red wall and Midlands seats where the cost of living crisis has hit hardest, it is a reasonable bet that when push comes to shove voters will take the cash they are offered and worry about the schools and hospitals later. This must therefore guide Labour’s response in their key battlegrounds with the Conservatives. They can’t afford to be outflanked.
But the Conservative – Lib Dem battleground is markedly different. The soft Conservative voters that the Lib Dems are trying to win over are in leafy Godalming and Ash for example (local MP: Jeremy Hunt). Here, the squeezed middle classes are more concerned about the collapse of their kids’ schools, the lack of GP appointments and the cost of their parents’ care homes, than the immediate pressure for an extra tenner to get them through to pay day.
An explicit commitment to put public services before tax cuts would not only give the Lib Dems a point of difference from Labour and the Conservatives, but one which would be carefully targeted at the audience that they need to win over. What’s more, it is also likely to appeal to the Labour voters in the Con-Lib Dem marginals, who need a positive reason to vote tactically for the Lib Dems and might even welcome the message this would send to their party of first choice.
Since the Lib Dems reneged on their tuition fees pledge, they have struggled to regain their former reputation for being ‘more honest than other politicians’. Now a message – “It’s public services or tax cuts. The others are lying if they promise both. So we’ll be clear: we chose the NHS” – might appeal as strongly as Ashdown’s “penny in the pound for education”.
Tomorrow’s budget is probably the last chance for the Conservatives to turn their fortunes around, while it’s just another potential banana skin for Labour to avoid. For the Lib Dems, however, it might just offer an opportunity to develop an appealing and distinctive message, if only they have the courage to grasp it.
* Ben Rich is Chief Executive of Radix, the radical centre think tank. From 1992-95 he was Lib Dem Deputy Policy Director and from 1997-2001 Vice Chair of the Federal Policy Committee. He was Tim Farron’s Leadership Campaign Director and his interim chief of staff from 2015-16 and senior adviser to the Lib Dem Business & Entrepreneurs Network until December 2019.
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35 Comments
I agree with Ben. Ed Davey speaks powerfully about the NHS and community care. It is a distinctive position for LibDems. That along with, “The last time the national vote disagreed with the LibDems the UK has lived to regret”.
It is indeed “a strategy of limited ambition for the Lib Dems”, but whether it will be considered as “thoroughly understandable” in the aftermath of the election is very, very moot.
Ben Rich is right to urge the Party to spell out that tax cuts (particularly in the context of Brexit) are incompatible with maintaining health, welfare, education, transport infrastructure and other public services; but I fear the leadership does not have the appetite to be less timid.
Is the Party geared up for an election on May 2nd? It needs to be; it needs to have a clear and challenging agenda that will, by putting other parties on the spot, keep the Party in the public eye.
Speaking as someone in Hunt’s constituency – but soon to be in the new Farnham and Bordon constituency – I wholly agree with Ben. I’d add that I suspect that Labour’s economic, tax and spend policy, is not just political tactics but also reflects Reeves’ personal background and education as a very orthodox economist. The Bank of England these days is little more than a department of the Treasury.
A different aspect is that the LibDems in the minds of many, are still heavily associated with austerity and the massive cuts to public services. That’s a good reason to show that the party has clearly moved on from that period. Investment in public services is as important as investment in the private sector. At the moment we have neither.
Council provision collapsing, under-funding, NHS in crisis, ancient water and sewage infrastructure not up to the job, huge delays in the justice system….
All these (and other issues) arise from lack of funds. We need to be telling voters that tax cuts are directly linked to failing public goods. That tax cuts worsen the most important services.
I agree with the article and the above posts. I also agree it would serve to mark us out from irresponsible Tories and Labour.
I am getting tired of hearing Tory Ministers claiming that expenditure on the NHS, schools, or road repairs (or whatever the story of the day happens to be) is at an all-time high. I am sure that these claims do not take into account inflation and such claims of
record spending on public services are therefore bogus. We (and journalists) should be pointing this out.
The title of the OP is essentially correct. I’d go slightly further and say we will probably need to have tax rises no matter who forms the next Government.
