Tax to invest, or cut taxes to neglect?

The weekend media have been full again of Rishi Sunak’s promise to return to tax cuts before the next election: cutting income tax and VAT further to win over – as Conservatives hope – wavering voters. But is it possible that the majority of voters would now prefer good public services, and targeted spending on long-term projects, to tax cuts that will squeeze public services further?

Martin Wolf in the Financial Times the other week argued that ‘we have to accept higher taxes to fund health and social care’, pointing out that the UK is still a modest spender on health compared to similar states. But it’s not just health that needs investment. The ‘Levelling Up’ agenda implies a generational commitment to higher investment in education, infrastructure, and economic innovation in the UK’s poorer regions. ‘Red wall’ seats the Conservatives won in 2019 will be lost again if all that happens is a trickle of money for specific local projects.

The contradiction between Sunak’s fiscal austerity and Johnson’s and Gove’s grand ideas about levelling up is becoming the deepest fault-line within the Conservative government, and a major threat to its credibility. November’s announcement of cutbacks in investment for northern rail was greeted across the region as a betrayal of promises to promote economic revival.

Levelling up has deteriorated into competitive bids for small packages of funding, with success disproportionately going to places with Conservative mayors and MPs. Different Whitehall departments distribute nearly 120 pots of money, with mayors and Councils spending their own money on consultants to help prepare their bids. Sums allocated are as little as £250,000 a time – for improving high streets or repairing historic buildings: central government playing at ‘local’ regeneration.

What’s the Liberal Democrat response? We need to develop a clear approach to the transition to a sustainable economy and the recovery from the twin setbacks of Brexit and Covid. We should cut specific tax rates where they may make a significant difference – on the lowest-paid and the smallest businesses, as Ed Davey proposed last week. But we have to accept, and to persuade voters, that the overall percentage of GDP taken in tax now needs to rise. Any government which we would support would have to embark on reforms of taxation to ensure greater fairness and to eliminate the many loopholes from which the wealthy benefit – such as the lower rate of capital gains tax than income tax.

Every time a Conservative minister promises tax cuts, we should challenge them on what spending programmes they plan to squeeze further: schools, public transport, housing, local government? Every time they attack alleged ‘waste’ in our squeezed public sector we should point out the billions that have been wasted in outsourcing services to private contractors and consultancies, and the profits transferred out of the country by many of those providers.

We should compete with Labour to take over the national commitment to levelling up – to reduce this country’s gross regional and local inequalities while at the same time reshaping our economy. The Liberal Democrat approach to levelling up will differ sharply from the Conservatives, in putting initiative – and money – back into local government and regional bodies rather than imposing detailed control from the centre.

Do we think that this message will go down badly in the ‘Blue wall’ seats we are working to capture? Polling evidence suggests that many of their voters now recognise that too many cuts have damaged public services, and that a fair society and a sustainable economy now require greater public investment.

I can offer an anecdotal impression. I was the invited speaker at a large City dinner in London last week (Lib Dem peers are asked to do all sorts of things), with the suggestion that I might talk about apprenticeships and skills. I linked those to the wider levelling-up agenda, arguing that reskilling left-behind communities in the north requires higher spending on education from infancy to adulthood, provision of better transport links, and support for local enterprise. I thought the message would attract criticism from such an audience. I was surprised by murmurs of agreement when I pitched for higher spending on schools, and by some enthusiastic comments as the dinner ended. There are more soft Conservatives out there than we may have thought, worrying about where the current government may be taking us to. We must win them over.

* William Wallace has fought five parliamentary elections in Manchester and West Yorkshire. He is a former president of the Yorkshire regional Liberal Democrats.

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57 Comments

  • John Marriott 7th Dec '21 - 9:36am

    How on Earth can the Chancellor expect to spend even more £billions and then cut taxes before the next General Election? It just doesn’t add up. It’s not just about going after the rich. Those of us who can afford to – and I count myself in as a retired teacher, living off a state and occupational pension – should pay a bit more.

    As I have written many times, both here and elsewhere, many people in this country expect Scandinavian levels of public services while paying North American levels of taxation.

  • A fascinating article by William which strikes a chord when it comes to social care, education, transport infrastructure and (much in the news now) the failing overhead national grid system.

    It strikes out in a very welcome new direction by rejecting the old classical liberal fiscal tradition of retrenchment so beloved by Gladstonian Liberals and more recently by such as David Laws in the Coalition Government. I hope the movers and shakers in the Lib Dem Party 2021/22 take more notice than they did when the Alston UN Report on poverty and inequality came out a couple of years ago.

  • Helen Dudden 7th Dec '21 - 10:00am

    A friend was telling me that over 75s wont be getting treatment in some areas, because of the roll out of the booster. I feel we are heading to private treatment through the back door.

    When there are problems in life we go about sorting them, not simply ignoring. There are problems with the NHS, it’s been that way for a long time. I was born in 1948 and lucky enough to be one of those who would enjoy the free treatment.

  • Up until about a year ago I would have agreed with William that we should be prepared to raise taxes in order to fund better public services. But the Tories have already beaten us to it and raised both taxes and Govt spending as % of GDP to relatively quite high levels, and I doubt there is much scope now for further increases without (a) harming the economy, and (b) alienating too many people.

    I think at this point we should be looking, not in terms of raising taxes or spending more, but going over how money is spent to make sure it’s being spent in the best possible way, and avoiding any needless bureaucracy. The Tories under Boris have been pretty bad in terms of just throwing money at stuff, without it seems that much idea of precisely where the money is going (look how vaguely the recent extra money for the NHS/social care was targetted, for example) so my suspicion is that there is much room for improvement.

  • Steve Trevethan 7th Dec '21 - 11:34am
  • Voter: The Conservatives have delivered low taxes and a thriving economy, so I shall vote Conservative.
    Me: What about underfunding of health and education?
    Voter: Because the Conservatives let me keep more of my own money, I can afford private health care and education.

    That was in the 1992 General Election! Nothing has changed. Selfishness thrives.

  • Lorenzo Cherin 7th Dec '21 - 12:04pm

    I agree with Lord Wallace here fully. But we need to be more radical and less typical, than previously.

    We ought to make, as David seeks to often in mention of the Alston paper, poverty, a priority. Much govt money, as colleagues say here, is wasted. It goes to chums of Tories.

    We need to put money in the hands of those who need it, not merely want it.

