All parties strive to have a narrative that makes sense to the voters and gets across the key messages the party wants the voters to hear.
The Lib Dems have a narrative – a story – about the economy, but it’s not being heard by enough of the people the party needs to win back. One reason is that the story has a beginning and a middle but lacks a proper ending.
The three main parties all have their economic stories for voters.
The beginning of each is a tale of financial woe. In Labour’s version (at least until now) the economic problems are down to the bankers and the international recession. The Lib Dems and Conservatives additionally suggest the then-Labour Government wasn’t wholly blameless.
At the moment, it’s the middle of those stories that’s defining the public mood – the cuts. Cutting public sector employment back to 2002 levels, deep cuts to public spending to take it back to 2006 levels.
The middle of the Labour story – “wrong cuts, wrong time” is clearly finding resonance with many voters, willing not to ask what the right cuts and the right time might be and concerned about the effects of such big public spending reductions.
The middle of the Conservative story is also holding up well with the majority of Tory voters.
The problem for the Lib Dems is the middle of our story is a lot of pain and not enough gain which, as the opinion polls make clear, is not going down well with many of the people who voted Lib Dem in May.
But what of the end of the story – of where all this is taking us? The Lib Dems are making the cuts for a reason and it’s not that hard to find, but we’ve not yet made it part of the story and got it across to voters.
The aim, as we reach the next election, is to have successfully rebalanced employment between the public and private sectors, with many more people in work overall than there are today. Because the deficit will be low or zero, the extra tax receipts coming in as the economy grows can be used to invest in public services and start paying off the national debt, reducing the massive interest payments we’ve been left with (£120 million a day and rising).
That ending can be contrasted with Labour’s approach.
Labour want to cut the deficit more slowly, meaning hundreds of billions more piling onto the national debt than under the Coalition plans. All that extra debt has to be serviced. If we were to go down Labour’s route, we would be left paying tens of millions more in interest than under the Coalition every day – money that would then not be available for schools, hospitals and all the other things Lib Dems want to invest in. Labour’s plan reduces the pain a little today, but increases it a lot down the road.
Back in September 2009, Nick Clegg was telling his party conference – and the country – of the need for “savage cuts” in public spending to sort out the expanding deficit and rein-in the national debt. At the General Election the Lib Dems identified more cuts than either of the other two parties.
That talk in Opposition was followed through by action in Government. Whereas Labour ducked the tough decisions and prevaricated, the Lib Dems have taken them.
But we need to complete our story – our narrative and vision – of where this is all going.
We need to tell people what each path means for their and their children’s lives and find a simple way to get our message across as to why the Lib Dem story has a much happier ending than the one being pushed by Labour.
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69 Comments
Before anything else, remember that ‘Labour’s route’ was broadly the route that the Lib Dems stole their votes promising to go down.
If these cuts damage growth to a decent extent, like we’ve had three Nobel prize winners and plenty of think tanks saying, it will harm tax intake more than servicing a slight amount more of debt. Additionally, it is much cheaper to sustain services as best as possible than to slash at them and then seek to start them up again from scratch (though I gather these cuts are intended to be permanent so it’s less of a problem… for the Treasury. For the people who rely on those services, I guess they can swing).
If we’re talking pure economic utilitarianism- do everything to get the deficit down as cheaply as possible- your approach is wrong, as the NIESR have said, as Joseph Stiglitz has said, as Will Hutton has said, as David Blanchflower has said, etc. You don’t get brownie points for making tough decisions if you make the decision to take the route that will hurt the most vulnerable.
I think you will find, Iain, that the talk by NC of “savage cuts” in 2009 was dropped very smartly, when it was realised that the party almost wholly rejected it. He got himself in quite a lot of hot water over it. Our problem as a party is probably that we have not analysed sufficiently how our original higher spending plans (yes, higher) should be funded, and how fundamental a reorganisation to economic, and geopolitical thinking was required.
With respect Iain, your analysis is flawed. How? Your assertion that:
The problem for the Lib Dems is the middle of our story is a lot of pain and not enough gain
The middle of the Lib Dem story is a complete reversal in their position from “cut slow and steady” pre-election to “cut hard + fast” before the Coalition negotiations. In other words – a reversal from a Labour supporting position to a Tory supporting one.
The facts didn’t change. No member of the Party can tell us what specific economic facts or conditions changed between May 5th and May 12th. They can only tell us that Mervyn King changed their mind – and their interpretation changed with it. I for one find this risible.
That is what has turned people away from you. Voters don’t like hypocrites.
Tim13 – you’re right that the phrase was dropped, but the stated aim of tackling the problems wasn’t.
Cuse – I think you overstate the change. The change the Lib Dems were persuaded of were the immediate (and relatively small) cuts in 2010-11.
Surely, the problem is that the middle part of the Labour story is largely what the Lib Dems were selling during the election campaign? Substantial cuts but a slower pace. Certainly the rhetortic about the pace of cuts from Clegg was closer to the Labour position of a slower pace of cuts than to the current coalition position of deep initial cuts. Remember the economic masochism of deep early cuts. I appreciate the manifesto was a little more aggressive in its wording in regards to cuts than perhaps came across to the public on the campaign trail, but the basic premise that people have been mis-sold as to the pace of the current cuts remains.
It harks back to the same problem which comes up time and again, one thing was said at the general election and now another position has been adopted. That’s the difficult sell. At the moment, the two lines to support that the need for change 1. The financial position was far worse than expected and 2. It’s the byproduct of being in coalition with a larger party who is determined to cut quicker.
The first position doesn’t really work because it’s frankly untrue, and the second position doesn’t hold water with the public due the constant support for the Conservative position from Lib Dem ministers, the occasional glee from Danny Alexander et al with which such support is given doesn’t help either.
The problem is that this story seems to be exactly the same as the Conservatives’.
You (Iain) are even repeating the old Tory lines about “same level of spending as in 2002/6” or whatever, to try and make it sound as if there cuts aren’t going to cause any real suffering.
There are reasons which ought to be obvious to any intelligent person why public sector spending has to rise while appearing to keep steady. The most obvious is health advances, expensive in themselves, but also leading to many more still alive in their advanced years, which involves huge amounts of public spending. But others just come from the fact that a more complex technical society requires a more complex infrastructure, both physical and abstract. The average distance people travel is steadily growing, for example, meaning more costs to keep roads in good repair – more costs which seem entirely invisible, because the state of the roads are no better than they were. The tuition fee issue is really about abstract infrastructure – a more complex technical society requires a more educated population, so higher education is no longer something for less than 10% of the population.
If we suppose the state is the admin and infrastructure part of the nation which serves the productive part, what is happening is no different than in businesses. In nay business now you will find a far higher proportion of the staff involved in admin and infrastructure tasks. Indeed, Tory types complain about “more bureaucracy” in the public sector, but what is the whole banking industry but bureaucracy, doing admin tasks shuffling money around to try and make it productive?
What we really need is a narrative which is honest about all this, which accepts the strains caused by the way society is developing and puts the sometimes harsh choices that have to be made direct to the people. The Tories have not done this at all, which is why they can get away with all this bland talk along the lines of, … well the sort of story Iain is telling us above. It’s a Tory story. It’s a story put about by the wealthy elite who don’t want to face up to the damage their politics – the politics we have had since 1979 in this country – has done to people in this country in terms of misery and social breakdown at the lower levels.
