Talk about economics, or we’ll be back to the party of the 8%    

 

I was delighted by Tim Farron’s performance at Spring Conference this year; his eloquence and passionate words show a good leader moulding into a great one. Yet, there is one thing that Tim’s speech missed: a distinct view upon the economy. The need for a Liberal Democrat policy on the economy is clear, with Tim himself saying in the speech ‘Britain needs a progressive party… a plan for an economy that makes the most of the opportunities in front of us’.

To put it short the Liberal Democrats need a clear economic policy so that when we get back into government (whether that’s in 2020 or 40 years away) that our voters know what they voted for. To my mind, we must focus upon investment. That investment starts with taking money creation away from high street banks and making it a government-influenced mechanism, as I called for in a previous article. Only then can we invest in our economy without extending the web of debt Britons and Britain find themselves in.

We should be investing in jobs; through government-financed infrastructure building, similar to that in Canada, to provide not only work to those without it, but also better transport infrastructure, faster internet, stronger public services, cleaner energy and more houses for those in need of it. By doing this we can address some of the issues that fed into the vote for Brexit; a lack of jobs, underfunded and overcrowded public services, a spiralling cost of living and just a general sense that no one is listening. That is how we carry out the will of the people; by seeing what the Brexit vote actually were a vote against; chronic underinvestment in our people and our economy.

When it comes to investing in people, we should not necessarily be opposed to considering introducing a universal basic income or universal inheritance. Without further research, however, I’m hesitant to say if I believe it is a policy we should be backing. But that is what a Liberal Democrat economic policy should be built upon, an ethos of consideration of all policies, no matter whether they fit traditional party policy or not.

To fund such a public investment programme we must look to change our taxation system. It has been Liberal Democrat policy for some time to introduce a Land Value Tax; now is the time to shout loudly about the need for this; to help to address escalating housing prices and cut down on corporate tax dodging. Our desire to introduce a NHS tax is welcome too; it could provide the extra funding needed to invest in the technology the NHS desperately needs. Finally, we must begin to think about not just taxing income, but taxing assets. How this would work I do not know now, but it seems grossly unfair that someone with no assets but a new job earning £80,000 p.a. can have the same take-home income as someone with assets worth near a million yet earning £80,000 p.a.

The current agreed economic policy of the Liberal Democrats (found in the 2016 conference report here) is a solid base to build upon, but it needs to be voiced clearer and go further in parts. Expressing our preference for a reformed taxation system backing an investment economy would be a clear Liberal Democrat economic view, which is necessary in this climate. We must be different, we must be frank on our economic policy; if not we’ll be back to being the party of the 8%.

* Callum Gurr is a member of the Thanet Liberal Democrats branch and the Policy Officer of the University of Birmingham Liberal Democrats.

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54 Comments

  • Sue Sutherland 3rd Apr '17 - 1:12pm

    Thank you Callum. I have just commented on the FPC report in a similar vein although I don’t have your knowledge so I expressed it as austerity or not austerity. I don’t see how we can arrive at a truly Lib Dem view of health, social care and housing policies unless we have a drastic review of our opinions on how to run the economy from those we practised in Coalition. I also don’t see how we can carry on supporting Remain unless we also try to sort out the problems of those who voted Leave because their lives are blighted by poverty.

  • Peter Martin 3rd Apr '17 - 1:27pm

    Yes you are right that the Lib Dems do need to “talk about economics”. But the idea that all the problems are down to the high street banks and that we should be “taking money creation away from high street banks and making it a government-influenced mechanism” isn’t at all correct. This so called “positive money” approach doesn’t have any genuine intellectual backing.

    The idea that any high street bank can create money is just as wrong as it gets! If the RBS or the Northern Rock could have done that then why wouldn’t they have done so to save themselves? All they can create are asset/liability pairs. For every financial asset held by a bank customer the bank holds an equal and opposite financial liability. These have to sum to zero in an accountancy sense.

    This is not to say that bank lending in financially neutral though. If banks lend they give the borrower an ability to spend which they wouldn’t otherwise have had. Generally speaking people borrow from banks because they want to spend. The GDP of the UK is something like £2.1 trillion. So it needs £2.1 trillion of spending to keep it going. Or more like £2.2 trillion if we wish to engineer some small amount of inflation into the system and aim for some growth. Too much spending means too much inflation. Too little spending means recession. It’s spending that matters. The money supply is irrelevant. If I have a sum of money stashed away in a safe the money exists but it might as well not be there if I don’t spend it. The economy can’t “know” about every saved amount of currency.