Let’s be clear about why though and why a possible change of circumstances may change the situation. It’s nothing to do with growth rates or the extent of the borrowing that will otherwise be required. The conventional view that Government collects what it can in taxes and then has to ‘borrow’ any extra it might wish to spend doesn’t answer the question of where money comes from in the first place. This is before it is available to be collected in taxation or ‘borrowed’ via the sale of bonds/gilts which is in fact just a swap of one form of Government IOU for another
It’s really about the extent of the available resources in the economy. At the moment there isn’t a lot of spare capacity but that could change if the recession deepens. If there isn’t enough the Govt has to create the fiscal space to spend more by increasing levels of taxation.
Prof Bill Mitchell explains in more detail:
https://billmitchell.org/blog/?p=60987
“with voters happy to vote tactical to whichever is best placed to unseat the Conservatives locally.”
Unfortunately all polling evidence suggests that voters aren’t doing this for us and are defaulting to voting labour in many lib/con seats regardless of them having coming third last time.
The most clear of these is a constituency poll of Godalming and Ash as reported on by mark pack here:
https://www.markpack.org.uk/172603/constituency-poll-vs-mrp-godalming-and-ash/
The labour vote has more than doubled and ours has barely changed since the last election, whilst this still puts us ahead in this seat, this will certainly cost us dearly in a great many seats, especially if the reform vote gets squeezed.
And it is happening in many other seats electoral calculus added up thier polling data from lib/con seats and found labour are averaging 20% in those where we came closest last time.
In seats where we were a more distant second last time labour is on 30% and us on only 21% with the Tories on 28%. Meaning 1) most of these seats are winnable 2) labour will stop us from winning them and 3) labour will overtake us in most of them thus making them much harder to win in a future election.
The recent yougov and electoral calculus mrp polls show this happing in many individual seats and Mark packs analysis above shows that these are in fact accurate.
This all of course reinforces the point of the article. Labour voters need to feel they would be voting for something more positive if the supported us.
I disagree with Ben Rich about Rachel Reeves and the Labour Party as she has accepted Jeremy Hunt’s stupid fiscal rule that national debt should be falling as a percentage of GDP in the final year of a five-year forecast. This is why the Labour Party abolished their policy to spend £28 billion on environmental measures in the fifth year of a Labour government. Their new policy is to spend the £13 billion headroom. If Hunt reduces this, then Reeves is likely to reduce the amount of Labour’s extra spending on the environment. They will continue their commitment not to increase any taxes except for the two they have already announced.
However, Ben Rich is right to urge our party leadership to make it clear that we would put public services before tax cuts, but Ed Davey has said that the signatories of The Guardian letter want the party to be a think tank rather than a political party, so he is unlikely to want to take advice from a think tank. The party should go further and say we would increase some taxes to pay for fixing public services. I wish our party would use tomorrow’s budget ‘to develop an appealing and distinctive message’.
Peter Martin,
When Joe Bourke quotes Jim Callaghan’s 1976 conference speech you should quote Bill Mitchell’s critique of it.
Being old and cynical, I believe any post-election government (even Tory) will be in desperate need of more tax revenue. So many systems, from defence to housing and local government have been quietly declining for decades and need overhauling. Our problems even include slow-burning ones, which date back to Margaret Thatcher.
Overall I feel very sympathetic to the case that we need better public services and that means we have to be willing to pay more tax. Personally I’d be very happy to pay a bit more if it meant better public transport, less crime, seeing a GP quicker, etc. etc. BUT we also have to be realistic about taxes already being very high. We can’t just keep unquestioningly throwing more money at everything, and I’m sure I’m not the only one to have an uneasy sense that the Government keeps spending more and more while also achieving less and less. I think if we want to be genuinely radical and effective, we must combine calls for better public services with seriously asking why everything the Government does these days seems to cost so much and what can be done to fix that. I would also argue that a message of keeping taxes high in order to spend more will go down a lot better with the public if they can see that we are serious about making sure money is well used.
“BUT we also have to be realistic about taxes already being very high.”
How high are they for the really well off?
Do they have more/better opportunities for tax avoidance than the rest of us? More loopholes to be found and used by expensive accountants?
Could/should they pay more?
@ Michael BG,
“When Joe Bourke quotes Jim Callaghan’s 1976 conference speech you should quote Bill Mitchell’s critique of it.”
Good suggestion!
What’s happened to Joe BTW? He doesn’t seem to offer his more establishment oriented comments on economics related posts like this any longer?
I hope he’s still well enough to make them ! Maybe he’s just changed his mind? 🙂
Eloquently put Ben Rich.
The only thing that I would add is that we should also have a clear plan as to what our demands and red lines would be should we find ourselves in a balance of power situation. We do not want to see a repeat of what happened in 2010.