@kmag – unfortunately the truth hurts. On reflection, and it’s been a tough time for all Lib Dems, There are really two different things: Deficit and non-deficit politics.
We’re coming from an era of `painless politics` – a fantasy land peddled with no financial consequences. No hard decisions had to be made and the Government could wave a magic wand and everything would be painlessly `cuddly wuddly` again.
It’s a transition period from the `politics of me` to the `politics of connectivity`. I often ask people who are Labour `what would you do?` Answer (even from very intelligent people): `I don’t know I’m not in Government/an economic expert/I hate the Tories because my Mum did` type of answers. Simply not good enough.
The coalition need to decide the following:
1. Who will be `winners` and who `losers` in post-deficit politics?
2. How to simply put the economic facts to the public.
3. Which reforms are necessary for this post-deficit world to come about (political, economic, benefits and banking)
4. Which reforms would have been done anyway (political, economic, benefits and banking)
Iain:
Cuse – I think you overstate the change.
Whether you, or the leadership or the electorate believe that isn’t the issue.
The issue is – as Keynes would no doubt approve…
What facts changed to make you change your mind?
This is the bit that riles people. This is the bit that colours you in public. The facts didn’t change (or rather they did – the OBR confirmed the economy was better than was thought), your ideology did. It links to the Tuition fees reversal narrative also.
I still can’t get a straight answer from the Party, activists or LDV as to what specific economic conditions changed the party’s mind.
If you don’t believe that cutting now will result in a double dip recession, which a significant majority of prominent economists don’t, then there is no justification for delaying the cuts further.
The Miliband/Johnston plan, continuing to run a larger deficit, leaves you with larger debt and debt repayments, making the cuts when the economy may be trending towards another recession, not in a period of growth.
The growth in our nation’s debt, with the deficit as it stands, is larger than the economy’s growth rate; the Balls plan, growth without reductions in government spending, therefore isn’t going to get us out of the national debt situation – under Labour it would continue to worsen.
So the remedy now is correct, despite feeling unpleasant.
The next question is, when we have returned to a balanced budget, or indeed a surplus, what do we do with it? Invest in improving social mobility, better conditions and international competitiveness, further supporting our growth – yes; return to the wasteful spending Labour would want us to or presently opposes cutting – no thanks.
To the commenters, I don’t know how many times it needs to be said; pre-election the Lib Dems were very critical of wasteful government spending and highlighted the need to cancel big programmes of government activity which were no longer affordable. The manifesto committed us to beginning this process as soon as the economy was back in growth – that’s what we’re carrying through.
@John
That’s a logical position, but it doesn’t change the perception that one thing was said during the election campaign and very different position taken once in coalition. People simply do not like being mislead, and frankly that’s what has happened across the board since the election. From Tuition fees to the pace of cuts, they voted for the party to support specific positions which they have reversed. Essentially, the lines in the sand the leadership chose did not reflect the will of the people who voted for the party. I’m not sure how the loss of trust can be overcome.
@Andrew Tennant. The rhetoric from Nick Clegg was much much more measured, and deeply critical of the pace of a Tory cuts program he’s now adopted wholesale. That’s the problem the party has, you can argue about semantics and detail and you might be right, but you’ll lose the argument with the public because they took Nick at his word (as he asked them to) and he’s been deemed to have changed position. Now do I believe there are compelling arguments for an actual, both economically and terms of coalition politics, of course, although I remain worried about the depth of the initial cuts. I think it would have been difficult to start the coalition with a series of public disagreements, but perhaps that’s what needed to happen.
@kmag
That’s simply not true; that Labour’s spin on this issue has taken hold with the electorate so quickly and so easily is a regrettable and damning reflection on the intellectual insufficiency and/or dishonesty of the UK media.
I love the way that you don’t tell us what the ‘end of the story’ for the Tories is, and whether you disagree with it.
I’ll tell you what their end is – the privatisation of the NHS, the end of the idea of comprehsive schooling with equal access for all backgrounds, the reversal of years of legislation protecting worker’s rights, environmental and financial regulations, the prioritisation of the motorist’s lobby over all other forms of transport and the wholesale exit of the state from providing protections for the very poorest in society, with churches, mosques, charities and volunteers stepping in instead, with all the lack of professionalism (though good itentions) that this would bring with it.
If you don’t disagree with this ‘end’ then do the honest thing – MERGE WITH THE TORIES AND BE DONE WITH IT.
And all the ill-informed deficit-fetishists… you could do better than have a read of a Nobel-prize winning economist or two – I’d suggest Paul Krugman and Joseph Stiglitz for starters.
1) The two major countries that have implemented severe austerity measures – Ireland and Greece – have seen their economies tank, whilst the country that has spent in Keynesian fashion – Obama’s America* – is now back out of recession and creating jobs.
2) UK bebt was falling before cuts were implemented.
3) The UK has had a higher debt in 150 of the last 200 years.
* On a related note, I guess most remaining Lib Dems are more Sarah Palin fans than Obama supporters, as she is far closer to your new ideology.
@Andrew Tennant. I’m sorry I must have dreamed up Nick Clegg on the Today program saying “We think that merrily slashing now is an act of economic masochism. If anyone had to rely on our support, and we were involved in government, of course we would say no.”
@kmag
Did he say it today? Or back when we were still in recession? Also, who’s merry? We’re doing a job!
@mike hartley
You think we’ve never previously encountered Stiglitz & Krugman? Theirs are two opinions, their records are not infallible, and the UK is too different economically to draw a direct comparison anyway. The UK debt was not falling, the deficit was slightly lower than originally forecast – learn the difference. And, on your final point, the direction of travel is what would dent confidence in the markets, not the total debt figure.
On the Tories’ ‘end game’, I think you take a very pessimistic view; they might prioritise their wealthy friends over the disadvantaged majority, inheritance tax cuts being their priority before we enlightened then to a £10k income tax threshold, but they’re not the crude and malicious caricature that you convince yourself you’re opposing; I suppose, when Labour themselves have abandoned all they claim to have stood for and become so repellent, the only way to keep their supporters on board is to paint a fictional battle against a abhorrent bogeyman that will destroy all they hold dear?
Ian – I’m afraid that I don’t agree with your take on why the LibDems are making the cuts and it appears that my view is shared by the majority of the population according to independent polls. Public perception is that the LibDems hitched their wagon to the Tory one, with all the ideological cuts that entailed, to take power. A few people might believe this was justifiable so that fragments of Liberal Policy could be enacted but I think most go for the power trip.
It’s too late for Clegg to do anything to reverse this perception as he is a busted-flush. That move IMHO can only come from the LibDem party being seen to impose its will on the Parliamentary Party and to ensure LibDem policies are fought for much harder and, more importantly, that Tory ideology isn’t so enthusiastically embraced.
Of course, these issues are part of the wider argument as to what direction the LibDem Party is actually going to go in – is it going to stay in the centre or will it move centre-right with an eventual anschluss with the Tories.
And the public have lost interest in what you think of Labour – you have to realise that Labour reached its core vote level at the last election. They will get back the voters they had temporarily lost to the LibDems and I predict they will also pick up a lot of former ‘left’ LibDem voters as well as party activists which is very good news for fighting elections in terms of their experience and strength on local issue politics – appears to be a lot of anecdotal evidence of this in O&S btw.