    So , bank lending initially increases the amount of private sector spending which means Government itself doesn’t have to spend as much to keep the wheels turning. But the debt in the private sector builds up which depresses the economy and leads to less PS spending than would have occurred if the lending hadn’t been allowed. So the Government then has to reduce interest rates to encourage us all to borrow more, and therefore spend more, to make up for too much borrowing in the past. So in the end we end up with interest rates close to zero and we can’t really go any lower.

    That’s where we are now. And the Lib Dems might like to think what else besides lowering interest rates can be used to boost the economy.

  • Simon McGrath 3rd Apr '17 - 1:40pm

    Oh dear: ” By doing this we can address some of the issues that fed into the vote for Brexit; a lack of jobs, underfunded and overcrowded public services, a spiralling cost of living ”
    Employment is at an all time high and the cost of living is not ‘spiralling’ – imflation is at very low levels.

    “By seeing what the Brexit vote actually were a vote against; chronic underinvestment in our people and our economy.” Actually as anyone who did any door knocking knows it was largely about immigration

    “We should be investing in jobs; through government-financed infrastructure building, similar to that in Canada” They arent actually investing that much – $C95bn over 12 years – the UK on for example CRossrail and HS2 is spending more than this. Also worth pointing out that the Canadian GDP/Debt ratio is targeted to peak at 31.9% – ours is currently 89% .

  • Callum Gurr 3rd Apr '17 - 1:42pm

    Thank you Sue for your kind comments, but I really am not so knowledgeable myself! I agree with your call to alter from our coalition policies, whatever the intentions were, the policies we followed in government and proposed in 2015 appeared Tory-lite.

    Peter – I’m not claiming all the problems are down to high street banks, merely suggesting they contribute to them. With regards to the it’s not money point I’d argue that when people treat these loans they’ve received from the bank as normal currency then they do become money, as Mervyn King argues too. I’m not calling for the end of banks or the function they fulfill in the economy, I’m just saying they should operate under less freedom than they do currently, which I appreciate may be deemed as not ‘liberal’ in the classical sense.

  • Callum Gurr 3rd Apr '17 - 1:50pm

    Simon – if you don’t believe anything besides immigration fed into the Brexit vote I suggest you look again and again if you think the majority of people are happy with the state of the economy I’d ask why they voted for Brexit when that clearly put that at risk. On the final point I’ll be frank and say I was unaware of this, but it doesn’t take away from the need for investment; in energy supply and housing as examples, both of which need significant funds to keep up with current trends.

  • I agree with “Oh dear.” It is the quality of jobs rather the number that is the problem. However one of us should be “happy” with the current state of our lopsided, investment starved economy. The Government’s EU quitting adventure is taking us from bad to worse. Apart from anything else people are already planning to leave the UK because they don’t want to live in a mean little tax-haven.

  • Did immigration and the fear of the “other” fuel Brexit, yes it did. Why though is immigration such a hot issue? Some people just can’t stand people who are different, especially if they look different. Other fear they will be left behind. Why would they fear being left behind because when ever we see a need for skilled people we abandon our citizens and look to somewhere else to poach their people. Neglecting your citizens comes at a cost and if we continue down that path the cost will grow.

  • How this would work I do not know now, but it seems grossly unfair that someone with no assets but a new job earning £80,000 p.a. can have the same take-home income as someone with assets worth near a million yet earning £80,000 p.a.

    What? Only Westminster politics comes to mind as a job can you go from zero to MP’s salary overnight. So what Tim is effectively saying is that those who have worked and scrimped and saved to PROVIDE A FUTURE FOR THEIR FAMILY should be discriminated against and be excessively taxed, whereas those who spend everything with no regard for the future (the state will provide)… Daft… I thought Brexit was bad enough…

  • Callum is right to raise the issue of economic policy – and I agree with Sue Sutherland when she voices concerns about “austerity or not austerity”. There is a danger that a becoming a one trick pony single issue party on Brexit will detract attention away from other issues which ought to be raised by a radical centre-left party.

    This week major benefit cuts come in as part of Osborne’s legacy. They are :

    1, Housing benefit for 18-21 year-olds abolished.
    2. Child tax credit claims limited to two children.
    3. Eldest child premium scrapped.
    4. The so-called “rape clause” comes into effect.
    5. Bereavement allowance cuts.
    6. ESA benefits reduced for work-related activity group.

    The combined impact will be devastating . They make a mockery of Mrs May’s promise to help the ‘just getting buy’ families. As a Food Bank Trustee I know we are expecting a rush of new applications.

    On the HB 18-21 cut, Centrepoint estimates an increase in homelessness of over 10,000. The number of rough sleepers has more than doubled and households treated as homeless has risen by half. (including 100,000 children. Not every young person can count on a home with a parent.