David LG,
Yes that Mark Pack report on polling for Godalming and Ash is disappointing with the latest Survation poll having our vote share almost the same as in 2019 and Labour up 14%.
As you say Electoral Calculus in their recent MRP poll have Labour ahead of us in the 44 seats where we were second in 2019 that they classify as medium (https://www.electoralcalculus.co.uk/blogs/ec_lib2seats_20240226.html) and us winning 50 of the 63 seats in those they classify as strong. This reinforces the point made in this article and by John Curtise in Bournemouth that we need to appeal to Labour voters in these seats, but the party leadership is not listening to this advice.
Simon R,
While I accept public services should be better managed, the problem is that the amounted needed for good public services is related to what outcomes and outputs you want to achieve, while the idea that we have high tax rates is linked to GDP and the very poor economic growth since 2008. In the article by Bill Mitchell linked to by Peter Martin there is a graph showing if we had achieved the growth rates of pre-2008 the economy would be 20% larger.
To have better managed public service money needs to be invested in staff training to put the customer/client first and managers in these services should not to be attacked for not adding anything to outcomes. Every new manager needs manager training, and many old ones too as they have never had any.
@Michael BG, David LG: Before jumping to any conclusions about us not appealing to Labour voters in our target seats, I suggest that we wait until the short campaign when the ground war kicks off properly, and we are delivering all our leaflets with those lovely bar charts, while Labour locally lacks the resources to put enough effort in to get so much of a rise in its vote. Many natural Labour voters are open to tactical voting, but are mainly influenced by the air war, so are not necessarily aware who is actually the challenger locally. Voters in our target seats who are determined to vote Labour for ideological reasons are usually the sort of left-wingers for whom a Liberal or Lib Dem is (and always was) a yellow Tory, and are lost to us.
It’s in our Labour-facing targets that we need to worry about appealing to Labour voters. But for the next election, the number of such seats is precisely 1 (Sheffield Hallam).
@ Alex Macafie,
” But for the next election, the number of such seats is precisely 1 (Sheffield Hallam).”
This shouldn’t be a reason to give Labour a free pass.
Elections, at least in England, shouldn’t be just a choice between voting Tory or any candidate to the left of the Tories who is capable of winning. You should be giving your supporters a reason why they shouldn’t vote Labour as well as why they shouldn’t vote Tory.
You’ve won relatively recently in places such as Burnley, Rochdale, Leeds NW, Cardiff and Cambridge . Regardless of which party currently holds them you need to be doing what you can to maintain as large a vote share as possible. If you don’t, you’ll drop to 3rd place or below – effectively giving you no chance in the next elections. This is what happened in Rochdale. You could have been in with a shout there if you had a previous voter base to work with.
As it was you just about managed to keep your deposit.
@Peter Martin: I wrote “for the next election”, meaning that (IMO) Sheffield Hallam is the only seat we have a realistic chance of winning from Labour at the next GE. It doesn’t mean we aren’t working other Labour-facing seats for elections further down the line. It’s possible that the collapse in the Tory vote will put us in a better position to win many of them. Of those you mention, Burnley and Rochdale are probably lost to us for the time being for reasons I have mentioned elsewhere here; the others can be won back from Labour as they are more like Bermondsey than Rochdale.
@ Alex,
I can imagine you’ve been to Bermondsey and even possibly Sheffield, But, have you ever been to Burnley or Rochdale? I must confess that I haven’t been there often. Just when various football matches have been played there!
But at least I know Bolton pretty well which is not a lot different. I also know some of the towns in the more prosperous SE. There’s really not a lot of difference between the people of various regions when you get to know them. It’s the people who cast the votes.
There’s really no reason to write any group off as a lost cause on the basis of their geographical location.
The Redfield Wilton poll of Blue Wall seats shows the risk the party is taking with nothing to offer their voters except a bar chart.
@Peter Martin “There’s really not a lot of difference between the people of various regions when you get to know them”
Indeed. In 2021, Sheffield Hallam was the 9th least deprived constituency in the UK (https://twitter.com/undertheraedar/status/1390633593542778885), only 6 places below Chesham & Amersham, so depressingly right up the Lib Dem’s street despite being in the north! 🙁
@Peter Watson ” right up the Lib Dem’s street”
Oops! The apostrophe should have been after “Dems”; I wasn’t singling out any individual member of the party!
