The political aftershock of George Osborne’s autumn statement is just beginning to sink in: the Coalition’s 5-year austerity programme, designed to end in 2015 by the time of the next general election, is now a 7-year programme straddling two parliaments.
This poses problems for the future of the Coalition, and for the Lib Dems in particular, encapsulated here by the FT’s Philip Stephens:
Here’s the paradox. The effect of sticking to economic plan A has been to shred the coalition government’s original political strategy. In the heady days after the 2010 election the Conservatives and Liberal Democrats signed up to austerity on the assumption they would reap the political rewards at the next election. Hard times would be a prelude to a return to the sunlit uplands of growth tax giveaways. Things are not turning out like that.
Instead the Coalition is now sticking limpet-like to Plan A until 2017, two years beyond the next election. But with Plan A dragging on longer than was expected, Mr Stephens points to what he calls the Coalition’s three-part political Plan B:
1) Blame others.
The Coalition has long laid a significant part of the blame for the UK recession at the door of the last Labour government. Partly this is justified: the warnings of Vince Cable and others that the debt bubble was unsustainable were brushed to one side. Partly it is unjustified: all parties were committed to increased government spending — both the Lib Dems’ 2005 manifesto and David ‘share the proceeds of growth’ Cameron.
But the charge against Labour has, to date, stuck. And to that charge can now be added the Tories’ favourite bugbear: Europe. With Greece, Ireland, Italy and possibly Portugal and Spain dragging the Eurozone down, and with the EU accounting for 40% of UK exports, it’s not unreasonable for the Coalition to point to wider economic conditions exerting a negative impact on the British economy.
2) Do something.
Here’s Mr Stephens’ verdict:
[P]art two of the new political strategy is calculated to show the government is doing all it reasonably can to ameliorate the impact. Hence the latest blizzard of schemes to boost infrastructure spending, help small and medium-sized companies and get more young people into work. The initiatives span the good and the dubious. Some will work, some will never be heard of again. But whatever the eventual impact, ministers concede it will not be felt before the next election.
3) TINA.
This was Margaret Thatcher’s favourite line: There is no alternative. Mr Stephens’ take again: ‘The markets would not forgive any relaxation of the fiscal squeeze. As much as you may be angry with the government, this argument runs, would you trust Ed Miliband and Ed Balls to do better?’
It is this TINA defence that should worry Labour most because we know that in poll after poll the Tories’ Team Osborne score better economic trust ratings than Labour’s Team Balls. This matters because Labour’s hypothesis, Ed Balls’ so-called 5-point plan for rescuing the UK economy, will never be put into practice — voters will be asked to take it on trust that it would have been a better alternative to the Coalition’s austerity programme, Plan A. That’s some ask.
That’s fine for the Coalition, but what can the Lib Dems say and do?
This, then, is the Coalition’s defence. And on the face of it it’s not such a bad one, with enough truth in each of its three parts to be credible.
But it’s not comfortable for the Lib Dems. We were at least as identified as Labour in the boom years with wanting additional public spending. We were advocates for joining the Euro. We have pressed for new infrastructure spending, but know this is a long-term dividend. The party’s trust ratings on the economy trail even those of Labour. And as for invoking a Mrs T mantra… well, even the most Orange Book Lib Dem may turn a little yellow at the thought of that.
In pre-Coalition days we could point to Vince Cable as our economic soothsayer, our get-out-of-jail-free card on the economy. But now he’s embedded in the Coalition and just as complicit, even if sometimes reluctantly, with the government’s defence.
The Coalition has its economic Plan A. The Coalition has its political Plan B. Both may work. But if they do it’s most likely the Tories who will benefit.
Neither Labour nor the Lib Dems have yet come up with a convincing answer to how a government can achieve social justice at a time of necessary austerity: put simply, what is the point of progressive politics when the money’s run out? However grim it might appear for the Tories today, the reality is that it’s the Lib Dems and Labour who have the biggest political problems right now.