    The cut in bereavement benefits is also scandal and will have a devastating effect on widows and widowers with young children – and economic need and grief do not stop after 18 months. Look this up on Google : The Guardian view on bereavement benefit cuts: cruel, stingy, wrong …
    https://www.theguardian.com › Opinion › Benefits
    20 hours ago – Sunday 2 April 2017 14.20 EDT Last modified on Sunday 2 April 2017 17.00 EDT … The worst of the cuts are the changes to bereavement payments. … that accounts for barely a quarter of 1% of Britain’s benefits budget.

    Does it all relate to the economy as well as to social need ? Yes, apart from the cruelty it reduces demand in the economy from those most in need.

    Let’s hear it loud and clear from Tim and the MP’s. The changes are cruel beyond words.

  • Graham Evans 3rd Apr '17 - 3:19pm

    As Roland implies, morally there is a fundamental difference between someone who has accumulated wealth of £1miilion over many years through saving and investing out of earned income, and someone who is gifted wealth, as for instance on the death of a benefactor, although even in this latter case the morality could arguably depend on the source of wealth of the benefactor. Similarly, those who have saved to provide for care in old age already cross subsidise those who rely on the state for the cost of social care. Is it therefore morally right to subject their saving to yet further taxation?
    While it is difficult to overcome the problem of the paradox of thrift when the UK economy is so dependent on spending rather than saving and investing, for the LDs to compete with Labour’s Shadow Chancellor John McDonnell in terms of economic policy is no way to earn the confidence of the electorate.

  • nvelope2003 3rd Apr '17 - 3:40pm

    Graham Evans: What should be the position of someone who after years of working for the family business for very modest rewards then inherits it. Why should they have to pay the same tax as those who either did nothing or worked in some entirely different job and then inherited a business to which they had contributed nothing or inherited money or property ?

    Geoff Reid: How would you define “quality jobs” ? We all have varying talents. When I was a student I remember the lady who cleaned the refectory tables and removed the leftover food. One day a friend looked in and asked her how she was getting on with her job and she said she really loved it and was very happy. There are millions of people who are happy doing simple jobs which they can cope with without undue stress or worry. Do we want a nation of unhappy people struggling to cope ? The hospitals would not be able to cope with the problems that would cause.

  • As Geoff Reid says above, the problem isn’t lack of jobs. Employment is at an all time high, and unemployment is low by historic (and European!) standards.

    The problem is that too many people are under-employed, on insecure zero-hours contracts, or overqualified for the job they have. Others are stuck in dead-end jobs with absolutely no chance of progressing or developing.

    If you want to make people (other than the “top” 10%) better off, you need to find a way of delivering sustainable, year-on-year wage increases higher than the rate of inflation. The only way to afford this is by constantly increasing productivity.

    We also need a strategy that creates skilled jobs that can resist competition from countries with inherently lower labour costs, and from automation.

    I have yet to hear a credible strategy from any major party in the UK to tackle these issues. More “Government Investment” is not in itself anything near the complete answer. It may be part of the answer, but only if it gets applied in a considerably more strategic and intelligent way than has historically been the case.

  • Jenny Barnes 3rd Apr '17 - 4:10pm

    “Our desire to introduce a NHS tax is welcome too;”
    Why? We already have National Insurance which was supposedly hypothecated for health and social security. We do need to increase NHS funding, but a third sort of income tax doesn’t look sensible. How about – more tax on diesel fuel, alcohol, sugar, higher excise duty on motorcycles and SUVs? All things that create demand for NHS resources.

  • Steve Trevethan 3rd Apr '17 - 4:49pm

    Perhaps the current form of Globalism aka Corporatisation needs to be considered. It is predatory with the powerful becoming ever richer/more powerful and the poor and the not yet poor having their resources extracted.
    It’s not trickle down, it’s pump upwards.
    Alleged “free trade” treaties have enabled corporations to lower wages, damage democracy, fuel climate change, destroy biological and cultural diversity and resources and remove money from the public purse by means of tax breaks/loopholes, interest free borrowing. [eg banking crisis] and the power to sue governments for protecting their peoples. [eg. Australia and big tobacco]
    Re-regulating global businesses and banks is needed for general sufficiency and genuine democracy,
    Re-regulating global businesses and banks is essential for World sustainability and for the health of societies that are based on local real-life work and play and not on detached rigged financial markets aka casinos.
    From H Norberg-Hodge: Counterpunch http://www.counterpunch.org/

  • @ Graham Evans “Similarly, those who have saved to provide for care in old age already cross subsidise those who rely on the state for the cost of social care.”

    Sorry< Graham, that sound straight out of the six jobs Osborne quote book.

    Have you ever considered that those who 'rely on the state for the cost of social care' may have been vastly underpaid – or even worse – worked for such uncharitable organisations as Amazon, Sports Direct etc., on zero hour contracts without the benefit of NIC contributions ?