    A heating allowance, a tax subsidy to all in a one or two bedroom accomadation, if their only home. A health fund, to spend ontreatments, or other remedies, often not available with the NHS,osteopathy, massage relief, etc., counselling.

    We ought to fully integrate public and private, but not by privatising and nationalising, but liberalising and democratising provision. No more top down, but make it get to individuals who have but little voice and little cash!

    Govt, like corporate power ever, is Leviathan vs the Lilliputians!

  • Barry Lofty 7th Dec '21 - 12:06pm

    I don’t know what all the fuss is about! Our Prime Minister believes that all you have to do is say it and it happens! Whats to worry about?

  • Peter Martin 7th Dec '21 - 12:20pm

    “The ‘Levelling Up’ agenda implies a generational commitment to higher investment in education, infrastructure, and economic innovation in the UK’s poorer regions.”

    This is true. However, it can be any kind of Government spending. The town of Barrow is, just about, kept alive by Government contracts which support the construction of Britain’s nuclear submarines. It is still a poor area though, and would be even poorer without the jobs created at the BAE shipyard. A somewhat uncomfortable fact for those of us who don’t support the existence of a UK nuclear deterrent, so we wouldn’t be wanting to call the spending an “investment”.

    It is, though, still a form of levelling up. What matters isn’t only the level of Government spending. It is where the spending occurs. This obviously has tax implications even though the principle of “fully costing” a project is a fallacy. Govt spending creates its own revenue. The revenue collected in the Barrow area would be far less if there were no submarines being built. It’s the inflationary implications that need to be considered which are less severe than in already prosperous regions.

    We could, for example, move a major London teaching hospital to Newcastle. There would be the costs of making the move but once that was done the costs would be lower than they are at the moment. Even the same spending would be less inflationary in Newcastle than it would be in London. There would be less need to raise taxes if the spending were increased.

    There’s no reason whole Govt departments couldn’t be moved several hundred miles out of London. Except, perhaps, that top civil servants wouldn’t like to be too far from Harrods and would do their best to thwart any such plan!

  • @Steve Trevethan… Is that article by Richard Murphy relevant? I don’t think it’s very useful. It quotes stats only for 2020, which is a very anomalous year, and also came before the recent, quite substantial, tax rises in the UK. The fact that the article makes no acknowledgement of either of those two very obvious problems with the data counts as quite as quite a black mark in my books – almost looks like a deliberate attempt to mislead.

    Also worth pointing out that – for what little the data presented is worth (which is very little) the data does actually show the UK as being very close to the average for OECD countries.

  • Lord Wallace references Martin Wolf’s recent FT article where Wolf concludes “” The country has still not recognised the long-term need to accept rising taxation in order to deliver the services people will demand. There is no realistic alternative. The government has however recognised the need to manage the immediate pressures. The problem is that its solutions are dreadful. They may work politically, but they are morally and intellectually indefensible.” Wolf is referring to the Health and Social care levy and the adult social care financial provisions.
    There is a template for tax reform. The work was undertaken by the late Sir James Mirrlees who concluded a comprehensive review of the UK tax system with the IFS in 2011 and left us a series of recommendations to make the tax system both more efficient and equitable. The IFS focused on tax reform last year https://ifs.org.uk/publications/14989
    “Even before the COVID-19 crisis there were pressures for higher UK taxes to deal with the public finance pressures of an aging society. Now there will likely be demands for a larger state that provides more services (for example, more healthcare or a more comprehensive social safety net) and a role for tax in managing down the elevated public debt and any enduring increase in the budget deficit.”
    “…as evidenced by many countries in Western Europe and Scandinavia, it is possible for most advanced countries to prosper while raising substantially more in tax than they currently do.”
    “Fixing the inequitable and inefficient parts of any tax system would be a valuable thing to do in its own right. More often than not, reforms that reduce distortions to economic activity would also increase economic output and mean that more revenue could be raised at less cost to households. ”
    “Structural tax reform isn’t often the easiest way to get revenue or the most exciting sell to voters. But with the economy in such bad shape, options that allow us to raise taxes in less damaging ways should be front runners.”

  • Barry Lofty 7th Dec '21 - 1:07pm

    Maybe we have to review how we raise taxes in our country, it certainly will not be an easy sell but something has to change as some earlier contributions on this theme have suggested. I am certainly not expert on this subject but the future of our country has changed significantly over the last couple of years and priorities have also altered.

  • Martin Wolf also has a good article on levelling up using Spain;s Basque region as an example https://www.ft.com/content/bb2c627f-1baa-4230-9cb8-3876c216b8f7
    “running through the story of the Basque country seems to be an ability to work out the right response to what was happening in the world. Since successful development demands the creation of a range of vital public goods, it depends on a development-oriented government. But the latter in turn relies on the ability of private business to seize opportunities. A good way to think about this is as a marriage of co-operation with competition within an open world economy.”

    “The parallels with Wales, Scotland and parts of England are evident. Probably the most important lesson is that those who live in and are responsible for the region should have both the resources and the freedom to make decisions. This is not just because they are likely to do it better. It is also because that is a way to foster the needed boldness. Furthermore, a big effort should be made to encourage co-operation among the various players, with a view to creating and exploiting the synergies. Finally, there should be a never-ending effort to develop the region’s resources. Change never ends.”

    “In the UK, above all, too much has depended for too long on decisions coming out of London. That is not how the Basque country prospered. Autonomy matters. We must learn from that.”

  • Neil James Sandison 7th Dec '21 - 2:06pm

    The question not that we tax its what we tax . Already the Tories are raising national insurance rates a tax on jobs We have uncontrollable increases in fossil fuel prices despite a cap . We need to look at carbon pricing and the polluter pays principle and tax those who fail to respond to climate change or import goods from economies not willing to wean themselves off fossil fuels. Wealth taxes from unearned income and over pricing capital investments in the square mile . come down harder on the on-line economy that pays little or no tax in this country despite having monster warehouse and distribution centres . I am sure there are many other ways we can raise new and improved taxes without impacting on just income or savings on low or average earners .

  • Steve Trevethan 7th Dec '21 - 2:59pm

    The premises of this comment are that taxation is fundamental to the structures and functions of the nation state and that its citizens need to have a deep and wide understanding of taxation.

