Tag Archives: economics

Josh Matthews

The Lib Dems must challenge the economic system – but with the plans to match

By Josh Matthews | Wed 11th March 2026 - 4:55 pm

The Lib Dems recently announced plans for a Department for Growth. I can agree with splitting the Treasury into finance and “strategic economy” departments. But the messaging doesn’t suggest that our party is that keen on challenging (or being seen to challenge) the economic status quo: an economic system which is not working for too many people nor the environment. 

Challenging the economic system does NOT mean de-growth. It does mean challenging and moving away from GDP and growth – regardless of what, where, and for who – being the ultimate aims. “Growth agnostic” is the technical term. But more clearly, it means that it shouldn’t matter if we grow GDP or not, because we measure our success based on what genuinely matters for people and nature. GDP becomes one of many metrics and levers, but not the overarching objective.

What separates us from the Greens in the minds of the many sustainability professionals I meet is that we have vision AND the plans to match. We’re at risk, not least because we have so many current MPs facing the conservative party, of limiting those visions and plans for what society could be. 

There is a (personally conflicting and valid) conversation to be had as to whether stopping Reform, the Conservatives, and their hate-filled divisive politics is so important that we ensure we win, where we currently get our best results, with more cautious politics – enough to make sure there’re enough Lib Dem MPs to group with Labour and the Greens after the next election. 

But for the sake of this article, and in hope that we can do better than cautious, let’s be ambitious enough to manage these conflicts and nail the best of all worlds. Especially as our “Thriving Economy” working group comes up with our new economic policies that will take us into the next general election and might very well make it into some form of government.

I’ve written recently that two things must happen in 2026 to accelerate the move away from GDP and growth-at-all-costs toward judging society based on what matters for people and the environment.

  1. Clarity on the end point and principles of a new economic vision: which we have, in so many different forms that I discuss in the articles linked throughout this piece, like Natural Capital (alongside Human and Produced Capital), Doughnut Economics, Missions (I know…), SDGs, GEP, and countless other frameworks, metrics, and philosophies. We need to align. The promising UN High Level Expert Group on Beyond GDP is working on this right now. 
  2. A transition plan for that new economic vision: How do we unpick the current economic system from inside itself? And build a step-by-step path from now to that end point. With core principles that allow continuous improvement even after the economy is measured differently. Principles that allow flexibility far beyond a rigid plan. An approach that also wins the political conversation, as well as proving that a new economic approach can work for people and the environment, as well as working within the current system. We have gotten this roadmapping approach right before, for example in our 2024 EU policy and 2019 decarbonization plan. (The latter, alongside the people, was a big reassurance that I’d joined the right party in 2019!)

For a longer read on the indicators, frameworks, philosophy, liberalism, tipping points ahead, communication challenge, see again this Critical Mass for Sustainability piece and broader article library.

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Theodore Roos

The Liberal Democrats must be the party that stands for Growth – and we are the best positioned to deliver it

By Theodore Roos | Mon 10th November 2025 - 8:59 am

Zohran Mamdani’s stunning victory in the New York mayoral race last week was more than a local upset. It symbolised a growing confidence among the democratic socialist left — in the United States, but also here in the UK. The rise of figures like Zach Polanski, newly elected leader of the Green Party of England and Wales, with his self-described ‘eco-populist’ views, and the new political venture of Jeremy Corbyn and Zarah Sultana, suggest that the populist left is not going away.

How should the Liberal Democrats respond — and where, in an increasingly polarised landscape, is our space?
The answer is clear: we must be the party that unapologetically stands for economic growth. Growth that is fair, sustainable and inclusive — but growth nonetheless. Because without growth, there is no route to improving living standards, funding high-quality public services, or addressing inequality. Without growth, liberalism has no solid foundation.

Growth is the antidote to populism

For too long, Britain has been trapped in a cycle of stagnation. Real wages have barely risen in more than fifteen years. Productivity growth has collapsed. Living standards have flatlined. It is little wonder that so many people are disillusioned and drawn to the counterfeit promises of populists — whether from the far left or the nationalist right.
If liberals fail to offer a credible path to prosperity, others will fill that void. That is why the Liberal Democrats must be the movement that argues confidently for growth — not as an afterthought to fairness, but as its precondition.
Fairness and growth are not opposites. They are mutually reinforcing. A society that provides opportunity, rewards effort, and removes barriers to participation is one that will grow. A growing economy, in turn, gives us the means to invest in fairness — in childcare, education, healthcare, and social mobility.

A liberal abundance agenda

In the United States, some thinkers have begun speaking of an ‘abundance agenda’ — the idea that societies can renew themselves by building more, investing more, and unblocking the forces of progress. As they note, America is stuck between a progressive movement that is too afraid of growth, and a conservative movement that is allergic to government intervention.

The same tension exists here. Labour knows that Britain needs growth, but its leadership remains timid — constrained by vested interests and trade union conservatism. The Conservatives (occasionally) talk about dynamism but have presided over years of anaemic productivity, high taxes on work, and collapsing investment.

Liberal Democrats should claim the abundance agenda as our own. We believe in both enterprise and effective government; both social justice and economic dynamism. We can be the party that unites optimism about markets with a belief in reforming the state so it actually works. That means removing the bureaucratic, outdated or self-defeating regulations that strangle innovation, while actively investing in the infrastructure, skills and institutions that enable growth.