15 Comments
The Government is doing exactly what it should: continuing to make it clear that they are committed to dealing with the structural deficit and continuing to adapt their plans in the context of the worsening international situation.
In a sense this is both ‘sticking with plan A’ and being pragmatic at the same time.
What the lib Dems need to do is set out how they would achieve this whilst being fairer than the Tories – emphasising that we can still deliver lower taxes on the lower paid, defend the state pension and benefits for those who need them, and ensure that the best off pay their fair share.
In the run up to the next election we need to build our own platform which deals with the deficit but also sets out what our priorities will be once it is dealt with. Again being seen to put the priority on fairness is key.
We also need to deal with the question of what our policies are following the election. There is no point tying ourselves to the coalition’s view as to the necessary measures to bring down the deficit during the additional two years. Clearly, it is pointless to try to set that out now when things could easily change again but we should be developing our own distinctive approach which can be laid before the electorate.
As Neil suggests, the Lib Dems need to be clear that people can support a further tax shift to take more poorly-paid people out of income tax if they vote LD in the future. But the party is suicidal if it sticks to Danny Alexander’s position on the 2015 manifesto aligning with a coalition economic policy. Reducing the structural deficit is rightly a coalition commitment and should stay for the manifesto, but there needs to be scope to argue how liberals would have done it differently with a free hand and that’s why there’s a point to voting LD rather than blindly supporting or opposing Osbourne with a vote for the Tories or Labour.
Yikes, TINA, really is that the best anybody has to offer? You’re not even going to pretend there’s anything other than austerity?
“It really is just like a medieval doctor bleeding his patient, observing that the patient is getting sicker, not better, and deciding that this calls for even more bleeding.” – http://krugman.blogs.nytimes.com/2011/11/30/bleeding-britain/
The conservative-led givernment would have reduced economic pain for average citizens if it had separated its ideologically-led drive to reduce public sector employment from the need to manage a time of international recession.
I am quick to point out that the public sector is rife with wasteful working practices and would like to see a smaller state, but it is in my view better for people to be wastefully employed in the public sector but supporting themselves and putting money into the economy than to have the same people on unemployment benefit with nothing to spend to stimulate the economy and contributing to costs for the NHS in treating depression and obesity.
Re-structuring should have waited until a more prosperous time when it would have been easier for workers to find other jobs, rather than simply producing increased unemployment, driving down spending power for consumers leading to double dip recession.
Public sector costs could be trimmed substantially by tackling waste eg in procurement as was demonstarted in David Laws’ brief but effective term in the Treasury.
The present approach to the deficit is like giving 95% of your net wage to creditors leaving yourself and your children without enough money to buy food to stay healthy.
We supported an economic stimulus during the last recession and we were right to do so, the economy started to recover. What it needed when we came into office was more time to continue to recover, which is what we said during the general election campaign. But instead we went the other direction, slowly at first. But then the momentum behind the cuts grew and the growth slowed to snails pace and we are in the desperate straits we are in now. In a desperate attempt to reduce borrowing we have killed off growth and now we are having to borrow more than ever. If we go into recession that will get worse – more money to pay in benefits, less income from taxes, a widening deficit.
At what point do we say enough? How bad does it have to get before plan A is ditched?
Does anyone think that cutting spending is a good idea in a recession?
We have also failed to be progressive. It is not easy to tax the rich to be fair, but we are being blocked from doing that anyway. Where is LVT or the mansion tax? The people with the broadest shoulders should pay more, not public sector employees or those on tax credits.
We have failed to be “The greenest government ever”. Good to see infrastructure investment – although the sums involved are tiny, but why spend it on roads? Why also remove protection from the environment in the name of “deregulation”?
I support those Lib Dem Parliamentarians who will try to unraval some of this, as they have done in the past, but to me this does not feel like a Lib Dem government. What are Nick and Danny up to?