    According to Richard Murphy of the site “Tax Research UK” the reasons/purposes of democratically efficient taxation are:
    1) Reclaiming some of the money H.M.G. has spent into the economy
    2) Ratifying/validating the value of its money
    3) Organising/Reorganising the economy
    4) Redistributing income and wealth within the economy
    5) Repricing goods and services for the benefit of society as an entity
    6) Raising representation in a democracy
    https://www.taxresearch.org.uk/Blog/2018/01/03/the-reasons-to-tax/

    If H.M.G. obtains in tax the amount it spends, where does the money for commerce and households come from?

    It is suggested that the efficiency and effectiveness of a nation state indicate how good its tax system and the public’s understanding of it are.

    It is suggested that an appropriate indicator of the quality of a nation state is indicated by the way in which it treats its children.

    In 2017 we had the highest level of children brought up in severe food poverty in Europe.
    https://www.endhungeruk.org/2017/06/27/unicef-report-britain-worst-europe-childrens-hunger/#:~:text=UNICEF

    Are we doing any better now?
    Does anyone have more up to date information?

  • William Wallace 7th Dec '21 - 4:38pm

    Peter Martin: If we want to move civil servants out of London – as we should – the best way is to move funds and decisions out to regional and local authorities. England is the most over-centralised country in the democratic world; that’s partly why the regions are so neglected.

  • Just thought to add to my early comments – I think it is great that, in this article, @William Wallace does recognise the dilemma that more spending and better services may well imply more taxes. That’s so much more realistic than the articles and comments I frequently see here that call for much more spending on stuff without any serious thought for where the money will come from.

    I still remain though of the opinion that we need to start thinking about spending (and taxing) more wisely instead of simply spending (and taxing) more.

  • Move Civil Servants out of London. Actually a lot of that has taken place over the years.
    Anyway with Home Working many more Civil Servants are working out of London anyway!!

  • Brad Barrows 7th Dec '21 - 6:26pm

    So there is an article on this site – 3 days ago – in which Ed Davy is calling for £5B of tax cuts, and today we read an article in which Lord Wallace states, “Every time a Conservative minister promises tax cuts, we should challenge them on what spending programmes they plan to squeeze further…”
    Does the same standard apply when the Leader of the Liberal Democrats proposes a tax cut? If so, please tell us, Ed, how you would pay for you tax cut proposal…spending cuts, increased taxes elsewhere or increased borrowing?

  • James Fowler 7th Dec '21 - 7:25pm

    @Brad. Yes, I saw that too. I think the best thing is to see this site as a sounding board. Of course, it also shows why attempts to write consistent policy documents (see the most recent manifesto post) are extremely difficult.

  • Peter Martin 7th Dec '21 - 9:04pm

    @ William Wallace,

    Setting up extra layers of government is a political rather than an economic decision. If you think an extra layer of government is going to streamline the spending process then that’s what you need to argue for.

    If, for example, we were to follow the lead of some countries with more devolved government than our own, we wouldn’t have a single DVLA in Swansea. Each devolved entity would have its own system for taxing vehicles and issuing licences. Presumably the good citizens of Australia must think that’s desirable. The States of NSW, Victoria, Queensland etc all have their own separate processes.

    My view is that having just one DVLA in Swansea is better for both Swansea and the UK. We need as many government departments as possible moved out of London. There’s even a good case for moving Govt and Parliament entirely out of London too.

  • The proposed increase in the employment allowance is targeted at helping small businesses recover from the pandemic and crucially be able to hire staff at higher wages in a tight labour market. The proposal was covered by the Sun newspaper earlier this year https://www.thesun.co.uk/news/politics/14393493/hairdressers-pubs-chippies-national-insurance-slashed/
    One way of offsetting the costs would be combining tax and employee NI into a single rate of tax so that EE NI was paid on incomes over £50k and on all sources of taxable income rather than just earned income. It may be necessary to reintroduce a significant age allowance of perhaps 50% on top of the personal allowance for those over pension age to mitigate the impact of the disposable income of seniors.

  • Peter Martin 8th Dec '21 - 5:49am

    The assumption throughout the OP, which starts right away in the title, is that the Govt raises taxes to then be able to spend the proceeds in the economy. If it doesn’t raise enough it has to go off to borrow from someone else. Many think these are Swiss bankers or possibly the IMF!

    So where do the ££ come from in the first place before they are available to be collected as taxes or borrowed back by Govt?

    This is not to say that there is no relationship between what Governments can spend and the levels of taxation they impose but Government finances aren’t like a local council except on a larger scale. The limit on all spending, by both Govt and Private Sector, is set by the available resources in the economy. If spending, generally, is too high and/or government wishes to spend more, then taxes have to rise to prevent inflation rather than to ‘raise spending money’.

    At present there is a potential inflation problem which isn’t at all surprising considering the large amount of Govt deficit spending which has pumped money into the economy to support it during the Pandemic. So why is there a clamour to raise interest rates? Why try to apply a monetarist solution to a fiscally created problem?

  • William Wallace 8th Dec '21 - 11:34am

    Tuesday’s FT reports, from an IFS report, that school spending fell 9% in real terms between 2009 and 2019; while spending on adult education fell by 49% (so much for reskilling…). The Liberal slogan, ‘Peace, Retrenchment and Reform’ was valid when the largest element in central public spending was on defence: war and high taxes went together. Johnson’s government is boasting of raising defence spending, of course, while cutting other programmes.

  • The recent spending review presented a forecast for the five years from 2022-23 to 2026-27. By the end of this parliament the government expects to be running an overall deficit of around 1.7% based on a current spending surplus of 1% of GDP and Public sector net investment of 2.7%. Based on historical experience before 2008, the deficit/borrowing can probably be increased to around 3.7% (i.e. equivalent to expected nominal growth) without exacerbating existing inflationary pressures. 1% of GDP on current spending (about £20 billion) on health, education and social care services and 1% of additional capital spending on public housing and the transition to net zero.
    Government borrowing is like any other borrowing in the economy. If the government is utilising or offsetting private sector savings to invest in future economic growth, then it needs to invest in areas that will preserve the purchasing power of the currency and pay for itself over time. These are areas such as productivity enhancing infrastructure and public facilities for early years education and childcare and R&D. Conversely, if the government is borrowing for consumption spending (outside of a severe slump where the economy is stuck and needs rebooting) then it is weakening the currency over the long term and the ongoing ability of the economy to provide for the needs and wants of the population.
    As Lord Wallace writes “We need to develop a clear approach to the transition to a sustainable economy and the recovery from the twin setbacks of Brexit and Covid.”
    “But we have to accept, and to persuade voters, that the overall percentage of GDP taken in tax now needs to rise. Any government which we would support would have to embark on reforms of taxation to ensure greater fairness and to eliminate the many loopholes from which the wealthy benefit – such as the lower rate of capital gains tax than income tax.”
    Lord Wallance is also correct to point to the importance of decentalisation of funding. This report Levelling up analyses ministerial statements on levelling up and how money has been allocated, including the £4.8bn Levelling Up Fund, the £2.5bn National Skills Fund and plans to move 22,000 civil service jobs out of London by 2030.