Reforming tax to reward work

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Simon Robinson

Economics: Thinking about Resources

By Simon Robinson | Fri 7th November 2025 - 2:23 pm

I’ve noticed here on LibDemVoice that when we have a discussion about the economy and what the Government can afford, it usually descends into a very technical argument about the nature of money: is money a flow, as mainstream economics says, or is it destroyed by tax, as Modern Monetary Theory (MMT) advocates believe?

Wouldn’t it be nice if there were an alternative way to think about expenditure that avoided these arguments and got to the root of what is really going on when we decide whether something is affordable? Well, there is! Instead of counting money, try thinking about the actual resources consumed.

How does that work? Here’s an example:

Most LibDems agree that fixing the crisis in social care should be a priority. That means we need more social care workers. There are currently around 1.8 million people working in social care in the UK (Report for Skills for Care and Development). Let’s say, for the sake of argument, that we decide adequate social care requires 10% more workers. That’s nearly 0.2 million people.

Here is where thinking about resources kicks in. Let’s say you do somehow recruit 0.2 million more social care workers. That doesn’t by itself change the size of the available workforce, so it must mean 0.2 million fewer people doing something else. Some other industry will have to produce fewer goods or services because it will have fewer workers. Which industry? Well, in theory the Government could make that decision by taxing or cutting spending on some specific thing. Or it could let the market choose — which will mean the jobs will be lost in whatever industry is least able to compete for those workers. But either way, we will gain more social care but lose out in some other way.

Another example: junior doctors are about to go on strike. They want more money, which the Government says it can’t afford. How would that work economically? Again, think about resources rather than money: the relevant resource here is all the things that people might buy with their money — food, travel, housing, and so on. The total quantity of available goods and services people can buy (the size of the “cake”) won’t change just because you give junior doctors a salary increase. What would change is that doctors would get a slightly bigger share of that cake. And — guess what — that must mean a smaller share for everyone else, translating into a small loss of standard of living for the rest of us.

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Tom Arms

Tom Arms’ World Review

By Tom Arms | Sun 26th October 2025 - 10:30 am

British Chancellor of the Exchequer Rachel Reeves says Brexit has damaged the British economy.

What a shocker!

In case you didn’t notice, the last sentence was dripping with sarcasm.

Let me explain why. The Centre for European Research (CER) estimates that British trade with the EU (which remains Britain’s largest trading partner) has shrunk by 10-15 percent since Brexit. There have been trade deals elsewhere, but analysts reckon that for every £10 of EU trade lost, the new deals have contributed only £1 to £1.50.

Foreign investment (FDI) in Britain has been a major factor in Britain’s economic success since the 1970s. Companies have queued up to invest in a country which speaks English, has a good education system, a fantastic culture and history and—most important of all—access to a market of 500 million well-off people. Not surprisingly, foreign investment in Britain has dropped 30 percent since Brexit and moved to the continent.

Why put your money to produce products for 69 million people when the same investment can give you access to 500 million?

Partly as a result of the lack of FDI the economy is reckon to have gown two to three percent more slowly than comparable advanced economies. By the end of this year, economists estimate that the UK GDP will be 4-5 percent smaller than it would have been. This has cost the country tens of billions of pounds.

This money would have been taxed and the taxes could have gone to maintain, possibly even increase welfare spending. No wonder Ms Reeves is contemplating breaking Labour’s manifesto commitment not to raise taxes.

Thirty to forty percent of Britain’s food inflation has been attributed to Brexit; most costly by the increased red tape, customs forms and other barriers at the border.

Wage inflation has been pushed up by the end of the free movement of workers and financial services have lost “passporting rights” to sell directly into the UK. As a result, Amsterdam has overtaken the City of London in the sale of some shares.

It is almost universally agreed that Brexit has been bad for the economy (Nigel Farage excepted). In fact, every poll indicates that most people now think that leaving the EU was a bad idea. But that does not mean they would vote to return to the Brussels fold. And it is questionable that the remaining members of the EU would want us back.

So what can be done to improve relations with Europe—and the British economy—short of membership of the EU or rejoining the Single Market and Customs Union?

Big steps are being made by the Starmer government in foreign policy and defense. Britain is coordinating its policies on Ukraine and the Middle East and is in the process of gaining access to the EU’s defense procurement fund. The latter would be a big boost to Britain’s defense industry with its large number of well-paid jobs.

The two sides could also deepen cooperation on services, improving market access in such areas as the legal profession, financial services, accounting and engineering.

A lot of the drop in trade and rise in inflation is caused by annoying customs forms, customs declarations and hold-ups at the border. This could be alleviated by UK-EU pilots for “trusted traders” who could skip forms and hold-ups at the border.

To ease wage inflation and job shortages, Brussels and London could introduce “temporary visas” for skilled workers and specific sectors of the economy such as health, hospitality and agriculture. The two sides could also introduce improvements to dispute resolution procedures and more joint-industrial projects.

But to start with, both Brussels and London, must accept that they need each other.

The world’s focus is on the eastern edge of Asia this week. It starts with the Association of Southeast Asian Nations (ASEAN) summit in Malaysia this weekend which will include US president Donald Trump.

On Monday he will fly from Kuala Lumpur to Tokyo for his first meeting with Japan’s first woman prime minister, former heavy metal drummer and car enthusiast 64-year-old Sanae Takichi.

The fact that the ruling Liberal Democratic Party has elected a woman as its leader is big news in highly patriarchal Japan.

Ms Takichi has a reputation as a Japanese nationalist and right-wing economist who models herself on Britain’s Margaret Thatcher. She even calls herself Japan’s “Iron Lady” and wears the same blue suits as Mrs T.

