What I’d change about the coalition

Since 2010, I’ve been very loyal to the Liberal Democrats.

There were many things I disliked during the Coalition, but I kept silent for fear of feeding the ridiculous exaggerated attacks on our party. Deficit reduction was hard, but in the lifetime of the Coalition, the amount cut was similar to Labour’s 2010 plans.

After the Coalition, my party was in a dire state, so for the same reason, I kept quiet about my concerns.

Only now the party is surging in the opinion polls do I feel free to say what I wish we’d done in Coalition. This article is to encourage those who are thinking about joining the party but are worried about what happened between 2010 and 2015, that they will have friends in the party. I also want to reassure new members that it’s okay to disagree with party policy, as long as you agree with the broad principles laid out in the preamble of the party’s constitution.

Below are three of my concerns about the Coalition.

(1) The decision to raise the income tax threshold. It was expensive; for the low paid, much of the benefit was clawed back with reduced benefits; and without it, we could have cut a little less severely. The suggestion of the IFS, to increase the amount the low paid could earn without losing their means-tested benefits, would have been far better targeted at helping low-income families.

(2) The bedroom tax. On paper, it sounded sensible. The idea of reallocating large family houses from those who didn’t need them to those who did wasn’t necessarily a bad idea. But local councils weren’t required to provide suitable alternative accommodation. I’m glad that, in 2014, we changed our position.

(3) Local government cuts. These were far too deep. It’s a natural instinct for a central government that wants to cut expenditure to foist a disproportionate burden onto local government. I wish we had vetoed this.

However, I don’t want to give the impression that I have any sympathy for Jeremy Corbyn when he rails against the Coalition. We held the Tories back on some truly savage cuts. Cuts which were quickly introduced when the Tories won a majority in 2015.

Corbyn showed his utter hypocrisy with 2017 manifesto plans that involved implementing most of those 2015 Tory cuts. That meant that, at a time when the pressure on government finances was far less, for those on benefits, a Corbyn government would have imposed harsher austerity than the Coalition did.

No party is perfect. We’ve made mistakes, including the three I mention above. There’s much members like me and new members could do to improve the party. If you are reading this, and you want to fight for social justice, please help us do this by joining the Liberal Democrats.

* George Kendall is the acting chair of the Social Democrat Group. He writes in a personal capacity.

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  • Chris Leeds 9th Jul '19 - 1:02pm

    A very helpful post George.

    I joined the Liberal Democrats in early 2017. I came from a Labour Party tradition going back generations, and was myself a Labour Councillor. I left the Labour Party many years ago and thereafter voted Lib Dem in most elections, but found it hard to fully break the tribal loyalty and take the step of joining the Lib Dems.

    Part of my reluctance was the coalition. I didn’t have a problem with Lib Dem participation in it. The electoral ariithmatic made that the only coalition available, and if we’re serious about PR then coalitions are in our future as well as our past.

    My issue at the time was the naivety of backing policies we clearly didn’t agree with, not just with our votes, but with our arguments. The pitch should have been much more clearly that we’re having to let some things happen that we don’t like, because we can get some of our policies through, and ameliorate others.

    Eventually I concluded that the Coalition errors were just that and not something worse. That realisation, together with Brexit, persuaded me to take the plunge and join the party.

    I agree with you that there are a lot of disenchanted Labour people that we can appeal to, with every hope of success, but to maximise that opportunity we have to be honest about the coalition. We don’t have to grovel, just explain. One of the Leadership candidates seems to get that, but the other doesn’t,.

  • Michael Cole 9th Jul '19 - 1:05pm

    Hi George,

    I agree with the general tenor of your article but I don’t necessarily agree with your three coalition concerns. I think we were right to raise the income tax personal allowance . And you don’t mention the dreaded ‘tuition fees’ fiasco.

    In defence of our part in the coalition we should be clear that:

    1. Our MPs were outnumbered by more than 5 to 1 by Conservatives and therefore our
    influence was limited.

    2. We had five years of ‘strong and stable government’. Contrast with the shambles
    since 2015.

    3. We should make it very clear that we are not only against austerity but against the
    causes of austerity – Labour’s recklessness. Remember Liam Byrne’s “There is no
    money left”.

  • On the bedroom tax the Lib Dems’ main problem was the shoddy quality of reporting in the media (and our own media operation having taken a big hit due to Short money I would imagine) — it had already come into effect for private tenants, and the extension to social tenants had already been announced by the government in 2008: this was a Labour plan that the coalition just carried on with, not a cunning evil Tory scheme.

    Unlike the private tenants who the equivalent move had hit with little electoral impact because they were a mass of individuals trying to get by, social tenants had a big organised and well funded interest to champion their story to the press – the housing associations. These acted like unions, heavily stacked with Labour leaning people who were only too willing to tell the press what a terrible thing this was, without mentioning that they had themselves voted for it.