  • In October we made little impression with our response to the budget and it was not clear how much extra we wanted to spend than the Chancellor (see my article where I try to set out how much this extra spending might be and where it might be going – https://www.libdemvoice.org/an-alternative-budget-a-budget-for-the-poorest-in-society-68935.html ). But I couldn’t see any mention of how much we would target into the regions with the highest levels of unemployment to stimulate their regional economies. The regions which I think should top the list for this support are: the North East, West Midlands, Yorkshire & The Humber and the North West.

    Indeed we should be talking about the government spending money to pay for people to be re-skilled. Our new policy of Training Guarantees is one way we can achieve this, with the government paying for unemployed people to be re-trained to do the jobs where there are shortages in their local areas.

    Simon R,

    We have to present our ideas for assisting the poorest regions and re-training the unemployed as a big programme which will make a real difference to people’s lives in the poorest regions of the UK. To talk about making savings and using these savings to fund this programme is not going to make an impression.

  • Peter Martin,
    “If spending, generally, is too high and/or government wishes to spend more, then taxes have to rise to prevent inflation rather than to ‘raise spending money. At present there is a potential inflation problem which isn’t at all surprising considering the large amount of Govt deficit spending which has pumped money into the economy to support it during the Pandemic”

    This is an MMT response on what causes inflation https://www.ft.com/content/539618f8-b88c-3125-8031-cf46ca197c64
    “…when we suggest that a budget constraint be replaced by an inflation constraint, we are not suggesting that all inflation is caused by excess demand. Indeed, from our view, excess demand is rarely the cause of inflation.”
    “…we do not believe that any and all inflation that does result from excessive demand can and should be addressed by higher taxes. This is a distortion of our view, as years of publications can attest. When MMT says that a major role of taxes is to help offset demand rather than generate revenue, we are recognising that taxes are a critical part of a whole suite of potential demand offsets, which also includes things like tightening financial and credit regulations to reduce bank lending, market finance, speculation and fraud.”
    “…when we do advocate using tax increases to address inflationary pressure, we are not suggesting that Congress attempt to raise taxes in real time after inflation has already emerged. Indeed, our approach is precisely intended to avoid a situation in which Congress merely spends without paying attention to inflation dynamics until it is too late. Thus, we argue varying tax rates and other inflation offsets should be included in the budgeting process from the outset.”
    “…there are a number of taxes — especially on the rich — which offset much less GND spending than their dollar amounts would imply. This does not mean that we shouldn’t tax the rich — they are too rich. It just means Congress needs to look elsewhere if they’re going to fully offset the inflationary potential of this spending.”

  • Peter Martin 8th Dec '21 - 9:57pm

    @ Joe,

    I didn’t mention that the Covid pandemic has also caused a reduction to supply so this has to be included as a factor. A combination of pent up demand and a reduction in supply will cause prices to rise. The general MMT view is that it is better to wait and see how the economy will fare in the next few months rather than increasing the risk of recession by acting hastily.

    You don’t mention the author of your quoted passages. I would have expected you to accept that MMTers are fiscalists, in the Keynesian tradition, rather than monetarists. The question is which is the better approach. As Bill Mitchell puts it:

    “Our preferred position is a natural rate of zero and no bond sales. Then allow fiscal policy to make all the adjustments. It is much cleaner that way.”

    http://bilbo.economicoutlook.net/blog/?p=4656

    The quoted passage was also written before the Covid pandemic. So we are in quite an unusual and probably temporary situation which wouldn’t have been anticipated at the time. Who would have forecast that the eurozone would have had a 5% inflation rate, and rising, just a couple of years ago?

    MMTers generally don’t go along with the deregulation of the financial sector that we’ve seen in the last 3 years. It has created a casino economy. This shouldn’t be interpreted as Govt wishing to use the lending process to regulate the economy by continuous fiddling around with interest rates. I’d say that we should decide what we want inflation and interest rates to be. 2% for inflation and 1% for interest rates would seem reasonable. 1% for inflation and 0% for interest rates is closer to the MMT view.

  • Peter Martin 8th Dec '21 - 9:58pm

    Should be “MMTers generally don’t go along with the deregulation of the financial sector that we’ve seen in the last 30 years”

  • @Peter Martin
    “I didn’t mention that the Covid pandemic has also caused a reduction to supply so this has to be included as a factor. A combination of pent up demand and a reduction in supply will cause prices to rise.”

    Another factor is our environmental/climate commitments, these too will rapidly require constraints to be placed both on supply and on economic activity. Brexit followed by CoVid has actually done us a favour and started us down the road of shrinking our economy.

  • Peter Martin,

    “I’d say that we should decide what we want inflation and interest rates to be. 2% for inflation and 1% for interest rates would seem reasonable.”

    The problem with that is government can neither decide or directly control either inflation or interest rates. As the BofE notes https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
    ” Bank Rate determines the interest rate we pay to commercial banks that hold money with us. It influences the rates those banks charge people to borrow money or pay on their savings.
    If Bank Rate changes, then normally banks change their interest rates on saving and borrowing. But Bank Rate isn’t the only thing that affects interest rates on saving and borrowing. Interest rates can change for other reasons and may not change by the same amount as the change in Bank Rate. To cover their costs, banks need to pay less on saving than they make on lending. But they can’t pay less than 0% on savings or people might not deposit any money with them. This means that when Bank Rate comes close to 0%, how far banks pass it on to lower saving and borrowing rates reduces. And as Bank Rate starts to rise away from close to 0%, that’s likely to lead to less of a rise in saving and borrowing rates.”
    Irving Fischer suggested that long-term bond yields were a reflection of expected future nominal growth i.e. inflation and real growth combined. Quantitative easing seems to have little lasting effect on long-term bond yields that are largely determined by market forces. As QE is tapered away bond yields seem to go down rather than go up. QE and low interest rates do inflate stock and property markets. Higher property prices exert upper pressure on rents and mortgage payments. Higher housing costs exert upward pressure on wages. Higher wages exert upward pressure on prices across the board.
    Interest rates on bank saving accounts need to be at least equal to target inflation to preserve the purchasing power of savings and pensions. That would suggest a bank rate of 3% to 3.5%. The problem is that government debt is now so high that these levels of interest rates would absorb an excessive part of public spending. Absent post-war levels of growth, it looks like we will have to live with higher inflation that the government cannot control. Higher inflation and negative real interest rates may be the only way to bring public debt back to sustainable levels where interest rates could be normalised for savers in the future. That may take many decades as it did after 1951 when inflation began to feature Interest rates and there may be intermittent periods of debt deflation along the way. In this low growth environment (driven by demographics) the proportion of national income allocated for public services will need to rise as Lord Wallace suggests.