  • If your not willing to pay (and make others pay) for a functioning society, don’t be surprised if you don’t live in a functioning society.

  • David Evershed 3rd Apr '17 - 6:02pm

    Wealth can only be increased by improved productivity.

    The Lib Dems economic policy should focus on ways government can help businesses to do this but in particular ways to help its own government controlled operations to improve productivity such as in health, education and defence.

    In turn this will reduce the costs of running government services and increase the profits and hence the taxation of private businesses.

  • David Evershed 3rd Apr '17 - 6:47pm

    ” Talk about economics or we will be back to the party of the 8%”

    Is not much of a threat when we are currently the party of the 10% 🙂

  • David Evans 3rd Apr '17 - 7:39pm

    David (Raw) of course Graham’s comment could be take out of the George Osborne’s quote book, but equally I have met people who earned more than me, but who boasted of a philosophy that was “We will spend it all and when it’s gone we will rely on the state to pay for us.”

    The assumption that because a fellow liberal quotes a point that a Conservative may support, doesn’t means that they haven’t considered the other side, or that they deserve asking if they have ever considered the opposite. In all likelihood they have, just as you will have considered their point, but perhaps in their judgement there is a significant amount of abuse and that justifies a more nuanced approach, while your judgement is that it is less likely.

  • Peter Watson 3rd Apr '17 - 7:56pm

    @David Raw “There is a danger that a becoming a one trick pony single issue party on Brexit will detract attention away from other issues which ought to be raised by a radical centre-left party.”
    Rather than being a “danger”, I suspect that is the intention, as this thread shows that once Lib Dems move away from opposition to Brexit there is a range of opinions and a lack of consensus, particularly on economic matters, without an obvious Lib Dem position.
    Based on my visits to this site over the last several years, I think that even your innocuous reference to a “centre-left party” would be controversial in some party circles, and (sadly) “radical centre-left” is not a description of the party that I would recognize these days.

  • Peter Martin 3rd Apr '17 - 8:19pm

    @ George Kendall,

    ” I’m not going to respond to your points that we don’t need to worry about the deficit.”

    I think you might be confusing me with someone else here, George. I didn’t mention the deficit. You were the first person to use the d-word.

    But as you have mentioned it, I might just add that there IS a time to be concerned about too much spending and too little taxation and that is when inflation is too high.

  • Jayne Mansfield 3rd Apr '17 - 8:37pm

    @ David Evans,
    You raise an interesting point.

    Is there a significant amount of abuse or fraud of social benefits, or does the general public have an inflated view of how much abuse there is of the system? What is the evidence?

    Would it surprise some people to know that there are people have never had the good fortune to earn enough to save for their retirement or for social care? Or that there is a major issue, rarely if ever addressed by the Daily Mail, of people not claiming benefits that they are rightfully entitled to?

    As for people who have a spend now and ‘the state will then provide for me’. In their dreams! Most people that I know, people who have exercised thrift, are using their savings to pay for private NHS or social care, including friends who today were fortunately able to shell out £3,500 for private psychiatric in -patient care for their child.

    It is a great disappointment to me that Liberal Democrats so readily subscribe to the increasingly dominant view that people in need are in need because of laziness or some character flaw, i.e they are spendthrift, they do not plan for the future etc., etc., and that those who are more fortunate should not have to shoulder or ameliorate their ‘burden’ more than they currently do.

    How easy it is to slide from evidence -based arguments to anecdote that bolsters one’s underpinning value system.

  • Katharine Pindar 3rd Apr '17 - 9:14pm

    It’s great to see this essential subject raised by Callum and followed by useful debate. It follows on from the open discussion session held by the party’s 21st Century Economy Working Group at the beginning of Spring Conference last month, based on their Consultation Paper 128. I thought the discussion session was well managed, with the introductions to topics from the Working Group people being followed by members able to attend dividing into six groups (each seeming to number at least a dozen people) to consider each of the topics and then report back orally and visually to the whole meeting. Hopefully this democratic exercise helped the Working Group further develop their thinking, which is to be presented in a policy paper at the 2017 Autumn Conference, and I guess that they will take note of this thread too.

    (Peter W., I hope this helps to prove to you again that after thorough research and discussion the party does develop policy, even in this very difficult area!)

  • Katharine Pindar 3rd Apr '17 - 9:23pm

    PS See also Duncan Brack’s interesting and helpful Federal Policy Committee Report, which I’ve just caught up with, and will study later.

  • Philip Rolle 3rd Apr '17 - 9:40pm

    The savings ratio is 3% and there are many millions of people with less than £100 to their name yet average non mortgage borrowing is £12,000. I’m afraid that it is hard to avoid the conclusion that a disappointingly large number of people do have a character flaw when it comes to money. The “must have” flaw.