    And so as a measure it hit us harder than we deserved.

    Not that that stopped it being a blooming silly idea: the bedroom tax treats a symptom rather than tackling the disease causing that symptom.

  • Michael Cole 9th Jul '19 - 1:10pm

    Not quite sure why my post was garbled but I hope that it is still intelligible.

  • Paul Barker 9th Jul '19 - 1:31pm

    More pointless raking over the Past, the largely forgotten Past as far as most Voters are concerned. The only real lesson to be learned about being a junior partner in a Coalition is – Don’t.
    This is a time to be focusing on our Future, there are crucial decisions to be taken & Time is running out.

  • John Marriott 9th Jul '19 - 1:49pm

    Before the 2010 General Election there were signs that the Lib Dem high point of 2005 was unlikely to be exceeded. Then came that first Leaders’ debate and the rest is history. It was clear that Labour was a busted flush, paying the price for its fiscal timidity at the start of its greatest period in government, its sucking up to Dubya in the Iraq War and, of course, its closeness to the money shufflers in the City. Compare Liam Byrne’s remark to David Laws regarding the bare cupboard with that of Reggie Maudling to Jim Callaghan back in 1964.

    So, after the votes were counted, despite the failure of ‘Cleggmania’ to make the definitive breakthrough, the electorate was clearly not completely won over by Dave ‘Hug a Huskie’ and his new look Tories, at least not enough to give his party a working majority.

    So Dave made Nick that ‘generous offer’ and we know the rest.

    Unlike Mr Kendall my ‘top three’ mistakes were as follows:

    1. Taking a mere seven days to get a deal when most coalition prone countries require a much longer time frame.
    2. Accepting the AV Referendum instead of one on genuine PR and even then failing to campaign effectively.
    3. Danny Alexander’s yellow Budget Box on the front bench at the fag end of the administration.

    Having said all that, I am still an unrepentant supporter of the 2010-2015 coalition. After all, even in countries with proportional electoral systems, that’s usually the most that true liberal parties can realistically expect. The fact that the Tories, but not all, attempted to use the Lib Dems as a kind of human shield and then put the boot into them electorally in the West Country in the 2015 General Election, should not be forgotten if the situation were to arise again, especially if the predicted coronation of Johnson leads to a winnable motion of No Confidence, where the idea of a ‘Government of National Unity’, already posed by Ed Davey, might become a really.

  • Matt (Bristol) 9th Jul '19 - 1:53pm

    Paul Barker, have you written to Ed Davey telling him to stop running a leadership campaign where he talks loudly about the achievements of the party in coalition and his record as a minister, because he is indulging in ‘pointless raking over the past?’

    If / when we are running high in the polls going into a general election and journalists are poring over the 2010 negotiations and aftermath in retrospective pieces, and speculating about what might happen if we hold the balance of power, will you write to the Times / Guardian and tell them to stop ‘pointless raking over the past’?

    The Coalition ended 4 years ago – inside the normal electoral cycle. It is now (rightly or wrongly) perceived as the start of the political period we are now in. It is live politics, and how its legacy is seen in this party is worthy of debate and is still contested.

    Obviously it’s worthy of polite debate, which is what George is attempting. But it’s not and should not be a taboo.

  • Is it possible to just move on, most work colleagues who voted LIb Dem in 210 and were then angered by the co-alition have put it in the past with the caveat do not do it again.
    Need I say more. Better a minoirty government. Best if our next leader does not defend the decion to join, but says it was a mistake and will not be repeated.
    The even worse mistake was not to leave to Coaltion in 2013, even early 2014, which would have allowed us flexibilty. to take on the Conservatives in our own Lib Dem seats.
    But as I say let us move on. We did not worry about Dunkirk when it cam to Normandy 4 years later.

  • Malcolm Todd 9th Jul '19 - 2:10pm

    Michael Cole 9th Jul ’19 – 1:05pm
    “Labour’s recklessness” was not the only or even the main “causes of austerity”. The continuing insistence on ignoring the 2008 crash or pinning the blame for it principally on Gordon Brown is quite astonishing. And it’s been said many times before, though obviously some people don’t learn, that Liam Byrne did not say (even in jest) “There is no money left”, but “There’s no money.” The difference is enormous: there never was some magical treasure chest of money that Labour recklessly spent, leaving the coffers bare. That’s simply not how public spending and taxation works.

  • Let us move on. Colleagues I know who deserted the Lib Dems because of the Coalition and Tuition Fees have, and said that is almost a decade ago. The only problem is that we are so so far behind in so many constituencies that reality says Labour has a better chance of winning them. I live in one of those seats.

  • Peter Martin 9th Jul '19 - 2:31pm

    @ George Kendall,

    “Deficit reduction was hard, but in the lifetime of the Coalition, the amount cut ………”

    This was the austerity economics which was also the claimed reason for the cuts to local government etc.