So the LP will hold course and under Milliband they will poll a higher percentage at the next election but we have to wait for the AV referendum to see where that leads to in terms of power as with the Tories and LibDems. But you should never make the assumption that the electorate will reward the Coalition even if they guide us into the somewhat mythical land of economic stability.
“The Lib Dems and Conservatives additionally suggest the then-Labour Government wasn’t wholly blameless.”
Actually every time a Govt minister (Lib Dem or Tory) speaks on TV they say ‘the mess Labour left us with’ and try to make out it was all entirely down to Labour mismanagement. This doesn’t play well with people who vote Lib Dem because it is seen as disingenuous and representative of the ‘old politics’ the party promised to banish. Lets start treating the voters with more intelligence and honesty.
Secondly the problem for the party is that it has been seen to be the Conservative stooge rather than having the ‘tempering’ influence that was used to placate those fearful of coalition with the Tories. Whilst the story of cuts for Labour and the Lib Dems may be about how best to deal with the deficit for the Conservatives it is not only about the economy but also ideology. The lib Dems should disassociate themselves from this drive to marketisation if it wants to keep its core vote. I teach in a school which is considering Academy status. The staff oppose the move but the management/governors say that it makes financial sense as the additional money available will be the only way to plug the shortfall in future funding. When asked what the benfits beyond finance would be our head publically said’ ‘there will be none’. The government is restricting money so that schools will have no option but to become Academies.
For the Tories the cuts are ideological and the Lib Dems are being tainted by this.
@muxloe
Liberals aren’t opposed to marketisation, just monopoly power, barriers to entry and issues of market failure.
Perhaps you’ll find this quote from Winston Churchill helpful:
“Liberalism has its own history and its own tradition. Socialism has its own formulas and aims. Socialism seeks to pull down wealth; Liberalism seeks to raise up poverty. Socialism would destroy private interests; Liberalism would preserve private interests in the only way in which they can be safely and justly preserved, namely, by reconciling them with public right. Socialism would kill enterprise; Liberalism would rescue enterprise from the trammels of privilege and preference. Socialism assails the pre-eminence of the individual; Liberalism seeks, and shall seek more in the future, to build up a minimum standard for the mass. Socialism exalts the rule; Liberalism exalts the man. Socialism attacks capital; Liberalism attacks monopoly.”
Well, here’s my version of the economic story:
http://thepotterblogger.blogspot.com/2011/01/why-cuts-are-necessary.html
“If you don’t believe that cutting now will result in a double dip recession, which a significant majority of prominent economists don’t, then there is no justification for delaying the cuts further. ”
Yes there is.
Many of the cuts which the government has brought in will damage the economy in the medium to long term. For example, the cuts to local government will mean that lots of projects which help young people will end, which will damage their development and impose greater long term costs. Cutting back on preventative healthcare services and payments for disabled people will mean that some people aren’t able to live independently and have to spend longer in expensive residential care. Cutting jobs increases the unemployment benefit bill, and long term unemployment reduces people’s skills and makes it more likely that they will suffer from poor health. Cutting housing benefit will make some people get into masses of debt and lose their homes, leading in turn to councils having to house them in emergency temporary accommodation at a greater cost. Axeing EMAs mean that some children won’t go on to do A Levels and will have lower skills and earnings potential. And so on.
Obviously, there are some cuts which don’t have these negative effects on the economy, but many of the areas – from university funding to local government grants – which have had the biggest cuts will end up making most of us poorer in the long run.
Think of the long term costs in incapacity benefit and housing benefit from government policies in the 1980s – at the time the government saved money by deindustrialisation and selling off council houses, but the legacy is that we now spend tens of billions on housing benefit renting back many of the houses that were sold off, and pay sickness benefits to people who haven’t worked since the coal mines were closed.
@donpaskini
So, when cutting, use any and all available evidence, prioritise areas that won’t increase your long-term costs, invest in infrastructure and future skills, and only after the reckless spending and low hanging fruit, go after the difficult bits; well intentioned, and I’m not disagreeing with you.
Some of your specific examples though, on EMA for instance, or the additional cost of having an individual unemployed on a small proportion of their former public sector salary; I don’t think are supported by the numbers. If you want evidence based policy, you need to accept that sometimes the figures don’t support your preconceptions. And note that blanket opposition is less useful and valuable than workable alternatives.
Winston Churchill wrote ‘Socialism attacks capital; Liberalism attacks monopoly’
Trouble is with that, haven’t the hundred years or so since showed us that the natural tendancy of capitalism is towards monopoly? And isn’t the only way to counter such private monopolies either to regulate them strongly, which will inevitably mean a fairly large state apparatus (at a national and super-national level), or to simply take them into public ownership?
To nail that down to a clear example, what possible justifcation is there for organising our water providers as private monopolies? Given that competition cannot be introduced in this area, is there any better solution than simply renationalising this industry?
To me there is a wealth of difference between this kind of state intervention and, say, ID cards.
Closer to original topic, the Tories commited themselves to Labour’s levels of spending until late 2008. Which means that either Labour was, by and large, not particularly economically irresponsible – or that the Tories are a bunch of unprincipled sh*ts. Which is it?
@Andrew Tennant
OK fine you don’t oppose marketisation per se. Has the party clearly articulated this to the core vote? Have you told the public that the cuts are not just about the economic deficit but also about ideology?
Those of a Modern as oppossed to Classical Liberal persuassion – such as myself – would like to see more emphasis on positive freedoms that alleviate the structural problems that limit people’s potential. The marketisation of public services will have the opposite effect. Running services on the basis of marketised incentives will not help to achieve this. Lets stay with the example of Academies – Academies have the provision to select 10% of admissions. Great news if you’re one of those whose ‘aptitude’ helps you to get into one of the better schools but tough luck if you aren’t.
Iain,
Intelligent and thoughtful as ever. I would disagree (or go further) on a few points, however.
To say that “In Labour’s version… the economic problems are down to the bankers and the international recession. The Lib Dems and Conservatives additionally suggest the then-Labour Government wasn’t wholly blameless” is an understatement. Labour under Milliband is trying to pull a “What? Me Guv?” approach to the recession, standing by the broken window whistling as if for all the world they were innocent bystanders. Meanwhile, the Conservatives (and too a lesser extent the Lib Dems) are pointing the finger at the government and saying that it was all Labour’s fault. Frankly, I’m more inclined to the latter camp, and think we should be a lot harsher in criticising “Labour’s recession” (and yes, I do know all the counter arguments!).
I was amused by the apparent shock in your ‘voice’ (which may have been inferred rather than intended) when you wrote ” Cutting public sector employment back to 2002 levels, deep cuts to public spending to take it back to 2006 levels.” It’s hardly Armageddon, is it?! I mean, Gordon Brown’s unrestrained spending spree began after the 2001 general election and the government began running budget deficits straight away. It is fair to say that by 2006 the government was already bloated and the public sector already unsustainably large.
“The problem for the Lib Dems is the middle of our story is a lot of pain and not enough gain”, or rather that what gain there is, coming from reforms many of which are Lib Dem inspired and many others of which are in line with liberalism, are not getting the attention they deserve from a media that is enjoying the big-number game of headline cuts. The answer is partly to push reform further to create lean, efficient, effective public services that offer high value for money, and partly to ensure that reforms are conveyed to the electorate.