Meeting Donald Trump will be Takichi’s first diplomatic test, especially as Trump puts a high premium on personal relationships. When Trump heard of Takichi’s election he said she was “a highly respected person of great wisdom.”

Trump will almost certain be pleased with Takichi’s tough stand on defense. In her first addressed to parliament she announced that Japanese defense spending would increase to two percent of GDP next year instead of in 2027.

However, Ms Takichi is very much a “Japan first” type leader and she and Trump are expected to clash over the US president’s announcement of a 25 percent tariff on Japanese goods. The tariff plans have been pulled back to renegotiation, but the US is determined to protect US car manufacturers by raising prices of Japanese and European cars.

Trump will leave Japan on Wednesday for South Korea and a meeting of the Asia Pacific Economic Community which includes China. Xi Jinping and Donald Trump will have their first face to face since Trump started his second administration. US tariffs and Chinese rare earth minerals will top the agenda.

Donald Trump’s Ukraine policy must be making him dizzy.

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Alastair Bowman

Markets work, but not for poor people

By Alastair Bowman | Fri 1st August 2025 - 12:34 pm

The economic concept of ‘demand’ was developed in the 19th century but merging our wants with our needs has its roots in Adam Smith’s Wealth of Nation (1776).  He observed that people were highly motivated to improve their own lives, spurring social progress.  Yet the mechanics of supply and demand mean that poor people lose out.

Smith believed that self-interest, combined with specialisation from a more complex division of labour, would unleash so much productivity and innovation that even the poorest benefit.  He claimed that markets are just because they advantage everyone, giving us permission to pursue our wants irrespective of other people’s needs.  Famously he wrote that markets are ‘led by an invisible hand’ though the end of that sentence is less widely cited: ‘to make nearly the same distribution of the necessaries of life, which would have been made had the earth been divided into equal portions among all its inhabitants’

With the benefit of hindsight we know he was wrong.  Today’s welfare state only exists because 19th century laissez-faire failed to address extreme poverty.  In reality, the market would fill a rich man’s swimming pool before quenching a poor family’s thirst given sufficient disparity in wealth.  Smith was right about capitalism’s productivity and innovation, but he was wrong to claim that market outcomes advantage the poorest.  He let us off the hook regarding the well-being of others, making selfishness consistent with the common good.  This is highly comforting for those who do well, but if something is too good to be true, it usually is.

Markets can be liberating, challenging established hierarchies and empowering people with choices through free exchange.  People facing acute need do not participate in this win-win.  Markets allocate on price and unequal bargaining power at the heart of every transaction systematically favours the stronger side.  Money exerts its own gravity, and tends to mass into fortunes as market prices suck wealth up from the poorest.

On the supply side, all workers sell their produce or their time, but those trading to meet their basic­ needs are forced sellers.  They must accept worse prices and lower wages because they have so little bargaining power.  When your children will go hungry or some other need will not be met, you are not just competing with others in the market but also racing against the clock, because needs get worse over time.  Those who survive this race to the bottom must tread water – they live to fight another day but are no better off.  They cannot afford any advancement, or enjoy any choice, through which the rest of us progress.

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Jack Meredith

Labour’s Embrace of Trickle Down Economics: An Open Goal for Lib Dem Opposition

By Jack Meredith | Thu 17th July 2025 - 9:45 am

A few “political open goals” have been facing the Lib Dems recently, from the firing of Christine Jardine from the front bench (covered wonderfully by Lib Dem Voice’s own Mathew Hulbert) to Unite the Union suspending Angela Rayner over Labour’s lack of open support for striking bin workers.

We can now add another open goal to the list: Labour’s embrace of “trickle-down economics”.

As reported by The Guardian, Rachel Reeves plans to scrap regulations introduced by Gordon Brown, Keir Starmer’s predecessor, to mitigate the impact of the 2008 financial crash on households. Chaitanya Kumar of the New Economics Foundation has criticised the move, calling the situation Groundhog Day, questioning the decision to expect the financial sector to do “most of the heavy lifting in terms of growth”.

We’ve seen how Prime Ministers have fared with trickle-down economics in recent times, with former Prime Minister Liz Truss being removed from office after less than 50 days in power for introducing a budget that sought to scrap banker bonuses, abolish the top rate of income tax, and reverse any increase on corporation tax.

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NewsHound

Jo Swinson talks to the Observer about a new approach to economics

By NewsHound | Wed 2nd July 2025 - 3:30 pm

Jo Swinson has long been interested in challenging the conventional way of determining economic success. She’s a graduate of the London School of Economics and when she was a Lib Dem MP, and leader, she promoted the idea of measuring wellbeing and not just GDP.

She has spent the past five years as the Director of Partners for a New Economy. This week she was interviewed about the work of PANE in the Observer.

She had some important observations to make about the timidity of some centre-left governments:

We are in this moment of rupture, where the old economic consensus around neoliberalism has lost credibility and is going away but the new economic paradigm has not yet become clear,” says Jo Swinson.

“The irony is that the defenders of the neoliberal status quo seem to be centre-left governments in different parts of the world.” That, she argues, is one reason the left is struggling: “People have sussed out that this economic system doesn’t work.” By contrast, “the part of the right that is being successful has stopped defending neoliberalism, because they know that it’s not popular and that defending it is not going to win them votes.”