“Neither Labour nor the Lib Dems have yet come up with a convincing answer to how a government can achieve social justice at a time of necessary austerity: put simply, what is the point of progressive politics when the money’s run out?”
Well, the point is, surely, that when we have hard times and everybody is at risk, we should strive for progressive policies, to ensure that nobody starves and the rich shoulder the burden. When we have boom times, on the other hand, we can afford to be much more “intensely relaxed” about rich people getting richer.
So Stephen Tall’s words are quite wrong in principle. Unfortunately, they often seem to be true in practice. Hard times tend to bring in right-wing governments and increasing inequality, as Mark Pack’s “top 1% of income earners” post today demonstrates. Inequality and depression go together – and so, we’re back to the 1930s.
Why does this happen? I think the best explanation is that when times are difficult, people turn toward politicians who offer the reassurance of simple certainties, and a comfortingly selfish determination to look after Number One which chimes in with their own fears and feelings. In a sense, Osborne’s simple certainties about the deficit and blaming Labour have something of the same kind of appeal as Hitler’s simple certainties about financial collapse and blaming the Jews.
I hasten to add that of course, Osborne and Hitler are not on the same moral plane. I make the comparison purely to illustrate that the common popular political reaction to hard times is, very often, highly maladaptive. What people want, in these circumstances, isn’t what they actually turn out to need. Hitlerism wasn’t what anybody in Germany really needed to improve their lives. In crude parallel, Osbornism has also meant – until now – deliberately ignoring rational arguments from Keynesians and others in favour of a blind, simplistic, destructive commitment to hammer the deficit, hammer public spending, and hammer the poor.
And we’re happy to be dragged along with this?
Some of the borrowing could have been off-set by progressive tax rises and actually tackling the loop holes that allow people to avoid tax., Restructuring government should have waited until a recovery was seccured. Even then the notion that the state and private sector are mutually exclusive or even that one is payed for by the other is largely a myth of economic libertarians. History in fact shows that at least since Roman times poweful economies are also powerful states. We saw this in Victorian Britain. In the post WW2 US and we are seeing it in China now. Arguably the current financial meltdown is the result of the rise of Supply Side Economics, borrowing went up because tax and spending power went down. The trickle down effect failed to happen and instead you got a bubble going upwards which has just hit the surface and burst leaving me, thee and various governments scraping through the penny Jar. More of the same will only make things worse.
The point surelyis that 2015 was only the end of Stage 1 anyway, we, like The Tories would have been putting forward a Program to reduce Britains Debt. That part of our Manifestoes would always have been similar. The big difference is the choice of where to cut & what to preserve.
We should not be trying to write The 2015 Manifesto now, nor should we assume that The Political Landscape will be the one we face now. Labour are facing massive problems internally & in terms of convincing Voters of their Economic arguments are going backwards.
No. It is the third best. For a discussion of the best and second, I suggest you read the article.
It would be more precise to say “Nobody has proposed a credible alternative”. Labour is playing heavily on their ability to handwave about alternatives without actually coming up with one. The 5-point Balls “plan” is, as Cameron recently pointed out, funded by money that Labour’s proposals have already spent ten times over.
A lot of people in and out of the government would like an alternative, but what the government can’t come right out and say is that they can’t fix the economy (because it’s being driven primarily by international factors). Everything sucks during a recession, and the government’s plan is, despite all its flaws, a sincere attempt to minimize the damage. Labour’s cries of “just fix the economy” are sadly unanswerable, because the only true answer is the politically intolerable “we can’t – and neither can you”.
Neither Labour nor the Lib Dems have yet come up with a convincing answer to how a government can achieve social justice at a time of necessary austerity: put simply, what is the point of progressive politics when the money’s run out?
To put that question another way: Are there such things as responsible left-wingers? If there are, then the Liberal Democrats can try to sell themselves as being those. If, on the other hand, to be left wing is to promise free pony’s for everyone, even when this is clearly impossible, the LibDems have a problem.