  • Roland,

    “Brexit followed by CoVid has actually done us a favour and started us down the road of shrinking our economy.”

    I am not sure I would put it that way, but I understand what you mean.

  • Roland,

    Shrinking the economy is always a bad thing and I thought that all who supported action on the climate change emergency accepted this today. It is now a question how we can grow the economy while controlling climate change.

  • Peter Martin 9th Dec '21 - 4:21pm

    @ Joe,

    I didn’t say that the government could exactly control the inflation rate or the interest rate or the rate that banks charge customers but they (sorry their totally independent central bank) can set the base rate by a decision of committee. Longer term rates are set by the level of intervention by the ‘totally independent’ central bank. They can use then use fiscal policy to regulate the economy.

  • Peter Martin 9th Dec '21 - 4:35pm

    To get back to the topic of the OP that higher taxes will be required. I’m not saying they won’t be, but not for the reasons assumed in the OP.

    Can anyone spot the mistake in the following argument?

    The govt can afford to build as many houses as they like without any cost to the taxpayer. It simply borrows a sum of money, say £100 million, at zero interest from the BoE. It builds 500 houses with this money which works out at £200k each. Afterwards it sells them for £250k each which gives it a total profit of £25 million Then we can calcalate that around a third of the £100 million will be spent on wages so that another £10 million will come straight back to the Treasury as tax an NI. The rest is spent and respent in the economy and collects tax revenue at each transaction.

    So after a few years it has nearly all come back. So that means well over £200 million has come back from a net outlay of £100 million. We can repay the National Debt in no time!

  • Kyle Harrison 9th Dec '21 - 5:56pm

    When it comes to healthcare, you could make the argument that the reason why we spend less on health is because we pay for it entirely through tax. In other countries there is a greater amount of private contribution towards healthcare. In many European countries you have both public and private contributions. In this country, since we pay tax to the govt to do with what they want people are less trusting that the tax they pay will actually go to healthcare. If we had a system in which some of the money you paid went directly towards your healthcare then maybe more would be willing to pay more.

  • Roland’s observation around environmental constraints is actually very relevant. On present trends China’s population is projected to drop by half by 2100, likewise Japan.
    In the UK, there will be an increasing number of older people; the proportion aged 85 years and over is projected to almost double over the next 25 years.
    These are the demographics of most European economies with a proportionally smaller population of working age.
    Kate Raworth has pioneered Doughnut economics for sustainability https://www.weforum.org/agenda/2020/05/doughnut-model-amsterdam-coronavirus-recovery/
    “Sustainability-focused stimulus packages by large economies, and potential changes in production models and consumer behaviours may support the sustainability agenda, But, brown stimulus measures, cuts in investment and any weakening of climate commitments risk stalling progress.”
    Amsterdam are implemeting a version of the model. Van Doorninck, who’s responsible for spatial development and sustainability in the Dutch capital, said the city’s circular strategy was focused on areas where local government “can really make a difference.”

    These areas include food and organic waste streams, consumer goods and the built environment. As a result, the city has targeted a 50% reduction in food waste by 2030, implemented measures to make it easier for residents to consume less (by establishing easily accessible and well-functioning second-hand shops and repair services over the next three years) and pushed for construction companies to build with sustainable materials.

  • @ Kyle Harrison With, as they say, great respect, I’m afraid I find your echoes of 1980’s Thatcherism on what is supposed to be a Liberal Democrat platform deeply depressing.

  • Peter Martin 9th Dec '21 - 8:10pm

    @ Joe,

    When you were supporting the idea of a UBI it was because the robots were going to take our jobs. When you were supporting the UK’s EU membership it was because we couldn’t manage without foreign workers. Somehow it wasn’t just UK workers who didn’t want to work in the fields. It was UK robots too. Now we have to have higher taxes because we are all getting too old to work any longer.

    So how are we supposed to pay these extra taxes? Out of our UBI?

    I personally wouldn’t think it was fair if the robots who took away our jobs ended up having to pay a lower rate of income tax! Someone, or some things, need to support us in our old age.

  • @Michael – “It is now a question how we can grow the economy while controlling climate change.”
    Sectors (both current and yet to be discovered) of the economy will grow, just as they have in the past. However, the pressure of the perfect storm forecasted since the late 1960’s and nothing that has happened since has shown the overall trend to be any different, means overall the economy will have to shrink (as will the population) over the next couple of decades, the only question is whether this is a managed downsizing or a catastrophic downsizing…

    I suggest now is the time to start thinking what economists, groomed on thinking that knew nothing about the limits to growth, are unable to think.

  • Peter,

    guaranteed minimum income is a reform to make the current welfare system more accessible and less draconian by converting the personal allowance and NI lower threshold to a direct tax credit or basic universal credit allowance i.e. a minimum payment to all adults not in receipt of a pension income in excess of the personal allowance. Technology is and will continue to disrupt traditional jobs. There are virtually no dockers left today, workers manually bolting rivets onto steel plates, labourers digging trenches on construction sites, switchboard operators or secretaries in typing pools. The economy has been dominated by the services sector such as financial services, retail, hospitality and leisure.
    Technological advances and improving productivity among a smaller workforce is going to be required to provide the goods and services needed by a growing number of retirees on fixed incomes The alternative to increased productivity is much higher prices for the smaller pool of services that can be delivered and for imported food, energy and goods that are not matched by higher volumes of exports or asset sales from a smaller workforce.
    UK Membership of the EU has little to do with reliance on EU workers. There are hundreds of thousands of Brits living and working in Europe just as there continue to be many EU citizens working here i.e. the beneficial legacy of freedom of movement.
    As to how are we supposed to pay these extra taxes? David Willetts writes in the Times Property tax would bridge the wealth gap between ages
    “It is more than ten years since I published The Pinch, setting out how huge intergenerational injustices were opening up across Britain. Or to use the more provocative wording on the cover, how baby boomers took their children’s future — and why they should give it back. The issue has risen up the agenda in recent years but it has been harder to take the action needed to bridge the divide. We hear a lot, rightly, about levelling up the regions of the UK but far less about levelling up the generations.
    The way that property is taxed in this country is a major contributor to the wealth divide between old and young. Council tax is based on property valuations from 30 years ago.”Baby boomers are going to have to pay more tax on their wealth to fund health and social care

    The fairer share campaign https://fairershare.org.uk/ sets out how to get started by making council tax proportional to housing value.