She was positive about the direction Mark Carney might take in Canada:

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Andrew Chandler

Neglected Assets: A case for a radical rebalancing and reform of our Tax System

By Andrew Chandler | Wed 5th June 2024 - 12:25 pm

In a twist worthy of a Shakespearean comedy, The Financial Times—yes, the very bastion of capitalism—has thrown its weight behind the call to increase taxes on the wealthy. It’s as if Ebenezer Scrooge himself woke up, not just offering Bob Cratchit Christmas off, but also turned his business into a consumer mutual. 

This surprising endorsement underscores a deeper, more troubling reality: the Tories have, over time, alienated their once staunchest supporters — pragmatic economic thinkers and investors. The people who’d toast their morning coffee to the Conservatives, secure in the knowledge that their financial acumen was reflected in sound government policy. 

However, even the FT don’t try to hoodwink their audience against their own interests; understanding the reality of how years of economic stagnation has impacted our country and the wealth imbalance. 

The Tories have managed to estrange themselves so far from these stakeholders, pushing them away with a series of economic imbalances that act more like tragicomedies than strategy. Gone are the days when Tories  were seen as reliable economic stewards. 

The Tories seem intent on peddling narrow, faux-capitalistic dogma than fostering real, sustainable growth. The FT would appear to not be as easily fooled. They understand that the economy needs careful tending, like a well-pruned garden, not the reckless abandonment of letting a child  loose with garden shears. 

The article claims that parties need to the bolder on the economy. Now you might think, bold from FT writers, we’ve all been here before; savage tax cuts, privatising the police force, parading with “We Love Liz” t-shirts and having a national “Margaret Thatcher day”. Except no. Instead, amongst many other arguments, the article states that arguments by the right that better economic rebalancing and higher taxes will impact the economy is just nonsense. They say that due to the state of public finances and a public interest to see robust investment into public services that we need to be honest about increasing taxes if we are going to prevent going through a cliff-edge. They have even argued that due to lack of private investment that it would be in our interest if a major re-balancing of wealth in this country through a series of targeted tax rises on the wealthy be implemented as the government can efficiency invest into the economy. The extreme position the Tories have left us in means we have no major infrastructure going on in the UK – the need is obvious. 

While it stop short of calls for any kind of Wealth Tax or increasing top earners’ tax rates it, the author argues that we should be looking at reforming our overly complex tax system which courts the favour of people with big pockets and good accountants. Amongst its arguments was  using revenue to bring VAT down and combining NI and Income Tax together. 

I have always been a strong advocate of reforming our tax systems.  The current tax system is deeply unfair where wealthy individuals who make their earnings by selling assets pay less tax than someone who is on a paid salary but earning considerably less. 

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David Brunnen

Fresh thinking required

By David Brunnen | Mon 27th May 2024 - 2:42 pm

As global climate concerns underscore capitalism’s flaws, who will lead the transformation of economics?

“A toxic combination of 15 years of low economic growth, and four decades of expanding inequalities, leaves the UK poorer and falling behind its peers” – not my analysis but that of the highly respected Resolution Foundation. And they go further, ‘Productivity growth is weak. Public investment is low. Wages today are no higher than they were before the financial crisis.’.

The view from the doorstep concurs, “We now pay far more for much less to enable wealth to be extracted by the few.”. That general despondency contributed massively to the anti-Tory sentiment that yielded so many LibDem Council seats earlier this merry month of May. But few local campaigners could confidently answer the question that will be asked time and again before the General Election. What do your lot think they can do about it?

Our parochial economic despair is symptomatic of a far larger malaise – an existential climate crisis. Mass migration is inevitable as large parts of our world are laid to waste, as nature is depleted, as societies collapse, wars rage, and coastal habitats shrink.

On top of a self-inflicted Poverty Pandemic and global unrest, we seem stuck – fresh out of imagination. We need to tackle the climate crisis and reverse societal decline. Fortunately, there is no shortage of guidance, but there is a political vacuum where none of the main Parties dare tread – rethinking our economic foundations. There is near zero confidence that anything can be done.

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Mark Valladares

3 April 2024 – today’s press releases

By Mark Valladares | Wed 3rd April 2024 - 10:30 pm
  • Aid worker deaths: Davey calls on government to suspend arms sales to Israel
  • Royal Mail proposal to cut second class deliveries: Another slap in the face
  • London Lib Dems response to Khan economic announcement
  • Worst hit rivers for sewage dumps revealed as Lib Dems call for new Blue Flag status
  • Rennie responds to CalMac boss stepping down

Aid worker deaths: Davey calls on government to suspend arms sales to Israel

The Liberal Democrats have called on the government to suspend arms sales to Israel, following the deaths of seven aid workers including three British nationals in an Israeli air strike in Gaza.

Liberal Democrat Leader Ed Davey said:

The deaths of these British aid workers in Gaza is an absolute disgrace. These brave people were trying to help starving families in Gaza.

Clearly, the thought that British-made arms could have been used in strikes such as these is completely unacceptable.

The government must take swift action to suspend arms exports to Israel. We must redouble our efforts to secure an immediate bilateral ceasefire.

Royal Mail proposal to cut second class deliveries: Another slap in the face

Responding to the news that Royal Mail wants to reduce second class deliveries to three days a week, Liberal Democrat Business Spokesperson Sarah Olney MP said:

These plans are a slap in the face for families being asked to pay more for less.

The cost of first and second class stamps has gone up sharply in recent years. It risks creating a cost of postage crisis, as people feel forced to pay for first class stamps because second class delivery days are being slashed.

People shouldn’t have to pay the price for Royal Mail’s failure, after executives missed their delivery targets and paid themselves eye-watering bonuses.