“The aim, as we reach the next election, is to have successfully rebalanced employment between the public and private sectors, with many more people in work overall than there are today.” Indeed, so let’s make that explicit. How about saying right now, point-blank to the electorate, that they should judge us on the employment levels in 2015. Imagine Nick Clegg saying to the British people “I know that many of you are concerned and fearful for the future. But I promise you that it will get better. In 2010 we inherited 2.5 million unemployed people from Labour, a budget deficit of £160 billion and an economy still in recession. If there are more unemployed in 2015 or the public finances are still in a mess by then, we will have failed and you will be right to vote us out. But if more of you have jobs, if the economy is growing and the public finances are sound, we will have done what we promised and I hope you will give us your support.” Say it now. Then remind them every day.
“Because the deficit will be low or zero, the extra tax receipts coming in as the economy…” Careful! The government’s predictions may include higher tax receipts from higher employment. Even if they don’t, a zero deficit is a zero deficit. There is no more money. The only way to raise more money would be to either raise taxes (which would slow growth) or by growing the size of the economy (which would be easier with lower taxes). Whether you want to raise spending or reduce the public debt (and we have to do the latter), the chickens in a balanced budget are still un-hatched.
BTW: You are quite right to highlight the issue of the public debt. It is too often overlooked but we currently spend more servicing the interest on our national debt than we do on educating our children and defending our country combined!
As you point out, “If we were to go down Labour’s route, we would be left paying tens of millions more in interest than under the Coalition every day… At the General Election the Lib Dems identified more cuts than either of the other two parties.” The truth is that the Lib Dems are the party with the best claim to be serious and responsible on the economy and the public finances. We need to make this point repeatedly, and we need to be extremely robust about it.
“Did he say it today? Or back when we were still in recession?”
Has it never occurred to you that some familiarity with the facts might be useful when trying to discuss these issues?
As anyone who paid any attention at all to the election campaign knows, the Lib Dems projected this as a crucial difference between their economic policy and that of the Conservatives. Clegg carried on criticising the Tory proposals for the timing of cuts very forcefully, right up until polling day. A few days later he agreed to the policy he had been criticising. As has already been pointed out to you, Clegg was later contemptuous enough of the electorate to claim that he had agreed with it all along, but kept quiet about that during the campaign!
• mike hartley
Posted 14th January 2011 at 11:41 am | Permalink
“And all the ill-informed deficit-fetishists… you could do better than have a read of a Nobel-prize winning economist or two – I’d suggest Paul Krugman and Joseph Stiglitz for starters.”
Actually, I have, but mine were Friedrich Hayek and Milton Friedman :oD
“On the Tories’ ‘end game’, I think you take a very pessimistic view; they might prioritise their wealthy friends over the disadvantaged majority, inheritance tax cuts being their priority before we enlightened then to a £10k income tax threshold, but they’re not the crude and malicious caricature that you convince yourself you’re opposing”
I think many people forget what the Tories and Osborne’s Ideology is, when it comes to Income Tax. Osborne would like to have a flat rate of tax for “everyone” whilst increasing the Personal Allowances.
Obviously this Ideology would massively favour the Rich and super Rich, who would see there 50% and 40% tax rates, slashed to 22%
http://en.wikipedia.org/wiki/George_Osborne
“Osborne has expressed an interest in the ideas of “tax simplification” (including the idea of flat tax). He set up a “Tax Reform Commission” in October 2005 to investigate ideas for how to create a “flatter, simpler” tax system. The system then proposed would reduce the income tax rate to a flat 22%, and increase personal allowance from £4,435 to £10,000-£15,500″
In my opinion, that reflects quite clearly just how crude, The Conservative Party is 😉
@Cuse
I still can’t get a straight answer from the Party, activists or LDV as to what specific economic conditions changed the party’s mind.
Well, people here should know that Vince Cable has now written in New Statesman, defending the coalition’s deficit-cutting plans. So, this is not a Tory plan any more. It is a coalition plan. It was online here, http://www.newstatesman.com/economy/2011/01/investment-keynes-essay, but it is probably behind a paywall now.
1. Cable says that he wrote in September 2009 in a “Reform pamphlet” that the next Government should try to eliminate the deficit over five years. “Now we are in government, that is exactly what we plan to do.” So, I don’t know why we believe that there has been a change of mind.
2. He says that the Labour government already planned for a budget cut of 1.5% of the GDP in 2010/11. The coalition plans are something like 1.4% of the GDP for four years. The boundaries of the debate are “narrow”, he says.
3. He says there is now plenty of empirical evidence (more than 40 examples since the mid-1970’s), that says that “decisive rather than gradual budgetary adjustments” are more successful in correcting budget imbalances. He points out, without citing, a recent IMF study that determines that ‘fiscal consolidation’ does indeed boost growth and employment, but “only in the long term (five years or more)”. Admitting that the conclusion is “non-Keynesian”, he goes on to construct an explanation of why this might be the case.
4. He mentions five reasons why the Government has chosen the present course, which invalidate the Keynesian view point in his opinion:
(a) The economy is in a recovery, not a slump any more.
(b) By balancing the budget, the Government keeps the cost of capital (interest rates) down.
(c) Again by balancing the budget, the Government boosts investor confidence and unleashes “animal spirits” of the entrepreneurs.
(d) If the growth were to be derailed due to the fiscal policy, he says that the Bank of England is standing by to offset it by monetary policy.
5. The main overall point is that the growth is expected to come from a large increase in private-sector investment, after decades in which ever-increasing consumption has borne too much of the burden of fuelling growth.
——
Well, I think the whole thing is a hogwash. The annual spending cuts are 27 bn, whereas the private-sector investment is at best 12 bn per year, according to the OBR estimates. So, 15 bn per year of aggregate demand will be taken out of the economy continuously for 3 years, and the economy will take a serious hit. This may not mean that there will be a second dip recession, but it will certainly mean that the growth with anaemic.
@George W. Potter
“Well, here’s my version of the economic story:
http://thepotterblogger.blogspot.com/2011/01/why-cuts-are-necessary.html”
George I am astounded. Your Blog starts with
“Look, I’m not going to beat about the bush. The cuts are unfair and they will hit some of the most vulnerable in our society. It’s not right that ordinary people are being made to suffer for the greed and incompetence of a few but there’s no alternative.”
You then lay the “entire” blame, with Labour Mismanaging the treasury,
You Justify all the cuts and the pain that you yourself acknowledged as being unfair that hits the most vulnerable, As being a necessity.
But not once do you acknowledge that there are alternatives, which could have Squeezed the Rich more.
My god is it any wonder that the public are beginning to view this party as being no different to the Tories
@Uday Reddy
Thanks for that – utterly fascinating…and yet more evidence of the curious revisionist history that the Party uses to justify it’s utterly indefensible U-Turns.
According to the Lib Dems – Gordo caused the entire worldwide economic u-turn and Saint Vince forecast it all…day by day…penny by penny…
I see Cuse and his Labour chums are out in force again, and it’s usually not worth arguing with them. But Cuse’s assertions of the Lib Dem position is just wrong. At no stage before the election did Vince Cable support Labour’s defecit reduction strategy and is on record as stating that as soon as the economy was back in growth significant cuts would have to be made and the speed and depth of them would have to be assessed on the basis of the prevailing condidtions at the time. That is exactly what the coalition has delivered.