  • Graham Evans 3rd Apr '17 - 10:53pm

    @ Jane Mansfield I do not know the level of social security abuse, but the point I was making was that we should not penalise thrift by taxing savings, pejoratively​ referred to by some people as wealth. This is an entirely different issue from social security abuse. However, I do think means testing of social care does promote abuse, such as old people hiding their savings in the accounts of adult children or other close relatives. I also think it morally wrong that care homes charge privately funded residents more than the economic charge (i.e. costs plus reasonable return on investment) because local authorities are unable or unwilling to pay an economic price. I’m quite willing to see taxes raised for everyone to meet the real cost, and this deals with David Raw’s point regarding those whose income is so low as to prevent them saving. However I think the present system of in effect imposing a stealth tax on those who are thrifty and save rather than spend, is morally wrong.

    @ Philip Rolle On the more general point made by Phillip, as something of a roundhead on consumer spending, I do think that far too many British people are willing to spend money on unnecessary onsumer products and entertainment, up to their income and beyond. Whether they do this consciously in the believe that the state will bail them out I however doubt. Ultimately I should like to see much tighter controls on all types of borrowing, but as I mentioned before I don’t know how we get from here to there given the paradox of thrift. Perhaps Brexit will at least offer the opportunity of introducing much higher taxes on unnecessary consumer products, such as the ubiquitous smart phone, and slowly turn us into a nation of savers rather than spenders.

  • ‘ a spiralling cost of living’

    Currently the same inflation rate as Germany.

  • Libdem should have policies that encourage savings rather than successive governments’ consumerism policies. Next, they have to redirect bank funding from areas like real estates to manufacturing and technology. A good way is to adjust the Basel risk weights, increase to risk weight on real estate loans and reduce that of loans to manufacturing firms. Other more administritive, less market-based policies could be absolute limitations of the proportion of real estate and consumer loans (well, people should begin to purchase things by saving their money rather than borrowing) of total bank lending, or impose maximum lending rates on priority sectors. Separating investment banks and commercial banks has been Libdem policy for years, and you guys should stick to it. Besides, financial transaction tax on secondary transactions to discourage speculation is also a good card that would put Libdem in line with the EU and distinguish them from the rest in the UK.

    I have always liked the idea of a powerful National Investment Bank. Libdem could begin with renationalisation of the recently privatized Green Investment Bank, and then merge it with Business Bank.

    Other policies. Well, inheritance tax and land value tax at the same time, and they must be progressive to avoid putting burden on poor and middle classes, or even richer people if they could prove that they would use their inheritance for productive investments. In other words, people like Duke of Westminster should be ready to face double taxation. However, I prefer to target the Russian and Arab oligarchs.

    About infrastructure policy, I think they should have a clear position over Hinkey Point, and provide alternatives, which could be Rolls Royce mini reactors, which would be cheaper and quicker to build and operate. Next, reevaluating Crossrail and HS2, and scrap them if they are not indispensable. The money could be used to upgrade roads, bridges and national broadband, which are actually more urgent and cost less. Also, reassessing the Heathrow airport expansion. Finally, of course committing to housebuilding.

  • Continue:
    Last, regarding R&D and business investment, Libdem must have clear targets, for example, “We would raise R&D spending (currently only 1.7%) to over 2% of GDP”, and “We would raise investment rate to over 20% of GDP”. Libdem must support business R&D via more tax credits and subsidies. But performance-based DISCIPLINE is required to make sure that firms would spend state funding on correct purposes. Of course, Libdem must explicitly embrace automation, not only in manufacturing but also in NHS, which is suffering from labour shortage (we can begin with toxic and dangerous tasks in hospitals).

  • Simon McGrath – But Canada’s investment rate is well over 20% of GDP, unlike the UK. Korea’s rate is even nearly 30%. And the positive correlation between high investment and high growth is undeniable, ceteris paribus (of course in real world we must look at ICOR). I’ve just said that Libdem must declare a clear target to raise investment rate to over 20% of GDP.

    Over the long-run, the UK should move to a mercantilist, export-led growth model with low debt, high savings level (well, a mercantilist and state interventionist version of Gladstonian Liberalism, great), which is more safe and sound than the current debt-fuelled consumer model.

  • Daniel Walker 4th Apr '17 - 6:56am

    @Jayne Mansfield, @Graham Evans The rate of overpayments in the benefit system is published annually by the DWP. Here’s the most recent one (2015/16). Headline is: Total overpayment (including honest mistakes) is 1.9% of the total. Underpayment is 1%.

    While fraud should, of course, continue to be investigated and dealt with, I find 1.9% hard to get incensed by.