London Lib Dems response to Khan economic announcement

Responding to Sadiq Khan’s joint economic announcement with Rachel Reeves today (Weds), Rob Blackie, the Liberal Democrat candidate for Mayor of London, said:

Labour’s plan ignores London’s biggest economic problem – Brexit. Labour are too scared to say that Brexit has damaged London’s economy, making us poorer and costing us jobs.

For instance, technology companies now have to spend time and money complying with two data laws, one each from the EU and the UK. And too many European citizens in London are made to feel unwelcome.

As Liberal Democrat Mayor I will campaign to fix the damage done by Brexit, and bring in a London passport to protect London’s EU citizen rights.

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Mark Valladares

11 March 2024 – yesterday’s press releases (part 2)

By Mark Valladares | Tue 12th March 2024 - 11:30 pm
  • McArthur looks to include cruises ships in visitor levy bill
  • Prison exec admits no plans to bring back rehabilitation services
  • Yousaf’s economic credibility is down the drain

McArthur looks to include cruises ships in visitor levy bill

Orkney’s MSP Liam McArthur has lodged amendments to the Visitor Levy (Scotland) Bill to allow a debate on the inclusion of cruise ship visitors within the scope of the legislation.

In light of concerns raised by local tourism businesses in Orkney, as well as Orkney islands Council, Mr McArthur is seeking to ensure the bill is both more flexible and fairer in the way that any levy might be applied by local authorities.

Commenting ahead of the Local Government Committee meeting that will begin consideration of Stage 2 amendments on the bill on Tuesday, Mr McArthur said:

Providing local councils with the power to set a visitor levy is a reasonable step to take. As ever, though, the devil is in the detail.

At present, Ministers have come forward with a bill that would apply to some parts of the tourism sector but not others. People in Orkney will not be alone in wondering why visitors to our islands who stay in hotels, self-catering or B&Bs should be charged, but not the increasingly large numbers who visit Orkney on cruise ships or indeed in mobile homes. All place demands on the local infrastructure and services, and all should therefore contribute. Anything else would be unfair and undermine business and public confidence in the scheme.

I am concerned too at the lack of flexibility local councils will have in the way any levy will apply. Just because it works in Edinburgh or Glasgow doesn’t mean it will work in our islands. Councils should therefore have scope to apply any levy in ways that make sense in local circumstances, such as collection via airlines and ferry companies.”

I support the principle behind this legislation but getting the detail right will be crucial. Unfortunately, that has not been a strong suit of this SNP/Green Government over recent years.

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Mary Reid

Does trickle down economics actually work?

By Mary Reid | Fri 23rd September 2022 - 11:28 am

I will start by stating loud and clear that my understanding of economics is at a very basic level. However the concept of trickle down economics is refreshingly simple, so even I get the gist. But does it work?

Ed Davey addressed the question in his interview on Sky News yesterday, where he says that the practice of boosting big business with tax cuts will not help the 4 million SMEs:

And neither will it help those many millions of people who are struggling now, at this very moment, with the cost of living crisis. Even if Truss’s proposals did manage to kickstart the economy again it would take months, if not years, to impact on ordinary citizens/consumers.

However the evidence appears to be that, even in the long term, trickle down (or supply side) economics doesn’t achieve its intentions.

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John Medway

We’re not going bust – but how will we manage our money in future?

By John Medway | Mon 24th January 2022 - 10:25 am

In earlier days of Covid, I argued that we should spend whatever was needed to tackle the pandemic and not worry too much about the national debt. It seemed a no-brainer then but, as we move into post-pandemic or endemic times, things don’t look so straightforward. 

To outsiders, including me, money and banking can look horribly arcane and complex. Still, it has a big influence on our lives. Active democrats need at least some understanding of it. I’ve tried to expand my own understanding and here, in summary, is how I see things:

In the UK we are in charge of our own currency, which is not pegged to any other currency or to gold or silver. We can borrow in our own currency. This means that we can’t involuntarily go bankrupt –  we can create money to settle our debts. A sovereign state is not like a household. 

We have to be careful. If we put too much money into circulation, by spending too much more than we raise in taxes, inflation can run wild and it can be difficult and painful to get it back under control. Too little money can mean unemployment, empty buildings and idle machinery. Things are particularly tricky at the moment because we have inflation driven by the world price of energy and by bottlenecks in supply chains from Covid and Brexit.

The size of the national debt doesn’t always matter much – it depends partly on who is financing it and at what rates of interest. At the moment, nearly 40% of the UK national debt is owed to the Bank of England, which the government owns, and there seems scant evidence that the debt is itself a problem. However, the debt is often used by right-wing Tories as an excuse for the austerity they love.

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Max von Thun

Book review: Vince Cable “Money and Power”

By Max von Thun | Thu 11th February 2021 - 2:34 pm

Despite his many years at the pinnacle of British politics, Vince Cable has always managed to maintain an impressive literary output. In 2009, while the party’s deputy leader and shadow chancellor, he published The Storm, an accessible analysis of the 2008 financial crash. This was followed in 2015 by After the Storm, a look at the aftermath of the crisis on British economic policy from the perspective of Cable’s five years in the Cabinet as Business Secretary. Most recently during his time as party leader, Cable even managed to find the time to publish a political thriller, Open Arms, set at the intersection of Westminster politics and the Indo-Pakistani conflict.