@Alex Macfie
There’s a limit to how many people we can win over by beating them over the head with a bar chart, we need to give them a strong positive reason to support us as well.
And as for regaining seats from labour, we can’t wait for the next election, the ground work has to be done now so we can regain second place and we need some bold progressive policies for this.
The big danger is that the green party is currently predicted to overtake or get level with us in most of the metropolitan seats where we once challenged labour or are currently still 2nd to them if this happens they can deprived us of oxygen and kill our chances of regaining them, they’ve already done this to us in Bristol West/central and Sheffield central.
And green party support us only going to get allot greater once labour gets into power.
Alex Macfie,
I would hope that the ground war in our target seats (strong seats as classified by Electoral Calculus) started a long time ago. All target seats should be putting leaflets (with the message that we are second) out across the whole constituency on a regular basis (at least four a year and hopefully 6 or more). Therefore if we are delivering on such a regular basis it is very worrying that our vote is still in the same region in these seats as in 2019 (as for Godalming and Ash).
Peter Martin,
I don’t remember seeing any comment from Joe this year. Indeed, I hope he is well.
It’s not just bar charts, it’s the fact that we’ll be the ones knocking on doors and shoving leaflets through letterboxes in our target seats, and Labour won’t be. MRP polls suggest that the Labour would get 18% of the vote in Richmond Park, up from a mere 5%. Maybe a constituency poll would show something similar, but I would be most surprised if the Labour vote went up significantly from 2019, as Labour doesn’t have the local organisation to mount any sort of campaign here. The thing is that we ARE working our target seats right now, but it’s during an election campaign that voters really focus their minds on who can actually win locally. This is one reason why pollsters often seriously underestimate our local election performance.
I don’t understand the obsession with geography in some of the posts above. We’re targeting Hazel Grove and Cheadle, which last time I checked were in the north of England. There are parts of the south-east of England that seem rather more Red Wall than Blue Wall (Kent especially), and where the Lib Dems are not strong. I have been to Sheffield, Leeds and Oldham at various times. I campaigned in the Leeds Central by-election and Little & Sad a few years earlier.
Our 1997GE results in most of the seats that we would go on to win from Labour in 2001 and 2005 were not very promising. It doesn’t mean we weren’t working them then, and nor should anyone be assuming we’re not working Labour-facing seats now, even if realistically we aren’t going to win them at this year’s GE.
“In 2021, Sheffield Hallam was the 9th least deprived constituency in the UK” and we won Sheffield Hallam from the Tories originally (it used to be safe Tory). Cardiff Central and Hornsey & Wood Green were Tory until 1992. Want to make any bets on seats that Labour have recently won from the Tories that will become Lab-LD battlegrounds in say 10 years’ time? My money’s on Putney and K&C.
@Nonconformistradical: Could higher earners pay more? Well the top marginal income tax rate is 45%, payable on salaries over about £125K, + 13.8% NI that their employer must pay, total 58.8%. That feels well high enough to me. Certainly there are loopholes and ways to avoid tax, especially for people who get a lot of income from sources other than salaries, but on the whole the reason those loopholes exist is they are very hard to close – and it’s a constant cat-and-mouse game as people try more inventive ways to reduce their tax. Also, although closing loopholes appeals to our sense of fairness, I’d say it’s doubtful that there are enough people rich enough to gain massively from them to make that much difference to overall public finances. You could probably do something with equalising the rates of income/NI and corporation/dividend/capital gains taxes, but to do so without unintended consequences in deterring investment etc. would require a huge reform of the entire tax system – which no party seems to have the appetite to consider (although I think it would be desirable).
So I think the answer is, yes, you probably could make top earners pay a bit more, but there’s not nearly as much scope there as lots of people want to believe.
Simon R,
Tax expert Richard Murphy has set out how over £100 billion extra can be raised by the government https://taxingwealth.uk/2023/09/13/the-taxing-wealth-report-2024-recommendations-to-date-and-their-suggested-value/.
Margaret Hodge in the House of Commons claimed on 25th November that there are 100 tax reliefs which could raise £195 billion if scrapped.
@Michael; I have to admit I’ve learned to take Richard Murphy’s suggestions with a strong pinch of salt (He may be an excellent accountant and tax expert, but he rarely seems to take into account how proposals will impact the economy), but since you linked to his article, I checked it out.