A question for Labour supporters on here. Given Labour’s stated position last year was for £44 billion of spending cuts and now their position is to oppose all spending cuts – who’s guilty of the u-turn?
“I see Cuse and his Labour chums are out in force again, and it’s usually not worth arguing with them.”
“A question for Labour supporters on here. Given Labour’s stated position last year was for £44 billion of spending cuts and now their position is to oppose all spending cuts – who’s guilty of the u-turn?”
I don’t think Labour have opposed every cut have they. They have opposed the “depth” of the cut
It is disingenuous to even say so. The Public are not fools, They know that there where cuts going to be made under Labour, and they know some of them would be pretty painful.
Clegg and Cable proposed one set of proposals on deficit reduction during the election campaign, Then Immediately U-Turned and supported and embarked on The Tories Policies days after entering the coalition. Clegg has admitted to this U-Turn on numerous occasions and it has been well publicised through the media.
It is the denial of the party, which does themselves more harm, than good.
Labour would have gone ahead with £45 Billion pounds worth of cuts, there is no doubt, I don’t doubt either, that Labour would have cut the welfare budget, But to make cuts of £10 Billion from the welfare budget, is a lot different to cuts of £20 Billion that is being made by the coalition.
It’s not the Departments, that Labour is opposed too, It is the depth at which they are being cut, There is a very big difference.
The public are aware of this, and this party does itself no favours by trying to pretend or dupe the public otherwise 😉
@ Tom Papworth
Friedrich Hayek and Milton Friedman are your economic heroes. That puts you to the right of John Major, Ken Clarke and most of the more moderate Tories and says a lot about the economic ideology of many of the remaining Lib Dems.
(forthwith to be referred to as the Rump-Dems)
I don’t know whether Liberal Democrats are right or wrong in their current policy, what I do know is that it is not what you campaigned to do, Liberal Democrats made certain pledges and promises in their election campaign which they failed to keep, not just failed to keep but now we know had no intention of keeping…
So much for better politics, no more broken promises, no more lies…
Can you not understand yet… it will not matter how well the government does by the next election, it does not matter who the party leader will be… Liberal Democrats failed the electorate by breaking those promises, how you can expect those same electorate to forgive you I have no idea… sorry I don’t think it is going to happen, and every 1 added to the unemployment queue will be 7 that could vote against you they will not forget, the electorate will not forget for a generation or two, that is what I think the reality is for Liberal Democrats
“The Lib Dems and Conservatives additionally suggest the then-Labour Government wasn’t wholly blameless.”
If this was what they were saying they would be entirely correct. In fact they state it was all Labours problem something that is now costing them as anyone can see that a significant proportion of the problem would have happened irrespective of who was in government.
Labour made some howlers and these should be highlighted, trying to blame the lot on them will eventually let them get away with taling responsibility for the bits they did cause…
@Andrew Tennant
“To the commenters, I don’t know how many times it needs to be said; pre-election the Lib Dems were very critical of wasteful government spending and highlighted the need to cancel big programmes of government activity which were no longer affordable. ”
To a point I agree. However if we take the school building programme as an example Clegg actually told Cameron it would be just “silly” to cancel it. Yet post election instead of saying he disagreed with cancelling it he made it sound like Lib Dem policy…
matt
Posted 14th January 2011 at 3:33 pm | Permalink
“I see Cuse and his Labour chums are out in force again, and it’s usually not worth arguing with them.”
“A question for Labour supporters on here. Given Labour’s stated position last year was for £44 billion of spending cuts and now their position is to oppose all spending cuts – who’s guilty of the u-turn?”
I don’t think Labour have opposed every cut have they. They have opposed the “depth” of the cut
Seriously, Matt. Can you name any cut that Labour has supported?
Remember, it’s not enough simply to say “The coalition is cutting by x amount and we would only cut by half x.” It is still necessary to say where “half x” will fall. Labour have failed to outline any of the cuts they would make. Balls is even rowing back on some of the cuts Darling announced in his last budget!
mike hartley
Posted 14th January 2011 at 4:11 pm | Permalink
“Friedrich Hayek and Milton Friedman are your economic heroes. That puts you to the right of John Major, Ken Clarke and most of the more moderate Tories”
Well, I’ve no time for the rhetoric of “Left and Right”, which is simplistic nonsense deployed by Socialists and Conservatives to obscure the existance of any other ideology. I consider “Left” and “Right” to be equally in the pockets of vested interests, and to be equally addicted to using power to control the people’s lives and money (though for different reasons). Both Hayek and Friedman described themselves as liberals, though Friedman admitted that this was in the European rather than the American sense and Hayek eventually felt that the term had become so confused that he preferred to refer to himself as a Whig.
As for Major, Clarke and the Tories, I don’t measure myself or position myself by others. I believe what you are engaging in is called “Triangulation” in PR circles: don’t talke about yourself and your opponent, but position the two of you in relation to some third party. It’s effective, but not very principled.
@ Tom Papworth – sure, left and right are redundent you say… but without even knowing you I can guess your political views, which will be:
a) in favour of introducing competition in the NHS, possibly also keen on the idea of co-payments and/or a social insurance system
b) opposed to the Licence fee
b) in favour of lowering the overall tax burden as a % of GDP
etc. etc. etc.
They just happen to be free-market, neo-liberal concepts, that’s all.
That was then…
http://www.guardian.co.uk/politics/2010/mar/14/lib-dems-refuse-support-tories
matt quoted:http://en.wikipedia.org/wiki/George_Osborne
“Osborne has expressed an interest in the ideas of “tax simplification” (including the idea of flat tax). He set up a “Tax Reform Commission” in October 2005 to investigate ideas for how to create a “flatter, simpler” tax system. The system then proposed would reduce the income tax rate to a flat 22%, and increase personal allowance from £4,435 to £10,000-£15,500″
So the increase in personal allowance is another much-vaunted Lib Dem coalition concession that is in fact Tory policy (and admittedly not a bad one in itself, though not when tied in to the abolition of higher rates). I genuinely didn’t know that – assuming wikipedia is correct, of course.
I am a former activist, not a Labour stooge.
http://www.conservatives.com/News/Speeches/2008/02/George_Osborne_The_Principles_of_Tax_Reform.aspx
“Our tax policy led the world again in the second half of the 1980s, when Nigel Lawson demonstrated that reductions in income tax and corporation tax rates could over time boost both economic performance and increase revenue.
And Britain led the world in the 1990s with environmental tax reforms such as the landfill tax.
I hope that the next Conservative Government will continue this proud tradition of leading the world when it comes to tax reform.
It was my determination to plot a long term course towards a simpler, flatter tax system that led me more than two years ago to set up the independent Tax Reform Commission under Michael Forsyth’s Chairmanship”
in {2006} The Tories Where speaking of raising the Personal allowance to £7185, So I am not sure that Liberal Democrats can even herald the latest increases in allowances as a Liberal Democrat Victory, since it was the conservatives intentions anyway.
http://www.conservatives.com/pdf/taxreformcommissionreport.pdf
” Reducing personal taxation. The personal allowance should be increased to £7,185 and the 10 per cent rate should be abolished. 2.5 million low paid people would thereby stop paying income tax altogether.