  • Peter Martin 10th Dec '21 - 4:38pm

    @ Joe,

    So you want base interest rates to be around 3-3.5% and inflation 1-2% ?

    OK, fair enough. But how should, in your opinion, the government regulate the economy to try to maintain these targets? The BoE has correctly taken the view that monetary policy has to be much looser, ie far lower interest rates, to try to hit the 2% inflation target.

    The only chance would be to run a much looser fiscal policy to offset a tighter monetary policy.

  • Roland,

    I can’t imagine that the world’s population will shrink in the next 40 years. It is possible that the UK’s might if immigration is reduced. I think our population had nearly stabilised in the late twentieth century. It is unrealistic to expect any country to plan to shrink’s the size of its economy. If economic growth in the UK falls below 1% unemployment increases. No UK party is planning on providing a UBI at the poverty level and this would be needed if they planned even to limit economic growth to less than 1% a year.

  • Paul Barker 10th Dec '21 - 7:13pm

    World Population is currently “predicted” to Peak sometime between 2060 & 2100.

  • Peter Martin,

    the government’s role in the economy is to oversee financial and price stability i.e. the conditions that allow business and individuals to make financial plans without a high degree of uncertainty about the future.
    Interest rates and the level of inflation are closely connected. In October the OBR predicted that if UK inflation were to rise to 5.4% next year as a consequence of either a ‘mild wage spiral’ developing or continuing pressure on energy and product prices, then the Bank of England base rate would need to increase to 3.5 per cent from the low of 0.1 per cent. now https://biznewspost.com/uk-news/obr-warns-wage-spiral-could-force-interest-rates-to-3-5-per-cent/
    The outlook for persistent inflation seems rather uncertain at present with a possibility that there may be the higher inflation that the OBR warns off or a return to disinflation if the economic recovery slows precipitously (i.e. inflation well below 2% or deflation as has been the case with Japan for many years).
    Whatever the case, government will need to address the large scale investment required to meet climate change targets and the critical need for affordable housing, primarily through public house building programs and land reform.
    Equally pressing is the issue of inequality including inter-generational inequality that will need to be addressed via structural reforms such as widespread tax reforms, guaranteed minimum incomes, job guarantees. minimum wage hikes and possibly rent controls in some circumstances.
    Borrowing costs remain low because economic growth has been relatively low. This has been the case in Japan for three decades and much of the rest of the developed world since the financial crisis of 2008.
    The investment required to make the transition to net zero and expand public housing provision furnishes the stimulus to pump-prime economic growth encouraging private sector investment, employment and improved productivity. Economic expansion brings with it inflationary pressures and these pressures can be restrained by rising interest rates as the economy returns to a trend rate of growth.
    That is not so much regulating the economy (which itself is a complex adaptive system) but providing the consistent investment, redistribution and financial and price stability that allows the economy to function in a reasonably orderly manner until the next big shock has to be dealt with.

  • Peter Martin 11th Dec '21 - 11:00am

    @ Joe B,

    “…the government’s role in the economy is to oversee financial and price stability”

    This is a narrow and very right wing POV. Those of us on the left are more democratically minded and consider their role is what the electors want it to be. The economy is there to serve the needs of the population rather than the other way around.

    “Borrowing costs remain low because economic growth has been relatively low.”

    Where’s the evidence for this? Borrowing costs are low because interest rates are low. Interest rates are low because Governments want everyone else to do the borrowing so they don’t have to. Low interest rates, zero for savings accounts, are designed to discourage saving, and encourage borrowing and spending. It’s not that difficult. Try it out with on small children. If you give them some money they’ll probably spend it fairly quickly. Promise that you give them some more at some future time, if they don’t, and they are less likely to spend it.

    Any chance of answering the question about how you would aim to meet you inflation and interest rate targets?

  • Peter Martin,

    the Bank of England gives a simple explanation of what the economy is and answers your question about the banks role in targeting the governments desired inflation rate with interest rate policy What is the economy. In the UK the bank base rate was cut in reaction to the 2008 financial crisis and a flight to safety by investors pushed down longer term bond rates close to the level of inflation, where they have remained to date. Governments react to economic conditions. This applies to all governments whether it is the US tightening monetary conditions to deal with inflation at 6.8% during 2021, Venezuela trying to cope with inflation of 1500% or China attempting to manage a property bubble even bigger than the one that brought down Japan’s economy in 1989.
    When Lord Wallace argues that reskilling left-behind communities in the north requires higher spending on education from infancy to adulthood, provision of better transport links, and support for local enterprise he is echoing what most thinking people believe to be necessary.
    The ICAEW published an article in October pointing out the need for higher taxes and greater devolution of powers to local government Getting public finances under control will not be easy
    “The introduction of the health and social care levy on top of the tax rises announced in the March 2021 Spring Budget shouldn’t have been a surprise given the long-term pressures on the public finances. The pandemic may have accelerated the arrival of new taxes, but more funding from taxpayers was always the most likely outcome at some point over the next few years.

    This is not just because the pandemic has exacerbated the financial situation, but because only very strong levels of economic growth would have enabled any government to avoid putting up taxes. Indeed, the Institute for Fiscal Studies believes that the health and social care levy may have to be increased further by the end of the current decade from 1.25% to 3.15%.

    There are some actions the government can take to delay the inevitable, such as increasing labour participation rates, so increasing the pool of taxpayers. But, in the medium- to long-term, the government needs to acknowledge the pressures on public spending and think about how it should go about increasing taxes in a gradual and stable way rather than the current approach of deferring the problem until the pressures become too great.”

  • Peter Martin 12th Dec '21 - 5:57am

    @ Joe.