Personally, I think there is a lot to be said for trying to think creatively. For example, housing benefit effectively pays people large sums of money to live in the center of London (and to a lesser extent, other great cities) on condition that they stay poor while they are living there. Would it not be cheaper to pay people to move to the suburbs and satellite towns? Not only would they rents the government had to pay for be lower, but the benefits trap would be lower as well. I can’t help but notice that the highest unemployment areas are almost all in the centers of cities, where you might have thought it would be easiest to find work. If it paid.
Yellow Bird:
“I am quick to point out that the public sector is rife with wasteful working practices and would like to see a smaller state, but it is in my view better for people to be wastefully employed in the public sector but supporting themselves and putting money into the economy than to have the same people on unemployment benefit with nothing to spend to stimulate the economy and contributing to costs for the NHS in treating depression and obesity.”
– Having spent a long day slogging away in the public sector, in a science/engineering role that actually brings in money for the treasury – and at a pay rate literally 1/2 of colleagues in the private sector – it’s nice to be appreciated! Didn’t feel as if I was wasting my time but maybe I’d be much more efficient if employed by Serco, Capita or the like.
It’s ironic that your comment starts off lamenting the “ideologically-driven” Tories, then you go on to write this.
As for the article, concerning the problems for the LDs in spinning austerity, I wouldn’t worry: I actually forgot we had a coalition govt today, so completely ‘tory-led’ that it is, and actually heard someone say, “that ginger bloke [sorry, no wish to offend, but that’s what he said], Danny whatshisname, is he a Liberal?” – people are beginning to forget the difference between Tory and LD, but if they like the way things are going I’m guessing they’ll vote tory.
It can only be political expediency for Cleggs far right agenda that has led to his approval of further cuts more than 3 years in the future. . The deficit may or may possibly need more attention after the next election, whether through spending cuts or tax increases for the better off… but it is surely not a decision that needs to be taken today … unless ofcourse it is for idealogical reasons by those who basically have doctinarial dislike for public services.
I run a Lib Dem council and we have had to make budget cuts for as many years as I can remember. Last year was worse but we got through with all libraries open (in fact a new one opened) all musuems, youth clubs and childrens centres open. It as hard going but the things that should seperate us from others is being cleverer is what cuts to make.
If there is no money – then there is no money. What we should be doing is pushing to make sure as much spending as possible is targetted at creating jobs and protecting the most vulnerable in society. £600 million for Free Schools cannot be justifyed. We could build 600 new council houses, but if they are all going to be bought by Cameron’s right to buy on huge discounts why would we borrow this money at very low interest rates to get the construction industry going and build homes that local people want. The private sector can borrow and do this but at a much higher rate of interest – and who pays for the extra interest, the poor tenants.
We keep being told by all and sundry that our structural deficit is the highest it has been since the War : in numbers perhaps,but has inflation been taken into account? In the mid sixties in my then relatively lowly job as an assistant print buyer I was earning £ 1600 p.a.,plus a month’s salary as bonus every six months. What would that be today ?
Somewhere in the region of £ 30.000 p.a.,but without any real bonus I suspect. The country’s continuing deficit has always been there, varying somewhat from decade to decade, but what is new and obviously bewildering to all our politicos and bankers is the U.S and Euro- wide implosion exacerbated by international market traders and speculators. And there would appear to be nothing that any of them can do about that,short of looking back to the old Soviet Union’s criminal code where “Speculation” was a mandatory capital offence. This may well be somewhat extreme,but speculation is the basis of all our problems,and that must be resolved. As to what we Lib Dems can do about their future I just do not know,other than slowly melt away from the Coalition. As things stand,there will not be more than a handful of Lib Dem M.Ps voted in at the next general election, and amongst those who will fail to get re-elected will be pretty well all our leadership, unless the party can come up and sell a convincing third way alternative strategy to that of the Tory and Labour Party no hopers.