The basic rate of income tax should be reduced to 20 per cent. A transferable personal allowance for couples with one or more children aged five years or under should be introduced”
Here is a little table that shows how much the deficit will reduce (expressed as a percentage of the current GDP), if the economy grows by 2% and 3% respectively:
2011 0.8% 1.2%
2012 1.6% 2.4%
2013 2.4% 3.7%
2014 3.3% 5.0%
2015 4.2% 6.3%
2016 5.0% 7.8%
2017 5.9% 9.1%
This is purely from the revenue growth. As the economy improves, the unemployment falls and the Government’s benefit payments would go down too. That is not represented in these figures.
The OBR’s June forecast had growth figures of 2.6%, 2.8%, 2.8%, 2.6% for the four years from 2011. So, they are closer to 3% than 2%.
So, the Government could have chosen growth-oriented policies instead of budget-cutting and still reduced a substantial part of the deficit by the next election. The accusation that this was an ideological exercise rather than a necessity, sticks.
A few things, Labour do not oppose all spending cuts, cuts were happening before the election.
The Lib Dem/Tory mantra of “it’s all Labour’s fault” isn’t working and won’t work, yes Labour made mistakes but the Lib Dems supported Labour on the idea of growth rather than savage cuts prior to the election, the Tories were promising to match Labour’s spending until 2008, so for either of them to criticise Labour’s general stance, is, for want of a better phrase, a bit rich.
That the other parties would have spent money differently, or in the Lib Dems case, listened to Vince Cable about wreckless spending, is a matter of detail, Vince was definitely talking of the risks of savage cuts prior to the election, the Tories did this in the thirties and it didn’t work then, I don’t know why they think it’s going to work now, we need growth.
Assorted commenters,
The Vince Cable pamphlet for reform, to which @Uday Reddy refers is here: http://www.libdems.org.uk/siteFiles/resources/PDF/Tackling%20the%20fiscal%20crisis.pdf
Please read and digest it, noting Vince’s intellectual argument, the high level of similarity to the government’s current strategy, and consider whether you’ve been justified in claiming a Lib Dem u-turn.
Many thanks and kind regards,
A Lib Dem member.
@udayreddy
Taking your figures as wrote, and the most generous growth assumption, which is 3% a year; looking at the cumulative reduction in the deficit does it not amount to a total of about 35.5%? Given that’s the deficit, and not the debt you’re talking about, is that not still an overspend, each year, of about £100Bn? Over the course of the seven years to which you refer, with no further action to reduce it, an extra £700Bn on our national debt?
Doesn’t look like it fixes much on that basis! Without cuts we get a larger deficit, more debt, more spent on interest repayments, and less opportunity for manoeuvre or investment in public services in the future. Borrowing now from the country of tomorrow; I’d rather be leaving a positive legacy than a poisoned chalice.
Tim Farron is right: Labour are in la-la-land in denying the need for cuts.
The deficit is still growing alarmingly, the economy is overheating particularly in the South-East, and (as has largely been forgotten in the rose-tinted discussion above) inflation is getting out of control. The (relative) cuts in the current high level of spending which the Coalition is having to make are exactly what Gordon Brown would have been forced to do if Labour had won the election.
Personally, I don’t like it. I think the Coalition should be braver (like Steve Webb who is helping develop universal benefits and restore dignity for pensioners) and resist the extension of means-testing to subsidised university tuition and child benefits. But our policies at the last election of higher taxes on polluters and megalandowners, and closing loopholes for high-earners, were rejected by the electorate, as Mandelson pointed out when we tried to negotiate a deal with Labour, and we have to protect the most disadvantaged in society.
And what is Mr Spinniband up to now? Apologising perhaps for his role in the mismanagement of the economy and the banks? No, he’s busy writing to the BBC and other broadcasters telling them to airbrush the Lib Dems out of the Coalition. Labour’s arrogance and hypocrisy are breath-taking.
@ Andrew Tenant Vince argues in that pamphlet about cutting too quickly, as did Labour pre-election, the only major party who disagreed with this were the Tories.
Vince highlghts the issues of falling tax revenues, as did Ed Millband, where Vince differs from Labour is that he suggests it was a temporary bubble, the tories didn’t agree with this, they were promising to match Labour’s spending.
I’m not sure what you’re seeing in this pamphlet that makes you believe the Lib Dems didn’t belive in averting draconian cuts until we were quite clearly on the road to growth.
Andrew Tennant Many in the party, and quite a few long and medium term members who have now left the party DO oppose “marketisation” (privatisation by any other name). We fought hard against it in the 80s under Thatcher, and as was expressed above, we believe “the new politics” to explicitly include more democratic approaches to the use of finance – whether that be through cooperatives or through the public sector, with an increased emphasis on localism. What this does NOT mean is the progressive reduction in public expenditure. It probably means more in the long term, as Matthew Huntbach’s earlier post seemed to imply. We should be about preparing the public for this, more international cooperation and democracy, and a genuine and rapid drive towards greenness. I fear that our Janus face on this will not allow such an approach any time soon, as we may not be believed (as so many people have said here and elsewhere).
I did notice your answer to my point about the dropping of the rhetoric on “savage cuts”, Iain, and if you are indeed correct, that the leadership dropped the talk, but maintained the policy approach, surely that is an example of exactly the same problem, of fighting an election strongly implying you are going to do something when you are planning something close to the opposite. How would / do we react when Labour or another party do this?
@Paul Kennedy “Tim Farron is right: Labour are in la-la-land in denying the need for cuts.”
Labour have not denied the need for cuts, cuts were happening before the election.
Paul Kennedy Why select just the odd policy which you say “were rejected by the electorate”. Surely we don’t know what was rejected – it may well be that some of the policies we claim as Lib Dem “successes” were actually rejected?
@ANthony – can you provide me with the website with the full detail’s of Labour’s response to the CSR – only I can’t find it.
@John, I can tell you now as a public sector worker that we went through a jobs cut round that started in January 2010, that’s a fact.
Also just heard vox pops from ordinary people `Oh I don’t like these cuts they’re terrible` etc etc – `oh, would you vote Labour then?` Answer: `you’re having a laugh ain’t ya`
Hove Howard @4.59pm – “assuming wikipedia is correct” – four words of infinite wriggle room!
Of course, there’s a huge gulf between a think tank noodling over an idea and it being the policy of a related party, but I think you know that and are just playing with us for the lulz.
@Anthony
I quote, from page 21, if you’ve bothered to read it:
“From a broadly Keynesian perspective – which is the author’s – it would be damaging to seek to curb the deficit in recession conditions (since it would be likely to deepen recession). But the structural nature of the deficit means that there will have to be a major correction once it becomes clear that the economy is no longer in a downward spiral.The data emerging in recent weeks suggests that we may be approaching that point.”
Page 29:
“Fiscal consolidation could come from curbs on spending or increased taxation. In practice there will almost certainly be elements of both and no Chancellor would sensibly rule out tax increases. But the emphasis certainly should be on public spending. The current Government, while pretending to be the stout defender of public services against the opposition, is itself proposing that over three quarters of fiscal consolidation in the period 2010-11 to 2013-14 should be in the form of cuts in public spending.
That emphasis is right. ”
And the conclusion on page 58:
“the Government’s estimate of a 6.5 per cent of GDP correction over an eight year period is optimistic. A fiscal contraction of around 8 per cent of GDP may be required over a shorter period – perhaps five years – to persuade the UK’s creditors that the government is serious.”