    I’ve tried to explain it to you before but you seem to have some kind of mental block. But I’ll try again. Any country, like the UK, which runs an external deficit in trade has to support that deficit by someone in that country doing the borrowing. If the Government wants to borrow less, ie run a lower deficit, it CAN’T just cut its spending and/or raise taxes. That depresses the economy and reduces its revenue. Its deficit remains the same.

    It CAN shift the borrowing requirement on to private sector by lowering interest rates and deregulating. It can create the conditions for the private sector to borrow more. And that’s what happened. We’ve continued to inflate a private credit bubble and, as a result, priced housing out of the reach of the younger generation.

    If you still don’t understand this, maybe you can ask Michael BG to explain. We still have our disagreements (that’s because he hasn’t totally grasped it 🙂 ) but I think he’s got roughly the right idea.

  • Nice to see some new (or not very often) people posting in this thread. Please keep posting. LDV can get a bit ‘samey’ at times.
    For me the biggest mistakes we made in the coalition were not policy-based but in terms of strategy and comms. I could live with most of the policy bits (albeit with gritted teeth at times). What I hated – and what I think was much more damaging to us – was the way we totally failed to communicate a distinct identity and what we were trying to achieve. From the Garden press conference right the way through to polling day 2015, that was a complete disaster.

  • Plus ça change, plus c’est la même chose…….

    Apart from a couple of thoughtful posts it seems that the causes and actions of the coalition are still blamed on Labour and the Tories… At the start of the coalition “75% of the coalition policies were LibDem”; then the good bits were LibDem and the bad bits (even the ill thought out ‘bedroom tax’ ) were someone else’s…
    In a global economy I’d love to know how a UK government could deter borrowing; (UK only punative borrowing rates would be a disaster for UK business competitiveness).

    As Matt (Bristol) points out “Don’t mention the coalition” except, of course, to praise the LibDem role.

  • It’s remarkable in politics how people believe what they want to believe, usually in a self justifying way.

    Does Geoffrey deny that the crash started in the U.S.A. – during the Bush presidency and as a consequence of the neoliberal policies and light touch regulation pursued by that administration ? Does he also accept that in the U.K. light touch regulation started under Thatcher ? Remember The events of September 1992.

    And does George remember that the IFS recorded the difference between Darling’s forecast and Osborne’s was £ 38 billion – and why is there mention of the cut in the top rate of income tax at the same time of the welfare cuts ?

    My litmus test is did the rich get richer and the poor get poorer….. and did cuts to local government slashthe services depended on by the most vulnerable ?

  • George,

    Telling people about your thinking shows your personality. I liked the idea of increasing the income tax threshold, but you are correct it would have been better for those in work on low pay to have increased the amount they could keep before their benefits are reduced (what are now called the work allowances under Universal Credit) Also the 1% cap on benefit increases should have been vetoed as the Conservative justification was terrible – because workers were not getting pay increases those living in poverty (those on benefits) should be forced to live further under the poverty line. (Not that they said it like that.)

    One of the problems with the Coalition’s economic policy was the deficit was targeted too hard and too fast in the early years so it was reported that we were having a double dip recession in 2011/12. Increasing VAT was particularly deflationary.

    Chris Leeds,

    When negotiating the Coalition Agreement it appears that there was a conscious decision not to just include things both parties agreed with but to include policies which would be unpopular with the supporters of one of the parties.

    Michael Cole,

    The majority of our MPs broke their personal promise on tuition fees. I think it was a moral mistake. (I am surprised George doesn’t see it in the same terms.)

    The argument concerning numbers is a falsity. The Conservatives even plus the Unionists only had 315, while the rest numbered 329. Therefore we could have stopped anything we wanted to stop, we just didn’t want to stop them enough.

  • Should read ,no mention of the cut in the top rate of income tax.

  • John Marriott 9th Jul '19 - 3:21pm

    I don’t know why my last post fell foul of the editor(s), so i’ll cut out the preamble this time.

    My three concerns:
    1. They were in too much of a hurry to put the coalition deal together. It took tge Belgians over a year!
    2. They got suckered into the AV Referendum and then failed to campaign properly.
    3. They tried to disengage when it was too late, witness that stupid yellow Budget Box that Danny Alexander paraded in the Commons.

    However, as Liberals, the party needs to get used to the idea of coalition, which might come sooner than we think and…

    @Peter Martin
    Try a little sympathy now and again. It must be terrible always to be right.

  • Matt (Bristol) 9th Jul '19 - 4:22pm

    For what it’s worth, my five main hind-sight-based gripes (and I was not a fan at the time):

    Democracy – once the AV referendum, house of lords reform and seat redistribution all failed, there was no meaningful democratising measure left intact (possible exception being the Scottish referendum). Local authority mayors were not adequate compensation, although the fixed term parliament act was significant but not something you’d get up a party about.