    We already know what many in Govt, the BoE think about the use of monetary policy. There is no need to fill a comment with long quotations on the point.

    They want to regulate the economy largely by adjusting interest rates. It’s the same in Japan and possibly China too. That’s why they’ve kept lowering them until they are close to zero. On the other hand you want to have higher rates and have expressed a preference for 3-3.5% base rate given that there is a 2% inflation target.

    So. the question is, how would you, ie not anyone else, regulate the economy?

    I don’t know how you managed to pass any exams at uni. You’re normally expected to answer the questions as set on the paper, rather than the questions you might prefer!

  • @Michael BG – “I can’t imagine that the world’s population will shrink in the next 40 years. It is possible that the UK’s might if immigration is reduced. I think our population had nearly stabilised in the late twentieth century.”

    Well with the perfect storm, it is time to start thinking the unthinkable.
    The UK’s population was stable and heading towards a natural decline in the mid-1990’s. Politicians got scared of the increasing numbers of pensioners and so encouraged unsustainable levels of immigration and as we can see today, have successfully compounded the problem.

    >“If economic growth in the UK falls below 1% unemployment increases.”
    Headline/cumulative economic growth is a dangerous myth, because by focusing on it people are in denial about what is really happening, namely massive and unstoppable change – the sort of change that really is unstoppable, unlike the sorts of schemes in the planning system that some like to parrot “you can’t stand in the way of progress…”. Just one example of the sort of change: EV’s will destroy entire industries and jobs based on ICE power trains and fuel supply. I expect the EV sector, whilst like other technology sectors, it will be highly valued it will be significantly smaller than the existing car industry and employ far fewer people.
    Similarly, it doesn’t really matter what the politicians or industry dinosaurs say, working from home will be part of the future work landscape – from the consulting work I’m doing, I expect it to be normal in 2~3 years time.

  • Peter Martin,

    Many people think people buy bonds because they want to hold them to maturity and be paid the interest on them, or their periodic dividends. However, this is not the case for many buyers of bonds. The US Treasury market trades about $10 trillion worth of treasuries each month while QE has been pumping perhaps $100 billion into those markets each month, a drop in the ocean by comparison. The fed doesn’t lead the markets, it follows the lead of the open, secondary, US treasury market.
    “Traders” are trading bonds and treasuries for the same reason that traders trade stocks: they hope to “buy low and sell high,”. When demand for bonds goes up, their price goes up. Because bonds are “fixed assets,” meaning they have a fixed, ultimate value upon maturity, when their price goes up, their yield goes down.
    Bond prices are not dictated by yields. If they were you would not have negative yields. It is the bond price that dictates the yield, not the other way around, and it’s all because of “traders,” and not investors. Price up; yield down; prices down, yields up.

    James Ferguson of Macro Strategy Research argues “Even if inflation comes back down to 2% and stays there, investors might again demand an inflation risk-premium, pushing ten-year yields up to 5% Are investors doomed?
    So, when you ask how will the government regulate the economy. The answer is it doesn’t regulate the economy; it uses counter-cyclical policy, where it can, to lean against the direction that markets are leading the economy and mitigate the effects of peaks and troughs in the business cycle. When the former Chair of the Federal Reserve, Paul Volcker, was asked “Why don’t you lower interest rates?” He said, “I don’t set interest rates; I set the money supply and the market reacts [with] the interest rate.”
    The money supply cannot be expanded if expansion drives inflation higher; it is contracted. The government will react to inflation by contracting the money supply and disinflation by expanding the money supply. Contracting the money supply is best done by monetary policy, expanding the money supply is best achieved via automatic stabilisers and expanded investment when monetary policy is constrained. Whatever the case, the government reacts to economic conditions, it does not lead them.

  • Peter Martin 12th Dec '21 - 10:27pm

    “The US Treasury market trades about $10 trillion worth of treasuries each month while QE has been pumping perhaps $100 billion into those markets each month, a drop in the ocean by comparison.”

    This is missing the point. The US Fed/US Government is the issuer of the currency. Many would say that it shouldn’t even be trying to influence the market. It doesn’t have to try very hard to do that. If everyone else knows that the Fed will buy Treasuries at a certain price then that is highly significant. The Fed is underwriting the price of the Treasuries even if they don’t buy many at all. It is the same story in Europe. Greek and Italian bonds are sold at a relatively high price only because they know the ECB is an active buyer in the market and is also acting as an underwriter.

    The US Fed has purchased nearly $ 9 trillion worth of bonds. This is not a “drop in the ocean.” Other participants in the market are sellers as well as buyers so their turnover is far greater than their net position as either a buyer or seller. As you say they want to buy low and sell high.

    “Bond prices are not dictated by yields.”

    But they are dictated by the what buyers are willing to pay. If one of the buyers is the Fed, should it decide to enter the market, it can push up prices and decrease yields. The Fed, and other central banks, don’t enter the market in a half hearted fashion. They do it to change prices. They are not market followers. They are market setters.

    Paul Volcker is taking a narrow view of the meaning of money. He’s not counting government bonds. Just changing from something that isn’t counted as money to something that is, isn’t increasing the ‘money supply’ in any meaningful sense. The whole point of QE, as I think you’ve acknowledged yourself previously, is to lower longer term interest rates. Volcker is being disingenuous about this. Short term rates are set by the decision of a committee.

  • Peter Martin,

    Paul Volcker is stating the facts. The central bank can determine the bank rate or federal funds rate target and engage in open market operations to achieve that target, but while bank rate may or may not influence interest rates in the real economy, it is the market that sets them including yields bid at long-term bond auctions.
    In the US, the treasury market (for example) trades about $500 billion worth of US treasuries each trading day and, it is assumed that the so-called dark pools trade an additional $500 billion each day. The Federal reserve bond buying program is equivalent to $5 billion or $10 billion per day. It is the flow of purchases that determines long term bond prices, not the stock of bonds that have been taken out of the market and replaced with short-term bank reserves by the central bank.
    In December, 2018 when the markets were pushing prices up (in response to money coming out of the stock market concerned about a trade war) and axiomatically, yields were falling., the fed raised rates, raising the ire of everyone from the President to Wall Street. The fed then abruptly changed course and followed the markets, lowering the fed funds rate three times in 2019.