Andrew – Matt, Cuse, Anthony and Mike (among others) seem remarkably quiet when presented with the facts about Vince Cable’s real views…
@Andrew Tennent
Taking your figures as wrote, and the most generous growth assumption, which is 3% a year; looking at the cumulative reduction in the deficit does it not amount to a total of about 35.5%? Given that’s the deficit, and not the debt you’re talking about, is that not still an overspend, each year, of about £100Bn? Over the course of the seven years to which you refer, with no further action to reduce it, an extra £700Bn on our national debt?
Let us keep to the percentage GDP measure, if you don’t mind. The current deficit is 10% of the GDP. If the economy didn’t grow, you would accumulate a debt equal to 70% of the GDP in 7 years. But, the growth of the economy reduces it by at least 35%. So, the net debt, which is currently 60% of the GDP will rise by another 35% of the GDP, making it 95% of today’s GDP. But note that it is today’s GDP. In 7 years, the economy would have grown by some 9%. So, it would only be 79% of the GDP in 2017.
Doesn’t look like it fixes much on that basis! Without cuts we get a larger deficit, more debt, more spent on interest repayments, and less opportunity for manoeuvre or investment in public services in the future. Borrowing now from the country of tomorrow; I’d rather be leaving a positive legacy than a poisoned chalice.
That is exactly what I mean by an ideological exercise. If your ideology says “I shouldn’t pay for interest”, then you shouldn’t pay interest no matter how much people get hurt. But if you sit back and think, this is the cost of paying for the worst economic crisis since the Great Depression, moving from 60% GDP debt to 79% GDP debt, then it might look to you as being rather cheap. In fact, if you generate the right kind of growth, it will be a lot less than 79% GDP in 2017, because as you put people back to work, you don’t have to pay for their unemployment benefits. So, it could be as low as 70% GDP. That looks even more cheap.
By following the cuts strategy, you won’t necessarily do any better. The economy would grow at a slower pace, perhaps 2%. (Actually, the 15 billion shortfall coming from the budget cuts would translate into twice or thrice the amount in lost demand. So, it would seem to me that the difference between the two growth rates would be more than 1%. But let us ignore that.) Totalling up the deficit reduction from growth, 23.3%, and that from budget cuts, 25.2%, you have a total of 48.5% debt saved out of the 70% GDP. So, in 2017 you would have an accumulated debt amounting to 81.5% of today’s GNP. Recalibrating it to 2017 GDP, it would be 72%.
So, the difference between the cuts strategy and the growth strategy is a debt of 7% GDP. Is it worth the pain that is being dished out?
This is assuming that the difference in growth rate between the two strategies is 1%. If it is higher than that, the growth strategy will actually turn out to be better than the cuts strategy.
These are theoretical calculations. But, check out how it worked in practice, the example of the US budget between 1950 and 1960, explained here.
@Dan Falchikov
Andrew – Matt, Cuse, Anthony and Mike (among others) seem remarkably quiet when presented with the facts about Vince Cable’s real views…
Actually Dan No, at 1.20am, most people have gone to bed 😉
Have you actually read the pamphlet yourself? written in sept 2009
Under section titled “After the Strom”
Interesting how Cable says
“. It is possible that we haven’t yet seen the worst but a reasonable working assumption is that the
issue for the future is now one of the timing, strength and durability of recovery as well as the legacy of damage.
The focus of debate has changed since the credit crunch first started in August 2007. Much of the attention has centred on the banking sector and the best way of countering the effects of a banking collapse and buttressing
the sector against future shocks. There has also been a major debate around how to head off recession, deflation or even depression, as in the interwar period, and the relative contributions of monetary and fiscal policy.
At the time of writing, it seems very likely that the sharp drop in British GDP predicted in 2009-2010 of 3.5 to 4 per cent would be realised, but that a catastrophic collapse has been averted. Given the economic firepower
directed at the crisis – almost zero interest rates, credit created through quantitative easing, devaluation, the UK and wider international fiscal response and the rescue of banks – it would be amazing if there hadn’t been
some stabilisation. We do not yet know the timing and trajectory of recovery, but we no longer face Armageddon.
The central issue emerging now in the UK, and one which will dominate politics in the next few years is the size of the UK government budget borrowing and deficits, and government debt. These problems are, in large
measure, a legacy of the financial crisis: the direct costs of rescuing the banks and the indirect costs in the form of greatly depleted government revenue.”
That to me suggests, That Vince was not laying all the blame on Labours Doorstep, And he was acknowledging that most of the blame lied with the banking collapse, the cost of the bailouts, directly and indirectly, reduced tax income due to job losses and businesses going under.
Page 31
“Before discussing specifics, a first step is to set out some broad principles for looking at public sector spending. If there is to be a decade of austerity it is essential for the programme to be anchored in structures which can survive
the ups and downs of fashion and political popularity. One of the main dangers at present is that a new government comes in with an insecure political mandate – with minority support in the electorate, let alone the
country – and rushes into a round of quick but brutal cuts in order to get the pain over quickly. This would leave the structure of government intact while ensuring that it is less well resourced. It would also have maximum
negative impact on the economy when the recovery is weak.”
From what I understood from all the information, Vince was basically saying that, If growth was slow, Then the cuts should be slower, Because cutting to fast and to deep, could have a negative effect and stall the recovery, However if Growth returned to 2.5-3% levels, Then the Government, could and should, cut deeper, in order to start reducing the structural deficit.
Since growth was only 0.6%, Surly Vince’s analysis was, we should be having slower cuts.
@Anthony – were those cuts due to the local council or the cuts?
You may think the Lib Dems are `treacherous` – I think it’s even worse to just oppose things and not put forward an alternative when you are the main opposition.
In the end it doesn’t work. Sure, you can win by-elections and local elections `attacking vat rise` or `attacking the cuts` – the Lib Dems made a whole industry of it for years. I’m struck by the similarities between this by-election and those of the 80s or 90s. The Lib Dems would get 20-25% swings only to add on a few seats, if at all, at the next election. In OES LD to Lab swing was 5%.
That’s because these votes were protest votes secure in the knowledge that they could go back to Labour at the next GE. If they were lucky the Lib Dems would flag up ideas for other parties to take up `more bobbies on the beat` which is really `cut back on the paperwork and get more efficient` which is really what will happen in 2011 if the chief can be bothered to stop cow-towing to Labour. One by-election I went to 20 years ago there where the Lib Dems came third there was a big issue about the local hospital for people to signal their opposition to. All fine and dandy – yet it’s never enough to win the seat next time.
The acceptance speech was also a rather anodyne `lib dem by-election victor` affair. `send a message, will work hard, never let you down, opposition to xxx tax or yyy cuts` – I could have written it myself.
At the end of it all Labour will have to put forward a coherent economic argument more than `less deep, less fast` – they will have to also go further than saying `these are the downsides of the Condems, these are the upsides of Labour`.
There are a vast amount of people out there who pay their way, save for a rainy day, work hard for a living who are locked out of the benefits system and want to know where their futures lie. Until Labour can answer the question `I’m on 14k, don’t pay tax on much of my money (after tax threshold rises) and don’t want to pay for those that choose not to work – what will you do and how will you differ from how you acted before?` they haven’t a hope.
And if you think OES is an average place for the UK think again.