    Narrative – The Lib Dem leadership failed to offer a reason for coalition that chimed with Lib Dem thinking, other than ‘stable government’ and ‘bipartisanship’ (which grated given the Tories were being nakedly partisan repeatedly).

    Campaigning – The Lib Dem leadership encouraged (or did not adequately quash) reporting that suggested they were keen to be freed of their troublesome grass roots in order to play with ‘proper grown up’ politicians, and that the longterm future of the party would be defined by the kind of policies favoured by the coalition. This was a poisonous line to take, and clearly there were some people who did believe this (although how many of them were in positions of power is moot).

    Redistribution of money, both in class and regional terms – it is clear that the coalition – whether or not it was willed by the lib dems or not – ended up with the poor poorer, the rich richer, the centralised state weaker, and the localised state crippled. This is a concern that goes beyond the details of bed room tax, universal credit, and tuition fees.

    Exit strategy – After 2013, the Lib Dems did distance themselves, ineffectively, but the Tories were happy with this. With the FTPA already passed, we could have left Cameron in minority government and fought him from the floor of the house of commons, if we really wanted to distance ourselves.

  • Peter Martin 9th Jul '19 - 5:24pm

    @ George Kendall<

    “I’ve tried many times and at great length to explain to you why I disagree with you…”

    No you haven’t. You’ve just insisted that you disagree.

    It’s rather like trying to explain to someone that the Earth goes around the sun and not the other way around. But then this person says ‘well you’re entitled to your opinion but I have to disagree’.

    For instance, I’ve just said that the trade deficit has to be funded by either the Govt doing some borrowing or the private sector doing some borrowing. So you now disagree with me. That doesn’t really matter. What does matter is that that you disagree with the equations of the National Accounting Identities!

    OK if you think they’re wrong please explain why!

  • Paul Barker 9th Jul '19 - 5:35pm

    There are 2 big reasons why I think having this debate Now is a waste of precious Time & Energy.
    First & most obvious is that we have had this Debate already, not once or twice but dozens of times.
    The second & less obvious reason is that we don’t know the result of The Coalition yet, its just too soon. There is a strong argument for saying that Brexit & everything that flows from Brexit is a direct result of The Coalition. One side-effect of our working so well with The Tories was to widen Conservative divisions; both “Sides” could clearly see that moderate “One-Nation” types had more in common with us than they had with many of their colleagues. Our Ministers reasonableness drove many on The Tort Right quite mad, in both senses.
    We certainly dont know the final Result of Brexit yet, if it led to a Liberal Democrat Government there might be a case for re-evaluating the whole Coalition experience.

  • chris moore 9th Jul '19 - 5:39pm

    @Peter Martin: Any country, like the UK, which runs an external deficit in trade has to support that deficit by someone in that country doing the borrowing.

    Hello Peter, the “UK” doesn’t “run” an external déficit. Nor does the “country” have to support the déficit.

    Trade surpluses (deficits) are exports – imports. Importers and exporters are manifold.

  • John Marriott 9th Jul '19 - 5:44pm

    @Geirge Kendall
    “Open the party up to a broader church”? Be careful. For many party members the party is already too broad, or so it would seem according to their reaction to what happened between 2010 and 2015!

    If you really do want voting reform because you reckon that two party politics is dead and is hanging on thanks mainly to FPTP, then why try to get a broad church? That’s been the problem in the past. PR usually means coalition government, but not always as the SNP proved a few years ago. I’ve never believed that one party has all the answers, unlike some. Working with colleagues from other parties as a councillor in local government for thirty years has taught me that you can’t always quite get what you want but you can come pretty close.

    With the U.K. in its present predicament, all this naval gazing is blinding us to the fact that, unless we get our act together somehow by Halloween at the latest, we are likely to be up that famous creek without a paddle quicker than you can say “WTO”.

  • chris moore 9th Jul '19 - 5:49pm

    @Peter Martin. If the Government wants to borrow less, ie run a lower deficit, it CAN’T just cut its spending and/or raise taxes. That depresses the economy and reduces its revenue. Its deficit remains the same.

    That’s too simple. Raising taxes will normally certainly reduce the pertinent activity. But the amount realised in taxation will often still be more than before. A higher % of somewhat less activity.

    It can also, of course, be LESS. The case you describe – where the déficit doesn’t change – would be a mathmetical fluke.

    There is no free lunch, either way. Cutting taxes does not USUALLY produce increases in government revenue. If only.

  • @ George Kendall you appear to believe in the Laffer curve. I don’t.

    The other thing I didn’t mention was general competence. They were not competent and the Tories ran rings round them. Look at the pension issue at Bournemouth hospital to see the mess Alexander and Webb left behind.