Cable’s latest work, Money and Power, marks a return to non-fiction and the serious economic themes that are his bread and butter. Inspired by Keynes’ oft-quoted remark that “practical men…are usually the slaves of some defunct economist”, the book is a survey of leading politicians over the past few centuries that – consciously or unconsciously – have through their actions changed or deepened our understanding of political economy. As both a trained economist and former government minister, Cable is better placed than most to take on this ambitious task.

The sixteen figures profiled by Cable are genuinely global in their breadth, and include Alexander Hamilton and Franklin Delano Roosevelt in the US, Bismarck, Lenin, and Thatcher in Europe, and Lee Kuan Yew, Deng Xiaoping and Shinzo Abe in Asia. Yet just as compelling are Cable’s profiles of lesser known yet nonetheless influential individuals, such as Ludwig Erhard, an economist turned politician who was instrumental in designing Germany’s post-war economic model, and Leszek Balcerowicz, another economist turned statesman who developed the thinking behind Poland’s largely successful “shock therapy” transition from communism to capitalism.

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William Francis

Economic planning, obesity, and lessons from Japan

By William Francis | Sat 14th November 2020 - 8:55 am

Whilst many have discussed obesity as a national health problem, this framing ignores the curtailing of individual liberty that obesity produces; from the limits it often imposes on everyday activity to wide-ranging health risks and even potentially shortened lifespans. This framing is probably why the substance of obesity discourse revolves around how this often agency limiting phenomena is supposed to be ameliorated by limiting agency. 

As a Liberal whose BMI straddles the line between overweight and obese, I think that obesity reduction policies should be based on expanding the agency of people, rather than curtailing it through Pigouvian taxes or even outright fat shaming.

This can be achieved by learning from the successes of other countries, primarily Japan. According to the 2017 OECD report the rate of obesity in Japan was 3.7% among people aged 15 years and older, whilst in contrast, the OECD average was 19.5% and that figure stood at 26.9% in the UK.

What explains this low rate of obesity? 

More regular exercise? 

About 25% of Britons age over 16 are classed as “physically inactive” as of 2017/18 whilst at the same time over 40% of Japanese people (aged 18 and over) admit they don’t exercise or take part in sports activity.

A lack of poverty?

As of 2017, 15.7% of Japanese people lived on 50% of median household income or less, compared to 11.9% of people in the UK. 

So, what is going here?

A good answer comes in the form of a YouTube video by an American expat living in Japan. As a person who has lived in two different societies, he provides a unique perspective on Japanese and American diets and a beautifully simple thesis for Japan’s lack of obesity; Japanese people have access to cheap, varied and convenient healthy food in a way Americans (or indeed Britons) don’t.

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Mark Valladares

Daily View 2×2: 21 April 2020

By Mark Valladares | Tue 21st April 2020 - 7:30 am

It was a hectic day yesterday, given what I do as a day job, and today probably won’t be any easier. But there are plenty worse off than I am…

2 big stories

The more aging amongst us will remember oil shocks, as OPEC squeezed consumers by controlling the flow of oil, and thus the price. Today, the shock is that the price of US crude oil is negative. Yes, they’ll pay you to take it away because it’s cheaper to do that than to build new storage facilities that probably won’t be needed for long whilst consumption is so much lower …

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Paul Reynolds

The UK’s responses to global economic changes

By Paul Reynolds | Wed 13th November 2019 - 8:34 am

High on the list of public priorities in the General Election is a sustainably improving economy. Even avid supporters of Brexit balance their new-found acceptance of economic damage from leaving the EU, with tall tales of an eventual post-Brexit boom for ‘Global Britain’.

Brexiter MPs have at different times blamed economic contraction and lower growth on ‘Remainers’ blocking Brexit and causing uncertainty, an idea which hasn’t gained much traction. Slower UK growth has also been falsely blamed on weaker global and European economic growth.

The latter claim is at least is an acknowledgement by Brexiter MPs that the UK economy is integrated …

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Rupinder Singh

Sunny Uplands and Baloney Economics: whence the falling Pound?

By Rupinder Singh | Fri 2nd August 2019 - 2:45 pm

The pound has hit a 2-year low and is the worst performing currency this year and there are still strong headwinds ahead for sterling, particularly if a No Deal Brexit ensues.

The circumstances facing the UK economy and the exchange rate remind me more about country risk scenarios that I faced for dodgy Emerging or Transition Economies, not a developed and mature economy such as the UK. 

All bar our more mature colleagues will have no memory of the dark days of the IMF led bailout of the UK in the 1960s. It’s worth therefore sketching out what the economic-cum-financial risks lie ahead if the “Sunny Uplands” scenario of Prime Minister Johnson starts to take shape, based on his statements and promises since his speech at the doors of 10 Downing Street.

The pound’s value in terms of other currencies is based several factors. Right now, the increasing risk of a “no deal” is scaring away demand for sterling and for sterling assets, thus pushing down the price or exchange rate in terms of other currencies – but the markets sense that there’ll still be a resolution or a further extension.

However, in the event of a “no deal” we will face a genuine currency crisis as investors pile out of sterling assets. These events tend to lead to an initial “overshooting” of the depreciation and we could easily see a further drop of 10, 15 or 20% – nobody really knows. With liberalised exchange rates there’s nothing to really hold back the initial loss of the pound’s value.

Ignoring the immediate hit for UK holiday makers facing a steep rise in the cost of holiday spending, what are the likely consequences for a no Deal as far as the pound is concerned?