My sense that some of his proposals are sensible, some are iffy, some are outright ludicrous. An example: Under ‘Close company rules’ he appears to be proposing to prevent small businesses from using profits to invest in growing the company in future years, and instead force them to pay most/all profits out as dividends, just so the Government can collect dividend tax on them. Can you imagine how disastrous that will be in terms of destroying future jobs!
Another example: Under ‘Reforming Companies House’, mixed with some sensible (but uncosted) proposals to improve checks on companies, he’s suggesting that anyone who owns any shares should have unlimited liability. At a stroke that will destroy many companies’ ability to raise finance as well as making starting a new business so risky that many people will be deterred from even trying.
If that is typical of Murphy’s proposals, then – sorry, but I don’t believe they form a sensible basis for raising £195Bn/year in extra tax. I stand by that there’s going to be some scope for the wealthiest to pay more, but it’s unlikely to be massive.
Low growth and a lack of productivity derives from a lack of public investment into our NHS that hinders health outcomes (more people unemployed due to sickness), into our infrastructure (crumbling schools and hospitals), into our land and water to utilise green jobs. There is a solid economic argument to be made in supporting public finances over tax cuts. Tax reform – making it transparent and including land value, along with even taxing wealth (uncontroversial at Davos) is also a way to go. It’s pragmatism, not radicalism.
We must show that we understand the electorate’s concerns and care about them. So there should be room in our messaging for showing compassion and a sense of justice. How we do this might alter depending on who we are targeting. Extreme inequality is something most people care about evern if does not show up in polling.
Labour people like Angela Rayner spent the coalition years attacking the Lib Dems, thereby helping the Tories to win in 2015. Such people are “Blue Labour” and need to be described as such.
Simon R,
I don’t think all of Richard Murphy’s suggestions should be implemented, but he does set out how over £100 billion could be raised. I wouldn’t support charging capital gains tax on a person’s main residence. I wouldn’t expect the party to accept all of them.
With regard to ‘Close company rules’ Richard Murphy states what he is proposing is done in many countries. I am not sure that £50,000 and £200,000 are the right levels but if it is a tax avoidance method then it does need addressing in some way.
I do think that requiring UK companies to have a share capital commensurate to their level of trading is a good idea. I would not see this as a means of raising extra tax. However, if a limited liability company does not have sufficient capital this is an issue and needs addressing. Increasing the liability of shareholders to meet this shortfall is not something I reject out of hand, but companies should be given time to raise more capital elsewhere to cover this shortfall.
His suggestion to align capital gains tax and income tax rates is already party policy. I think that at least over £40 billion could be raised from just five of his suggestions.
“Public Services or Tax Cuts? Let’s be honest, you can’t have both” Ben Rich
“Richard Murphy has set out how over £100 billion extra can be raised by the government”
The problem with both these statements is the implicit assumption that Government needs to “raise” money, either by taxation or borrowing, to be able to spend. This household model is clearly incorrect as it doesn’t explain where the money comes from in the first place before it is available to be borrowed back or collected in taxation.
Richard Murphy should know better.
This isn’t to suggest that increased taxation isn’t going to be necessary in the next few years but it won’t be because of any shortage of Government revenue. It will need to be increased to increase the fiscal space rather than “raise” money for spending. It this word which is the problem.
Fiscal policy should be applied the other way around to the way nearly everyone assumes. It should be relaxed when revenue is low, and the economy is sluggish, to stimulate demand. It should be tightened when revenue levels look good especially if there are signs that the economy is overheating and inflation is a looming problem.
Peter Martin,
“(taxation) will need to be increased to increase the fiscal space rather than “raise” money for spending.
You often state that the government needs to spend money into the economy.
You have posted in another thread that “we are already pretty close to (full employment)”.
Are you saying that at the moment it is not the correct policy for the government to create money and spend it into the economy?
If so, then you must agree that the only way to increase government spending at the moment is to raise more tax to pay for it. Therefore if Richard Murphy agrees with you then it makes sense for him to set out where extra government revenue can be raised.
@ Michael BG,
The point is that a wealth tax could “raise revenue”, if it were successful, but it may not create much extra fiscal space. That’s not to say we shouldn’t have one though!
Unfortunately, from a left wing POV, the way to create fiscal space is to encourage us all to spend less and save more, and raise taxes on those of us who would otherwise spend the money. Encouraging us all to save more, though, will show up in the accounts as the Govt borrowing more which will spook the neoliberals.