  • chris moore 9th Jul '19 - 6:06pm

    Malcolm Todd 9th Jul ’19 – 2:10pm
    Michael Cole 9th Jul ’19 – 1:05pm
    “Labour’s recklessness” was not the only or even the main “causes of austerity”. The continuing insistence on ignoring the 2008 crash or pinning the blame for it principally on Gordon Brown is quite astonishing.

    The 2008 crash resulted from a multi-year bulid up of perilous levels of banking and other private debt, itself partly enabled by inadequate regulation. The initial locus of the crisis was the US. But UK Banks and teh governement’s failure to curb their excesses played a very significant starring role too.

    The 2008 crash was not merely an externality that visited an unlucky Labour govenment.

    And it’s remarkable too that they presided over a government spending déficit in the credit boom years.

  • Michael Cole 9th Jul '19 - 6:08pm

    @ MalcolmTodd 9th Jul ’19 – 2:10pm

    Liam Byrne’s note was addressed to David Laws and he reported that it said: ‘Dear chief secretary, I’m afraid to tell you there’s no money left,’.

    You are of course entitled to your opinion but nevertheless Labour were indeed reckless. They continued their excessive spending despite warnings from Vince Cable.

  • chris moore 9th Jul '19 - 6:21pm

    @Michael BG so it was reported that we were having a double dip recession in 2011/12.

    The Great Recession of 2008-9 lasted five quarters.

    There was never a doublé dip. However, in four separate discrete quarters from 2010-2012, GDP went down a bit.

    It’s unfortunate that some lessons about the perils of debt from the credit boom of the noughties haven’t been learnt. Globally – partly as a consequence of very low interest rates to try to stimulate growth in countries coming out of recession – there has been a build up of sovereign and corporate debt. This represents a significant risk going forward. Real estate in many countries and many stock markets look exposed.

  • Michael Cole 9th Jul '19 - 6:23pm

    George Kendall 9th Jul ’19 – 3:52pm

    I agree with you when you say “We can have different views with each other, and still have civil discussions. And we can also have different views from our party.” There are some that say we should not discuss the coalition and hope that people will forget that it happened. But I think we should discuss the history of it and hopefully learn from our mistakes.

    I agree that the word ‘austerity’ has become a slogan and a stick with which to beat those who believe in fiscal responsibility.

  • David,
    I think you are being a little unfair on Webb, the problem with NHS pensions is taper relief and the level’s set for that was brought in 2016 under Osbourne’s watch. He has also been critical of the level set for the lifetime limit for pensions, again a policy with Gidieon’s finger prints all over it. So while Lib Dems in government have much to be tarred with, the NHS pension issue is down to Gidieon’s penny pinching; although I suspect Alexander would have been cheering him on.

  • Peter Martin 9th Jul '19 - 8:14pm

    @ chris moore,

    “UK” doesn’t “run” an external déficit. Nor does the “country” have to support the déficit.

    It may not “have to” but it does. Otherwise there wouldn’t be one! We have money net flowing out of the economy in the form of a current account deficit. This is the difference between what we earn from the sale of goods and services (including some so-called invisibles) and what we buy. This has to be balanced by money flowing into the economy in the form of a capital account surplus.

    The two sum to zero. If there’s a tendency for imbalance then the pound will shift one way or another to make it rebalance. It’s very difficult to keep track of all money flows. Some of it is semi-legal. Some absolutely illegal! So there is natural tendency to keep it hidden. But it doesn’t really matter in accountancy terms. What does matter is that the inward flow has to be recycled back into the economy by someone spending it back in.

    The inward flow is largely debt. Rather than looking at the money flows in strictly conventionally defined terms of what constitutes the current and capital accounts we can split it up into two flows which are non debt related and debt related. Again the two have to balance. There is a net outflow of money which is not debt related as we buy cars from Germany, wine from France etc. And a net inflow of money as overseas buyers of Government gilts make their purchases or the private sector receives inward investments or loans.

    This means the government is doing some of the borrowing and the private sector is doing the rest. So it’s arithmetically impossible to reduce both at the same time unless our current account deficit (or our non-debt related deficit) is also falling.

    With a freely floating currency it is just about impossible to make this happen. If people want to park their money in the UK then that’s what they’ll do. In accountancy terms this is the same as someone in the UK borrowing it. But so it is for a commercial bank too when we make a deposit. Does the bank start then fretting about taking on additional debt?

  • Peter Martin 9th Jul '19 - 8:38pm

    @ chris moore,

    PS You’re quite right to say “that’s too simple” on the point that reducing spending and increasing taxation will keep the deficit exactly the same. It won’t be exact to the penny. Money is created when governments spend it into the economy and cancelled when they tax it away. Just like the Mail will cancel a stamp. Stamps are worth something to everyone else apart from the Royal Mail who have issued them. Money is worth something to everyone else but the Govt who have issued it.