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Mark Valladares

11 December 2018 – today’s press releases

By Mark Valladares | Tue 11th December 2018 - 11:35 pm

Amidst the chaos that is Westminster at the moment, at least somebody was trying to do something liberal. Admittedly, it wasn’t successful, but as another step towards a more liberal drugs policy, it was certainly worth the effort. Otherwise, another day of national humiliation for our country, as Theresa May found herself child-locked into a limousine. It’s a metaphor for something, isn’t it?…

So, what has gone out in the name of the Party today…

  • Lamb: Prohibition of cannabis is causing harm across the country
  • Cable: Govt economic analysis on Brexit misleading
  • EU confirms May has no room to renegotiate Brexit
  • Lamb: It is

…

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David Thorpe

Labour’s Bank of England plan is based on ignorance

By David Thorpe | Mon 25th June 2018 - 8:07 am

I am about 99 per cent less politically engaged now than was I was even three years ago, mostly because I think all parties lack true radicalism right now, so I find the endless rehashing of each party’s greatest hits albums tedious in the extreme.

But this week Labour did pop up with an idea that tempted my focus away from the books I’ve been meaning to read, and the friends I’ve been meaning to meet, when they proposed shifting the Bank of England to Birmingham and changing the central bank’s mandate to target productivity.

The first idea is based on the …

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David Thorpe

What the Lib Dems can learn about economics from Donald Trump

By David Thorpe | Thu 8th February 2018 - 5:05 pm

https://www.flickr.com/photos/wwarby/4860335535/in/photolist-8puuqx-nH9KhK-x5gkW-a2Yx4D-8putCp-a32qpS-a2YbjP-9kJJvt-7b8177-8puprR-6SKbQG-6SKbZG-oKCWvp-dkaUyr-v2EDLi-r1tFvY-r1tFHm-9kNUaq-4Mph7K-ChcB23-8puqfH-8pxBCE-8pxDRo-9kJHqK-aWwhx4-9VBBzN-5WEQZB-a2Ybz8-9kJLQR-9kP8co-4icUAV-9kMMvL-9kMSBb-9kMNwd-bYafLo-8purhr-9kKZfe-nzKQ2n-yNYtG-8pup2p-8purRn-hKv96Z-8pupSi-8pust2-bZPiEm-9kP7hq-a32p7J-8upwDg-5MSyss-9kMKy9Not least among my irritating habits is that I often take the opposite side of the argument to whatever the consensus is at any one time, not because I necessarily believe it, but rather to test my knowledge of my own point of view.

But there are times when even my ability to agitate for an unpopular cause runs aground. Donald Trump’s presidency is one where the well of mischief runs dry.

But there is a lesson for liberals in Mr Trump’s economic policies, as his actions reveal the failings of trickle-down economics …

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NewsHound

LibLink: Vince Cable: Politicians get lost in search for fabled Magic Money Tree

By NewsHound | Mon 16th October 2017 - 10:40 am

Vince Cable has written for City AM about governemnt’s fiscal responsibilities and how it has become less important to be financially credible.

Yet since the 2015 election, belief in financial magic appears to have grown. Brexit’s biggest appeal was a treasure trove to finance the NHS. Labour has caught the new mood.

A few weeks ago, shadow chancellor John McDonnell added £200bn of PFI contracts to a lengthening list of Labour financial commitments, including the nationalisation of rail franchises, energy and water utilities, free universities, and much else.

The IFS was scathing at the June election about Labour’s numbers, but it did little political harm, perhaps because the Conservatives had no numbers at all, and have since oscillated between preaching austerity and signing cheques when pressed. My own party, the Liberal Democrats, received an IFS Gold Medal in 2017, but it did us little good.

He then goes on to talk about a recent discussion with economics students who thought that austerity had had its day. Vince recounts the main points that he made with his response:

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Richard Morris

Please stop saying people don’t vote against their economic interests. They do it quite deliberately, all the time.

By Richard Morris | Sun 4th December 2016 - 10:39 am

I’m hearing the same argument uttered over and over again  – ironically by both sides  – in the Brexit debate.

Remain supporters keep saying ‘no-one in Britain voted to be worse off in the referendum campaign’, on the presumption that folk don’t vote against what they believe is in their economic interest.

Leavers, for the same reason, believe that they’ll get a great deal in their Brexit negotiations because ‘it’s in the remaining EU member countries’ economic interests to do so’

Both sides are of course wrong. People make quite deliberate decisions against their economic interest every day. The reason why political folk don’t realise this is because they are brought up in a culture of Fiscal and Monetary economics. The real world works rather more like Behavioural Economics.

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David Boyle

Story telling might lead to economic revolution

By David Boyle | Wed 23rd March 2016 - 12:22 pm

It is extraordinary how compartmentalised everything is – especially when we are campaigning in local elections.

We, few of us, who know a little about the way public responsibilities are demarcated between different layers of government, have a kind of sense of corrosive superiority as we expect campaigners to demand the right reform from the right level.

But partly this is just a function of sclerotic centralisation. The Treasury has a crushing monopoly on economic policy because, well – it always has.

Partly because of that, and because there is almost no local economic data collected about where money flows (the exception is bank lending to postal district level, forced on the banks by Lib Dem peers in 2012) – Whitehall doesn’t see the economic innovations at local level.

And in particular, they don’t see the emergence of a new generation of local entrepreneurs who are no longer prepared to wait patiently for the Chinese to invest or the government to give them a grant – and are trying to transform their local economies a bite at a time.

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Peter Martin

Fixing the Budget. Are we looking at the problem the right way?