  • Jayne Mansfield 4th Apr '17 - 7:45am

    @ Daniel Walker,
    Many thanks Daniel. My questions are often rhetorical as I have done my homework before asking them.

    I have given up on the Liberal Democrats and their hollow ‘virtue signalling’. It is not just deliberate cut -backs of social care and funding that needs addressing, but the cut backs in both mental health and physical health services. A GP’s referral to a specialist can now be blocked by private firms employed to save money.

    I was once someone who supported ‘a penny in the pound for education’ , but would I now support a Lib Dem call for a penny in the pound for the NHS? Absolutely not. Like many, my family are being forced to pay privately for operations, such as cataract operations that we thought we had already paid for through taxation.

    I can’t tell you how painful I find the idea of paying for preferential treatment rather than subscribing to a system that rations according to need, but fortunately, we do have savings to pay for better eyesight, and I would now rather give any available money directly to anyone who needs to pay for private care than put it into the pocket of private firms who block GP referrals. That said, neither option is satisfactory., and I believe that he Liberal Democrats are too wrapped up in their chosen obsessions to trouble themselves with such ‘bread and butter’ matters.

  • Mike Tuffrey 4th Apr '17 - 8:47am

    It’s not too late to contribute to the work of the policy group currently considering our forward economic stance (deadline extended to Friday 14th April): http://www.libdems.org.uk/industrialpolicy
    Thanks to Callum for original article and subsequent comments – which I’ve posted round to our group. (Julia Goldsworthy and I are co-chairs).

  • Elaine Woodard 4th Apr '17 - 12:39pm

    @David Raw
    “There is a danger that a becoming a one trick pony single issue party on Brexit will detract attention away from other issues which ought to be raised by a radical centre-left party.”

    I expressed these sentiments myself this weekend, although you have put it far more eloquently.

  • Graham Evans – Imposing absolute limitations on consumer and real estate lending as a proportion of total lending (for example, not exceeding x% of total loans). Real estate and household debts were the underlying cause of the last crisis. Plenty of Asian countries used to employ or is currently employing this kind of policy. Personally people should just spend no more than their savings, they should always live within their means. Also, the wide availability of credit cards allowed people to temporarily spend more than they have.

    The problem is that successive governments tended to introduce policies that ENCOURAGED consumerism.

    One more thing, Libdem should always put two classic Liberal policies for over a century at the heart of their policy set: LAND VALUE TAX and CORPORATE CO-OWNERSHIP. Besides, now, there are two emerging options: Financial Transaction Tax and explicitly embracing automation.

    Also, why not raising Land Value Tax, inheritance tax and financial transaction tax AT ONCE, as an alternative to austerity?
    Many studies found that FTT could raise a crazily high level of tax revenues for the UK (can even surpass 100 billion euros with a tax rate of 0.05%).

  • Graham Evans 4th Apr '17 - 3:47pm

    @ Thomas While I agree with many of your detailed proposals I think the idea that Britain should pursue mercantile economic policies is fundamentally wrong. This is essentially a 19th century economic policies which, quite rightly, has been abandoned by most advanced industrial economies since in essence it is a zero sum game. The idea that every country can achieve a trade surplus is of course mathematically impossible. Moreover many of the problems of the EuroZone have arisen precisely because Germany has consistently pursued mercantile trade policies with disastrous consequences for many of its neighbours. Similarly concepts of consistently running a budget surplus are equally dangerous. There is a balance to be struck between saving and consumption. The UK has gone too far in one direction; Germany too far in the opposite direction. Similarly there is a balance to be struck between saving for long term investment, and spending for short term consumption. (Incidentally it is notable that the one thing that German with its huge trade surplus and the US with a huge trade deficit have in common, namely that both have a crumbling infrastructure because of lack of public sector investment.)

  • Richard Underhill 4th Apr '17 - 6:18pm

    “Only” is a four letter word.

  • @Thomas re: “About infrastructure policy, I think they should have a clear position over Hinkey Point, and provide alternatives, which could be Rolls Royce mini reactors, which would be cheaper and quicker to build and operate. Next, reevaluating Crossrail and HS2, and scrap them if they are not indispensable. “

    Firstly, Hinkley Point (and our entire nuclear industry) is effectively on hold until the UK resolves the issues arising from Brexit and it’s exit from Euratom. Although, assuming the UK can replace all the treaties and associated benefits arising from its Euratom membership within the next two years this shouldn’t impact current delivery schedules…