    And obviously the Govts deficit is exactly what the rest of us have managed to prevent the Govt destroying! ie what we’ve saved. So will we save more or will we save less if the Govt imposes fiscal austerity? It’s impossible to say for sure. Nevertheless, it will be likely true that if the Govt reduces its spending it will also reduce its income.

    It’s also impossible to do those back of envelope calculations to suggest that putting 1p on income tax will ‘raise’ £6 billion or whatever. Maybe it will. Maybe it won’t.

  • Two things

    1. More political nous. Or at least a teeny weeny bit!!! To spend £6 billion more on overseas aid was laudable but was the wrong time domestically. Even George Osborne said that tuition fees meant the Lib Dems were “sc***ed”

    2. Next time not a full coalition but lib dem bills introduced by lib dems as government bills


    3. And hire Lynton Crosby to campaign for us at the start of the parliament!

    4. And throw lots of stones!!!!

  • George,

    But I do think 2005-2007 he spent too much, considering we were at the end of a record period of uninterrupted growth”.

    According to the ONS there were 24 years of uninterrupted economic growth between 1949 and 1973. There was uninterrupted economic growth between 1992 and 2007 – 16 years. I would expect any competent government to run the economy so that there is always economic growth unless there is a world crisis as there was in 2007-08 and 1973. The only years when economic growth under Labour was slightly too high were in 1998-2000, 2003 (3.3%) and 2005 (3.1%). Looking at the current budget between 1999 and 2002 it was in surplus; in 2003 it was only 0.99% of GDP in deficit and in 2005 1.38%. The deficit was then reduced to 0.89% in 2006 and 0.5% in 2007 while growth fell to 2.5%. There is no way in which anyone should see these figures as excessive.

    I don’t disagree with your critique of raising income tax thresholds, but it is a better policy that reducing the rates which is why I like it. The amount anyone benefits by is capped when increasing the threshold and lots of people benefit by the same amount, this is not true with rate decreases.

    You are correct that the double dip recession was reported at the time based on provisional figures. Economic growth revised figures were 0.1% in the last quarter of 2010 and the second quarter of 2011; 0.2% in last quarter of 2011; –0.1% in second quarter of 2012 and –0.2% in the last quarter of 2012. A better economic policy would have been to try to keep economic growth to about 3% a year and let that aim dictate the plan to reduce the deficit as a percentage of GDP. According to ONS figures in 2009/10 the deficit was £154 billion which was then 10% of GDP; in 2017/18 £154 billion is only 7.45%, but the economy didn’t grow by 3% a year. If the economy had grown by 3% a year then£154 billion would be a lot lower than 7.45% of GDP.

  • Christine Headley 9th Jul '19 - 10:51pm

    @ John Marriott. The Coalition deal was done quickly because the civil service were convinced that, if we didn’t, the pound would be toast. We had the example of Greece playing out in front of us. There was a television documentary which made this clear not that long afterwards.

  • @christine Headley

    Of course what Sir Humphrey says to get the politicians to do what he wants and what is actually the case are two different things. My recollection is that we survived the three weeks of an election campaign without a government perfectly well!

  • @ George Kendal.

    I’m afraid you still haven’t responded to my comment that between 2010-15 the rich got richer and the poor got poorer. Whether that is why the Lib Dems have avoided championing the Alston Report I don’t know, but it has that feel to it.

    The cuts to legal aid were indefensible. Access to justice is justice denied and surely a basic Liberal principle going back over the ages.

    The total focus now on Brexit is an excuse for not having an honest overall view of policy and long term goals as befits a party claiming to be radical and reforming. I’m afraid the current state of British politics is depressing and incompetent to say the least whatever angle one looks at it from

    The Webb plan to have access to full pension funds was also highly irresponsible.

  • Peter Martin 10th Jul '19 - 8:34am

    @ George

    I’ll do my best not to ignore any of the points you make. If you think I’ve done that please let me know which one.

    Let me take your last question first.

    1) “In the last fifty years, countries in the world that have tried numerous different approaches to deficits. Can you point to one that has successfully adopted the approach you recommend?”

    There’s still an implicit assumption that you think “deficits”, by which I presume you mean Govt deficits, are a bad thing. I would just make the point that if we divide up the economy into three sectors: Govt, Private Domestic, and ROW, that deficits for one mean surpluses for another.

    But you still want the Govt to run a surplus or at least a small deficit? You can do that by putting the private sector and or the overseas sector into deficit. The first one isn’t a good option. This creates a credit bubble with ultra high house prices and too much credit induced spending. Sounds familiar? The second option is to put the overseas sector into deficit. In other words we run a large trade surplus with everyone else.