By Peter Martin | Fri 19th February 2016 - 12:12 pm

Whenever we read articles on reducing the government’s budget deficit the underlying assumption is invariably that it needs to spend less and obtain more taxation revenue. This approach is known as economic austerity. We all know from our personal experience that if we have a debt problem we have to spend less and/or earn more to get out of trouble. So that must work. Or must it? All politicians in all parties need to get this one right if nothing else. Any government’s spending and taxation policy impacts just about everything else in its ‘to do’ list.


We saw in the last Parliament that the Coalition ‘reluctantly’ raised VAT to 20% to increase taxation revenues. All spending plans were subject to extreme scrutiny. Various bodies in the Treasury, or the Office of Budget Responsibility had previously been at work and had produced figures to show the extent to which the deficit would shrink over the course of several years. Usually just before the next election, hey presto! We’d have that surplus we were always promised.



It never does work. After a couple of years we see articles and more articles in the press saying that the Chancellor has been ‘blown off course’ by this or that event, and the story is usually that whereas government spending has been kept to plan the taxation receipts have been disappointing and consequently the promised date of a budget surplus is further away than was first predicted. There are lots of articles along these lines for anyone who cares to search them out online. There are never any at all, as far as I know, saying that the situation has turned around better than expected.

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Peter Martin

“Look after the unemployment, and the budget will look after itself ” (Keynes 1933). Is he still right?


By Peter Martin | Sat 19th December 2015 - 1:25 pm

Keynes was undeniably a genius of his time, but he wasn’t infallible. We should not just assume that he was always correct. As with all prolific writers we can cherry-pick quotations to suit our own political purposes. If we want to argue for more government spending, we can use this:

For the proposition that supply creates its own demand, I shall substitute the proposition that expenditure creates its own income.

(Collected Writings of John Maynard Keynes, Volume XXIX, pp 80-81)

Keynes meant that the mere supply of a commodity is not enough to ensure the sale of that commodity, but money from all government spending inevitably ends up in someone’s pocket. This is a statement of the obvious, maybe, but he evidently felt it needed making anyway. On the other hand, if we are suspicious of what sounds like “magic money tree” economics, as many scathingly describe any deviation from their understanding of ‘sound money’, we can find this quotation:

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Peter Martin

We need to balance the Budget over the business cycle as Keynes suggested, right?

By Peter Martin | Mon 14th December 2015 - 4:09 pm

Firstly, we do need to ask if Keynes did suggest that. There are arguments either way on this point.  Keynes’ view unfolded and developed starting in the bleak 1920’s in Britain. There was no ‘roaring twenties’ for the UK economy as the government deflated the economy to try to fit the Pound back on to its pre-war Gold  Standard. Keynes then did argue that governments should run deficits if private spending declined and reduce those deficits when future growth was strong enough. This has been interpreted by many that his intent was that the budget was to be more or less balanced over the business cycle. If anyone is …

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Kirsten Johnson

Opinion: Solutions to Inequality: Quakernomics and Economic Justice

By Kirsten Johnson | Mon 16th February 2015 - 8:55 am
  1. Unemployment
  2. Subsistence wages
  3. Hazards to Health
  4. Harm to the environment

These are the four results of unregulated capitalism according to Mike King in Quakernomics. In his book, which I highly commend, he details the history of Quakers in industry and how they modelled an ethical capitalism which served the community. “Quakernomics is the enthusiastic pursuit of economic activity as a social good.” We can always learn from history. In this blog I will explore what lessons gleaned from the Quakers can be applied to economic and social problems today.

The Quakers valued the entrepreneur, but gave equal value to the workers who brought new ideas to fruition. Equality and the worth of every individual were key. Owners and workers were interdependent.

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Peter Sloman

Deserving of more than a footnote: George Watson and The Unservile State

By Peter Sloman | Wed 31st December 2014 - 3:45 pm

The Unservile StateThe announcement that the Cambridge academic George Watson had left the Liberal Democrats £950,000 in his will was one of the most surprising political stories of 2014.

George Watson was a distinguished literary scholar and a lifelong Liberal. After working for the European Commission as a translator and interpreter during the 1950s he became a Fellow of St John’s College, Cambridge, in 1961 and remained there until he retired in 1990. As a scholar, he was known for serious bibliographical work, spirited polemics, and a traditional approach to literary criticism. He also made two forays into electoral politics, contesting Cheltenham in 1959 and Leicester in the 1979 European Election.

Watson is perhaps best remembered by Liberal Democrats, however, as the editor of The Unservile State – a 1957 volume billed as ‘the first full-scale study of the attitudes and policies of contemporary British Liberalism since the famous Yellow Book’ of 1928.

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David Boyle

Opinion: Small plus small plus small equals BIG

By David Boyle | Tue 13th May 2014 - 5:22 pm

ultra-micro economicsIn the heady days of the Thatcher government, when the hideous mistakes of Big Bang were being forged and coming to fruition, I used to run an excellent magazine called Town & Country Planning.  In those days, we were extremely exercised by the idea of the huge and mounting cost of rundown private sector homes. Who was going to repair them?

We don’t talk about that problem any more. This is not because it was ever exactly solved, but because of one of the more benevolent effect of rising house prices, before the oligarchs came in, was that it made a bit of DIY worthwhile. Instead of the government shelling out to repair all those privately-owned dwellings, the young owners went down to B&Q and bought a paintbrush.

It was a lesson to me that neither the conventional public sector nor the conventional private sector may be best placed to tackle the really intractable problems.  And it makes me wonder whether the great unanswered questions about rebalancing the economy might eventually be answered – not by the long night of the soul as we wait for the Treasury, but by the places themselves.

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