    This economic analyst No, The Fed Does *Not* Rig The Bond Market And It Only Takes Five Seconds To Debunk This Myth writes:
    “Quantitative easing, large scale asset purchases, whatever label anyone might PR-test and slap onto these ineffective central bank endeavors, these are the most real-world tested policy programs around, twenty years and spread anyway near worldwide, and the evidence is incredibly one-sided. They don’t work in any of their theoretical channels, but most of all they don’t reduce interest rates.

    They don’t even interfere with how the market sets interest rates whichever direction!

    The only control the Federal Reserve, ECB, or BoJ exerts is over the level of bank reserves as a byproduct of all this purchasing. And the level of bank reserves is just as irrelevant to financial markets and the real economy as QE is to growth and inflation expectations.

    Those other are the only factors driving yields up, or, as the last decade plus, down to stay.”

  • Peter Martin 13th Dec '21 - 8:59pm

    Joe,

    You can find supposedly well qualified economists who will say just about anything you’d want them to. As I’ve often pointed out there’s no consensus in Economics. So it doesn’t really count for much to try to use an “argument from authority”. However, if you are going to do it you really ought to find someone who actually agrees with you.

    You seem to be quoting with approval Paul Volcker’s claim that “I don’t set interest rates”, meaning that the US Fed doesn’t set them – even when it is is conducting large scale QE.

    However just last month you wrote (and broadly correctly) “Quantitative easing by itself does not impact significantly on consumer prices. It does impact asset prices by lowering interest rates and hence inflating the price of stocks, bonds and property.”

    So make up your mind. Does QE lower interest rates or doesn’t it?

    You may disagree with my Economic world view but at least I know where I’m coming from! You aren’t going to convince anyone, including yourself, if you don’t formulate a coherent theory first.

  • Peter Martin,

    theory that doesn’t match reality is a big part of the problem. It is far better to look at empirical evidence of what actually happens in the real world and learn from experience.
    Asset prices and housing in particular have been inflated during a period of relatively low economic growth and low inflation. Interest rates are low in advanced economies all around the world and much higher in emerging markets as capital has flowed out of emerging markets to safer havens pushing down yields on bonds in the developed world.
    There is mixed evidence as to whether QE influences how the market sets longer-term interest rates or inflate asset prices through providing liquidity and eliminating moral hazard in financial markets. What seems to happen is that by announcing QE the Central bank is signalling its intentions for the future. It might mean that bonds tend to follow suit in some circumstances. Or it may not.
    Regardless of the effect of QE, the BofE can determine bank rate through its monetary policies and this rate will affect market interest rates in the economy including the rate that can be earned on savings accounts. Until interest on savings accounts is at or near the inflation rate, then the economy cannot normalise. Pensioners and others on fixed incomes will see a continuing erosion of their purchasing power and savings, while those saving for a house deposit will find it harder and harder to save an amount that keeps getting further out of reach year by year.
    You don’t need a theory of money to win people over to the idea that a fair society and a sustainable economy now require greater public investment. You just need a government willing and able to address the issues as Lord Wallace outlines in his article.

  • Peter Martin 14th Dec '21 - 5:38am

    @ Joe

    Yes theory should fit the facts. After the GFC in 2008 the mainsream theory was that interest rates would have to rise because the Govt was in the market wanting to borrow lots of money. The only way the ‘market’ would create the lenders was to pay them more.

    Inflation was supposed to rise because Govts were spending money they didn’t have leading to a surge in the price of gold as a supposedly safe haven.

    The opposite happened. As predicted by MMT. The GFC itself wasn t supposed to happen because the so called ‘Great Moderation’ had put an end to financial instability. It was caused by an old fashioned credit boom in the private sector turning to bust as debt deflation triggered an economic crash just after interest rates were increased by the BoE and the US Fed
    Reserve.

    When it did happen many, including in the Lib Dems, wrongly ascribed the bust to a build up of public debt. Many in the Labour Party weren’t much better.

    Yes we need public investment, and maybe even higher taxes, but we also need politicians to understand how the economy works otherwise it won’t count for anything. The same mistakes will continue to be made.

  • Peter Martin,

    I don’t think the LibDems ascribed the 2008 financial crisis to a build up of public debt. Larry Elliott reviewed Vince Cable’s 2009 ‘The Storm’ The Storm
    “Where credit is due – as in the government’s much-copied bailout plan for the banks last October – Cable is scrupulous in giving it. But he is scathing about the PM’s claim that Britain’s problems are imported from across the Atlantic. True, Britain had 16 years of uninterrupted growth with low inflation, but this was mainly due to Chinese workers flooding the global economy with cheap manufactured goods, and recycling the resulting trade surpluses into the City and Wall Street.”
    In understanding how the economy works it is important to be cognisant of how globalisation has impacted the UK economy over the past three decades. Britain has enjoyed an enormous terms-of-trade benefit from the fact that the exports in which it specialised (largely business services) were going up in price, while its imports (largely commodities and mass-produced manufactures) were getting cheaper. This terms-of-trade gain goes into reverse, as exports of financial and business services decline while the cost of imports from China and the rest of Asia goes up.
    Demographics and the impact of an aging population likewise have an increasing impact on the level of output of goods and services.
    These trends and the inter-generational inequalities that have become evident in access to housing and pension provision are critical to economic planning going forward.
    If Lord Wallace can elicit murmurs of agreement at a large city dinner when pitching for higher taxes and higher spending on schools and other public services, then perhaps there is hope that we can address some of these issues in the way that many of our Northern European neighbours have. In the immediate future, the advice of the IMF is worth bearing in mind UK needs mini-furlough if Omicron hits economy, says IMF

  • Peter Martin 14th Dec '21 - 9:43pm

    “I don’t think the LibDems ascribed the 2008 financial crisis to a build up of public debt. ”

    I would agree that this has been acknowledged more in recent years but during the coalition years, Lib Dems went along with the Tory narrative.

    It would take me a while to find the quotes and references to support this claim, but the message at the time, and if I remember rightly, went something like this:

    ‘Labour spent too much and borrowed too much. They maxed out the nation’s credit card and we ended up where all spendthrifts end up- in queer street. In order to rebuild a strong economy we need to cut our clothes according to our cloth. We need to cut back Govt spending until it is in line with taxation revenue. We pledge to abolish the deficit within the lifetime of this Parliament’

    You’d be hard pressed to find anything much different from Clegg and Laws. Vince Cable probably knew this was all nonsense but didn’t want to put his job in jeopardy by speaking out too loudly.

    Or is my recollection different from everyone else’s?

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