    We can do that by going into the euro at a very low exchange rate and be another Germany. Or we can do like the Danes do and peg our currency at a low rate. So if your looking for examples of countries who have “successfully” reduced their deficits, I would point to the big net exporters of the world like Germany, Singapore, Denmark and Switzerland. They don’t “achieve” low Govt deficits by cutting Govt spending and raising taxes. They probably do have high taxes but that is to reduce domestic demand and divert production into exports. They do it by manipulating their currency to run a trade surplus. How many examples would you like?

    The snag of course is that we can’t all be net exporters. So we have to come up with a viable model for other countries to be net importers, and still have viable and successful economies, to make the arithmetic of world trade balance. A net external deficit has then to translate into a Govt spending deficit.

  • Peter Martin 10th Jul '19 - 8:35am

    @ George (cont)

    “……but I don’t agree. If I did, I would probably be a supporter of Corbyn’s Labour party, like yourself”

    I’m not such an uncritical supporter as you might imagine! The left are often just neoliberals with red rosettes! I’m not suggesting anyone should change their political opinions. You might like to look up Jan Hatzius who is the chief economist at Goldman Sachs. He analyses economies in these same terms. I doubt he’s a supporter of the Labour left. No-one had to stop being a Christian when Copernicus came along to point out that the sun didn’t go around the Earth. And that neither the sun nor the Earth were the centre of the universe.

  • Innocent Bystander 10th Jul '19 - 9:44am

    Full marks for trying but you are wasting your time arguing against MMT. It’s akin to arguing against Creationism. If you want a laugh there’s a woman called Kelton who’s made a video. She talks for twenty minutes and misses the point entirely. It’s beloved by Bernie and AOC and it’s just the desperate Left clutching at straws to avoid facing reality.
    I like what you write, George. Keep it up.

  • Julian Heather 10th Jul '19 - 10:04am

    It is simply incorrect to say, as several here have stated, that the rich got richer and the poor got poorer under the Coalition. The gap between rich and poor actually narrowed between 2010 and 2015.

    Please see this article by John Rentoul from March 2015, based on a IFS report at the time. In reality, the Coalition cut tax benefits for the rich, eg for their pension pots, while the rise in income tax thresholds did help the poorest workers, at a time when their pay was frozen:


  • My third attempt, not sure why the earlier messages have been edited out. They seemed harmless to me, just saying let us move on, we do not want to remind others of the co-alition, we are now in a brave new political world. Next time just let a minority government operate.

  • Nigel Quinton 10th Jul '19 - 10:41am

    Thanks George for your thoughtful comments on the coalition, most of which I agree with wholeheartedly, including the need to talk about this crucial part of our recent history. From my own experience on the doorstep (860 contacts in past 12 months says Connect) our record in coalition remains a cause for concern, especially in Labour leaning areas, and for those we need to attract to join us, it is especially so, not least because the party we are trying to lure them from continues to make it the main thrust of their attacks on us. If anything the intensity of Labour’s attacks has increased recently. My belief is that the right response is to be honest and admit where we got it wrong. If we can!!

  • Peter Martin 10th Jul '19 - 10:51am

    @ Innocent Bystander,

    “there’s a woman called Kelton who’s made a video. She talks for twenty minutes and misses the point entirely.”

    OK I see. You don’t like what she says but you are totally incapable of explaining why.

    If you don’t like the “woman called Kelton” how about some hard headed money men?


  • Steve Trevethan 10th Jul '19 - 11:15am

    What was/is the reasoning behind, pretty well simultaneously, putting money into the economy through “Quantitive Easing” and removing it through “Austeriy”?
    How much of our “National Debt” is owed to UK citizens and to UK residents?

  • Steve,

    Bit out of date but


    Since 2009, the Bank of England has purchased gilts. During this period, the % of gilts held by UK insurance and pension funds has fallen.

    On 2nd November 2017, The Bank of England has bought £495bn worth of UK gilts.

    Overseas holdings have stayed fairly constant around 30%.

    23% of the UK national debt is made up of magic money the Bank of England magicked up out of thin air. They could quite easily make it disappear in the same way and our National Debt magically plummets to well below 70% of GDP. the thing to remember about economics is it is based on magic thinking and what people belief. If people believe the pound/dollar/euro etc has a value you can print as much as you like, if they don’t believe it has a value well printing doesn’t work any more as was seen with the Zimbabwean and Venezuelan bolívar and many decades ago the German mark. Now economists will come up with theories and they will all work for a time until people’s believe in them evaporates, at which point a new theory will be required. Remember the policies we are implementing now not so long ago would be described as loony tunes.