Jen wrote:
Hove Howard @4.59pm – “assuming wikipedia is correct” – four words of infinite wriggle room!
Of course, there’s a huge gulf between a think tank noodling over an idea and it being the policy of a related party, but I think you know that and are just playing with us for the lulz.
—-
I think there’s also a pretty big gulf between ‘think tank noodling’ and a policy that was, it seems, advocated by the current Conservative Chancellor.
I am not playing with you (what’s lulz?!). Rather, I think have hit a raw nerve. The Lib Dems really have got eff all out of this coalition – apart from the liberal vision types, whose ‘vision’ is very close the Conservatives’ anyway.
Arguing about what St Vince said in some text that about 0.00001% of the electorate will have read rather avoids the main point, to my mind – the media coverage and the mood music all pointed the other way, and what he said is, in any case, arguable. Just like all sacred texts.
The main point is that many people feel themselves to have been deceived, are angry and have deserted the party. Like latter day trots, the liberal voice tendancy doubtless believe this to be some kind of catharsis. They are wrong – there is no room for a purist right wing continental liberal party in this country, as we shall see.
@Andrew Tenant I did read it, which is why I can see that Vince was saying cutting too hard before we see real growth is a dangerous path to tread, it’s a point that both Labour and The Lib Dems agreed upon prior to the election. Both Labour and The Lib Dems were saying cuts would have to happen but they had to be balanced with growth, even economists who support the quicker cuts point out they will hit growth, growth is still fragile.
@John they were due to forthcoming cuts in budgets, people get wind and a rough idea of what’s coming and a programme of 15% job cuts was started in January 2010.
@matt
Everyone deserves sleep.
That the cause of our extensive indebtedness was systemic failure in the banking system an the artificially inflated property bubble doesn’t absolve Labour of responsibility; Labour set the regulatory and taxation system in the UK in the build up to the crisis; that we were so exposed, so ramped up on risk, and so chronically unprepared, is all evidence of their complicity.
Vince had indicated in the paragraph I quoted that cuts could begin, would need to be significant, and would need to happen over a relatively short timescale (deficit eliminated within five years); what he also argues, throughout the pamphlet, is that it is better to cancel whole areas of wasteful or non-productive spending, than to ‘salami slice’ and take capacity out of services that support growth.
@Uday Reddy
In a decade of loose spending and plenty, the UK’s GDP growth rate has been near 3% on one of the last ten years; your assumption that we can outperform that in the next decade is thus perhaps a little too optimistic. Debt accrues debt interest, which reduces spending power in the economy; those who think we can grow out of our problems without painful correction are idealists, not realists.
To quote Vince again (page 5):
“The current Government’s plans for a correction of 6.4 per cent of GDP over 8 years are optimistic. They underestimate the size of the structural deficit, assuming a brisk economic growth rate of over 3 per cent per annum after 2011-12. They place too much reliance on cuts in capital spending; due to halve from 2010-11 to 2013-14 while current spending will face real cuts of only 2.3 per cent per year. And they fail to address how the tightening will be made from 2014-15 to 2018-19.The risk of declining market confidence and market concerns over inflation leading to an increase in borrowing costs, means a plausible plan to eliminate the structural deficit is critical.”
Since growth was only 0.6%, Surly Vince’s analysis was, we should be having slower cuts.
Should have said, since growth was more likely 1.6 % for the entire 2010 period, surly vinces analysis was , we should be having slower cuts
@Andrew Tennant
“That the cause of our extensive indebtedness was systemic failure in the banking system an the artificially inflated property bubble doesn’t absolve Labour of responsibility;”
And I would agree with you, I have not, and I have not seen anyone else proclaiming that Labour where totally blameless,
However, there are large sections of this party, that have become obsessed with using the line, It’s all Labours fault, which is simply untrue.
Vince acknowledges, that a large proportion of the crisis, lays with the collapse of the banks, and the world baking crisis.
Yes Labour failed to regulate the banks, But is also fair to say, that the Tories where calling for less regulation.
We also have to acknowledge, it is near on impossible to regulate a British Bank, who operate within a World Banking Environment, It would require international cooperation in order for it to work.
We also have to realise, That when one bank collapses in one country, It has a knock on effect on all banks, from all other countries. It is out of Britain’s control to regulate Icelandic Banks, Or the American Banks, Lehman Brothers, All of these collapses effect our own Banks.
Yes Labour have to shoulder some of the blame, but they are not solely responsible. That’s what the Public Identifies with. And I think they are getting tired of hearing anything otherwise, no matter how many times the line gets repeated
I think we will all remember as well though,
That Vince Cable always said, That the deficit reduction plan, could and should, always be flexible, responding to Economic Circumstances. Slower Growth, slow down the speed of the cuts, Stronger Growth, Faster cuts.
That was something that Vince was very clear on when asked, That the deficit reduction plan must be flexible, and I think that is something that the Public could understand.
Now Cameron and Osborne have been totally the opposite to this, They have both taken a very firm stance, saying this is the plan for Reducing the deficit, and that is what they will stick too.
That resonates in most peoples mind, That the Cuts, as far as the Tories are concerned, are not just about cutting the size of the deficit, but is also a Tory Ideology.
What most of the Public want to see and hear, is Liberal Democrats dissociating themselves from that, However they are failing miserably on that score, IMO 😉
ohn they were due to forthcoming cuts in budgets, people get wind and a rough idea of what’s coming and a programme of 15% job cuts was started in January 2010.
What, BEFORE the election result – so basically the town hall bosses decided that whoever won there would have to be these cuts. Got yer.
@John the government may change, a lot of people behind the scenes and funding bodies do not, you don’t just get a new government and get told the very next day, here’s your new budget, these things are done months in advance and yes, you’re pretty close, whomever won the election was going to cut, that’s why cuts were taking place before the election.
@Andrew Tennant
In a decade of loose spending and plenty, the UK’s GDP growth rate has been near 3% on one of the last ten years; your assumption that we can outperform that in the next decade is thus perhaps a little too optimistic. Debt accrues debt interest, which reduces spending power in the economy; those who think we can grow out of our problems without painful correction are idealists, not realists.
If you look at the history of UK’s GDP growth rate, e.g., here, I don’t see how you can say that growth rate of 3% is unrealistic. If you want to make a comparison with what happened in last 10 years, then you would need to analyse what went wrong during those years. I would say excessive reliance on the financial sector, over-valued currency and the neglect of manufacturing and exports were the causes of the sluggish growth. If you look at the trends in exports, you can see that. Plot it against our two capitalist neighbours, Germany and Ireland, and you will see the difference very starkly! It is not unrealistic to expect that the UK should be able to do at least half as well as our neighbours, given its technical expertise and capitalist institutions.
To quote Vince again (page 5):
“The current Government’s plans for a correction of 6.4 per cent of GDP over 8 years are optimistic. They underestimate the size of the structural deficit, assuming a brisk economic growth rate of over 3 per cent per annum after 2011-12….”
I haven’t seen the Government’s plans. So, I can’t comment on them in any detail. But I hard put to find any vision for the country’s economic growth in this document, except to dismiss the Government plans.
The Figure 9 in the document looks quite scandalous to me. The US had a much bigger financial crisis and housing crisis than the UK, did stimulus spending rather than budget-cutting, and is now coming out ahead of the UK. Doesn’t this show the folly of the cuts strategy as opposed to the growth strategy?