    Secondly, I think you’ve included too few projects to be reviewed:
    1) Crossrail is nearing completion (power is due to be switched on later this year, with services starting in December 2018). So little room for construction savings.
    2) HS2 should of have binned back in 2010 and even the PAC is highly skeptical of the possible benefits, particularly prior to 2070. So a potential saving of 2Bn pa..
    3) Smartmeters – The PAC back in 2014 lambasted this project, giving a return to consumers of £26 pa at a cost over £200pa. So a potential saving of £14Bn over the next 5 years (enough to fund the widescale installation of solar panels and so make real and significant energy savings).
    4) Universal access to fibre broadband – Whilst this has a cost associated with it, it is a change enabler and so savings will be made elsewhere eg. not having to upgrade road/rail infrastructure to such a large extent.
    5) Airport expansion – with the UK leaving the EU, it will no longer be a gateway to the EU and hence the number of passengers transiting and thus flights will reduce (compared to projections being used to justify Heathrow expansion).
    6) The “northern powerhouse” – here I suggest we need to invest, particularly in better regional transport links.

    These are just a few that come to mind. The important consideration, is that with the UK leaving the EU, our infrastructure needs will change and our ability to fund any investment in the next decade will be different – it is too early to make a judgement over subsequent decades, but circa 2020 we should be able to make a more informed guess.

  • Arnold Kiel 4th Apr '17 - 7:52pm

    My suggestion is quintessentially liberal, but sounds ugly nowadays: CAPITALISM! It has one principle: he who risks his money in an enterprise, shall decide on its use, absorb the risk of failure, and reap the rewards of success. There is no other way to create wealth. Capital and talent are mobile, and both like liberal places to take root.

    The state makes the boundary rules, taxes and redistributes (better in moderation) profits, and undertakes the investments the private sector cannot deliver, essentially the ones where the benefits cannot be privatized. The state exceeding this limit is always wasteful.

    Evidently, the UK currently has no sustainable business model because of its imbalance: high-skill services thrive but benefit only a few million people in the biggest cities; manufacturing, which provides high pay for low skills, is too small a sector. Low-skill services do not pay enough to sustain a decent living in this expensive country. Smart people prefer to invest in existing assets instead of output expansion. The state cannot compensate for that successfully by indulging in state capitalism, but should fix the boundary conditions. The worst attack on boundary-conditions conducive to expansive private investment is Brexit. It reduces capital deployment in two key wealth creators: the city and manufacturing. Brexit does not distract from the “real” economic issues, it is the UK’s economic story for years to come; nothing else can be “achieved”.

    In a situation where private capital prefers the continent for expansion, and the UK for speculation, public infrastructure spending is questionable because of its low multiplier. Austerity must continue. You can save or invest, but not spend yourself out of a structural deficit. A government that executes the “will” of low-skill employees and welfare recipients, but ignores the needs of entrepreneurial capital means austerity to the bitter end.

  • Peter Martin 4th Apr '17 - 9:05pm

    @ Callum,

    Only then can we invest in our economy without extending the web of debt Britons and Britain find themselves in

    “then” is actually, if I understand you correctly, the process of switching to what’s known as full reserve banking.

    It won’t make any difference. The reason that the UK is in debt is entirely due to the deficit in the current account. If the UK buys more from the rest of the world than it sells in return, someone in the UK, usually but not necessarily Government, has to borrow to cover the difference. Fiddling around with the banking system isn’t the answer. IF you succeed in reducing the amount of private borrowing, but that may not happen with such a switch, then the government will just have to borrow more to compensate.

    That in itself may not be a bad thing in itself. But It may very well be a bad thing if everyone starts to panic about the increased size of the government deficit which they surely will.

    So, in other words, if you are worried about the Britian’s debt do something about the current account deficit. Like argue for a lower pound to make exports and imports balance! But no-one is going to thank you for saying that either!

  • Peter Martin – the trade deficit, more specifically, thats why Britain had to both encourage savings and move to a more mercantilist economic policy (well, like Germany and Northern Europe, but maybe to a lesser extent).

  • Graham Evans – British persistent trade deficits are the cause of its high debt level, as someone must borrow to balance them. With current policy set that continue to focus on propping up consumer spending, you cannot solve this problem.

    Also, another cheaper option is repairing existing roads and rail infrastructures, as many of them are run-down. About broadband, Libdem can promise a higher level of investment than Hammond’s £2m.

    And an economic model led by investment spending is more compatible with an export-led, mercantilist model, rather than our current model, because to get higher investment rate, people must save more and thus comsume less. You can see that export-oriented nations like Japan, Canada or Korea tend to have higher investment rate.

    Policies like infrastructures, housing… are common in all parties in the UK, but changing the whole economic model (to a savings and investment-led, a little more mercantilist model, of course) would distinguish Libdem from the rest. Oh wait, don’t forget separating investment and commercial banks.

  • Peter Martin 5th Apr '17 - 1:05pm

    Thomas,

    You’ve just said “British persistent trade deficits are the cause of its high debt level, as someone must borrow to balance them.” This is correct.

    But previously you said “the trade deficit, more specifically, that’s why Britain had to both encourage savings…..”

    You can’t have it both ways. If the Government wants to borrow less itself than it needs everyone else to borrow more. Not save more.

    “….and move to a more mercantilist economic policy (well, like Germany and Northern Europe, but maybe to a lesser extent)”

    The economy of the UK, with its large trade deficit, is just about as unmercantilist as it is possible to be. If Germany wants to run a surplus then it needs countries like the UK and the USA to run deficits. We’re doing them a big favour by buying up so many of their exports!

  • @DavidRaw, you talk about Osborne’s legacy. But have you forgotten the Lib Dems were part of the Coalition for 5 years!

    @Sue Sutherland, you are right to contrast the party’s principles with what it actually did in Government. This is what people judge you on!

  • Graham Evans 5th Apr '17 - 8:19pm

    @Thomas I see you’re persisting in your view that Britain should pursue mercantile economic policies. But how do address the problem that it is impossible for every country to do so? If every country tried to do so the result would be world recession. Or are you proposing that the UK should become a freeloader like Germany?

  • Peter Martin 6th Apr '17 - 2:22pm

    @ Graham Evans,
    Your last comment is spot-on. Every country’s surplus is some other country’s deficit. Pound for pound. Euro for euro. That happens within the EU too. And the result within the EU is EU recession as the rules of the SGP impel every member, apart from the UK, to try to export their unemployment to someone else. The powerful economies, only, can achieve that.

  • Graham Evans – Well, if becoming a freeloader can help the UK to reduce its own debts, deficits and unemployment as well as reinvigorating British manufacturing base, then OK, I will support it, even at the expense of other countries (this is called realpolitik).
    Libdem should learn to embrace realpolitik (well, Liberal Party wouldn’t have been wiped out a century ago if they embraced realpolitik rather than making decisions based on ideology).
    Besides, you can search on Google about the “Learning by doing” effect that an export-led model can bring about.

    Back then, less developed countries like South Korea also developed their economy by aggressive export strategy with protectionism (a.k.a mercantilist). Later, countries like China also did the same.

  • Graham Evans 6th Apr '17 - 10:34pm

    @ Thomas. But there is a big difference between a developing country concentrating its economic development on exporting, and advanced industrial economies. Once a country has reached a certain level of development, it has a responsibility to do two things if if we are to avoid an economic war of the jungle. Firstly it must concentrate much more on improving the economic well being of its population, through greater emphasis on domestic consumer spending. And this is what China is trying to do. Secondly it should reduce its trade surplus by investing in underdeveloped economies. Simply lending these countries money to buy your exports is irresponsible. Lenders have responsibilities as well as borrowers. To give them their due Japan has to some extent recycled its surplus through investment in the UK car industry, and to a lesser extent so has Germany. However investing in the UK was a relatively safe option. It is countries like Greece where German companies should have been investigating, and not merely acting like door to door salesmen.

  • @ Thomas
    Are you calling for the pound to be devalued? That would make exports cheaper and imports dearer. Foreign holidays would be less affordable. I can’t see this going down well on the doorstep.m

  • Stephen Hesketh 8th Apr '17 - 8:54am

    Peter Watson 3rd Apr ’17 – 7:56pm

    Totally agree Peter. This also feeds into the question of why we are not higher in the polls. An essentially Social Liberal party of the (radical) centre-left attempting to compromise with its smaller Whig wing while seeking to attract Europhile Tories is not conducive to building a genuine core vote.

    Whilst I absolutely do believe that Brexit is a game changer, we can not at the same time pretend that traditional left/right views on economics and how we are perceived on fairness, taxation and the very unequal society have somehow magically gone away.

  • Stephen Hesketh 8th Apr '17 - 9:22am

    frankie 3rd Apr ’17 – 5:43pm
    “If your not willing to pay (and make others pay) for a functioning society, don’t be surprised if you don’t live in a functioning society.”

    Quite!

    I still think it would be a great idea if contributors could like/not like comments in some way. That would give a clearer view of the opinions within the LDV readership.

  • Simon Banks 9th Apr '17 - 7:52pm

    A Liberal Democrat economic policy should be based on the same values and threads that underlie our other policies. So investment and long-termism versus short-termism – YES. Green versus short-term and short-sighted – YES. Empowering communities and individuals versus handing more power and wealth to the already powerful and wealthy – YES.

  • Simon Banks – Long-termism must be put on the front page of the next manifesto. Long-termism will include the commitment to increase investment spending to over 20% and R&D spending to over 2% of GDP, as well as embracing green, digital and automated technology, land value and financial transaction taxation. Make sure that the words “digital” and “automation” are also visible to viewers.

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