  • In a modern developed economy international trade is a key determinant of national prosperity. The great bulk of global trade is in manufactured goods rather than services. Comparative advantage in international trade comes from a combination of natural resources, capital stock and most importantly human capital or the skill level of the working population.
    As manufacturing has declined in the UK and shifted offshore more and more demand is satisfied by overseas producers. High paying jobs are replaced with lower paying service jobs. Consumption is maintained by the recycling of foreign surpluses into lending in the UK to bridge the gap in disposable incomes. Persistent deficits over a long period see more and more assets acquired by overseas investors and increasing levels of interest, rents and profits are repatriated overseas.
    When private sector borrowing reaches its limits, government deficit financing steps in to maintain consumption. Public sector financing is dependent on the productivity of the economy and the ability of the government to service debt from taxes on future production. When government debt begins to test the limits of credibility inflationary expectations start to rise and interest rates increase to contain inflation.

    The management of credit creation in the banking sector and the public finances are essential elements in the maintenance of financial and economic stability. Neither, however, address the fundamentals of a successful modern economy that is based on the production of high value added goods and services that can be traded internationally at competitive prices.

  • John Littler 10th Jul '19 - 12:30pm

    Good post Joe. I agree that the UK is increasingly running on borrowed money, inflated asset values and money created electronically. Our balance of payments deficit is terrible and getting worse. Most containers arrive here full and leave empty. We can’t even fill them with plastic waste anymore as China and others are rejected that.

    leaving the EU would make it far worse and our deficit outside the EU has worsened greatly lately. A recession is also starting to arrive. Could it be the one to shake Capitalism to the core?

  • Peter Martin 10th Jul '19 - 12:42pm

    @ Steve,

    “What was/is the reasoning behind, pretty well simultaneously, putting money into the economy through “Quantitive Easing” and removing it through “Austerity”?”

    Sometimes you’ll see QE described as an asset swap.


    Other times you’ll see it described as “money printing”. It’s an asset swap in the sense that the BoE are creating £ IOUs and swapping them for Treasury gilt IOUs. Sometimes other types of bond. So they end up all square on their books. By being a player in the market the BoE is bidding up the price of those gilts which reduces their yield and effective interest rates. This is the purpose of QE. To lower long term interest rates. This is how rates were reduced so quickly after the 2008 GFC. The govt can then sell new bonds into the market and get a better price for them. ie Not so much interest to pay.

    Problems arise because issuing ££ isn’t counted as additional debt as it should be. So QE makes it appear that the National debt has fallen. It hasn’t really. But that doesn’t really matter as the neolibs might think. No one has to ‘pay it back’!

    The ECB plays the same role. No-one in their right mind would buy Greek and Italian bonds at anything like an interest rate either govt could afford. So the ECB and does some buying to bring the rates down directly, and indirectly gives other bond buyers some confidence they’ll be able to sell them back to the ECB in the future.

    Having low interest rates is considered a stimulus for the economy by the neolibs who also then consider there is no need for Govts to run a deficit to provide further stimulation. This works for a little while. A few years or so. But then debt deflation builds up and we have to have another monetary stimulus. When interest rates are at their “lower bound”, ie so low that they can’t go any lower, some monetarists will grudgingly accept that fiscal measures are then needed and we don’t have to have austerity any longer.

  • Steve Trevethan 10th Jul '19 - 1:13pm

    Is it the case that we are paying interest on the money with which we pay the debts which we owe from getting the money we got to pay previous debts as well as for less esoteric financial-commercial activities?
    Who gets the interest we seem to have to pay, to get our own money?

  • chris moore 10th Jul '19 - 1:19pm

    @Peter Martin: Any country, like the UK, which runs an external deficit in trade has to support that deficit by someone in that country doing the borrowing.

    Another more elegant way of saying it is that imports have to be paid for and exports have to be paid for too.

    “Countries” do not “run” external “deficits”. A current account déficit is the aggregate sum of imports minus exports.

  • Paul Holmes 10th Jul '19 - 1:36pm

    @Michael Meadowcroft. Which lesson of history says we had to go into Coalition in order to avoid being clobbered in a second election a few months later?

    The only modern comparison is 1974:
    Feb 1974, Liberals surge from 6.5% of the vote in 1970 to 19.3% (but only increase from 6 to 14 seats because they had no effective Target Seat strategy in those days). Refuse to enter Coalition with Heath because Tories will not countenance PR (and despite the crisis at the time of Miners Strikes, 3 day weeks, who governs the country etc etc).

    Oct 1974, Liberals fall to 18.3% and 13 seats. Hardly being clobbered.

    Whatever drop we would have taken in a second election in 2010 it would not have seen us near destroyed as 2015 did.

    I agree with you though about the very poor handling of the Coalition. However we did not have to enter Coalition at all, merely because the random result of FPTP (22% and 62 MP’s in 2005, 23% and 57 MP’s in 2010) meant that we could.

  • Innocent Bystander 10th Jul '19 - 2:14pm

    “Neither, however, address the fundamentals of a successful modern economy that is based on the production of high value added goods and services that can be traded internationally at competitive prices.”

    As I have come to expect from you, proper common sense.

  • chris moore 10th Jul '19 - 2:17pm

    Julian Heather 10th Jul ’19 – 10:04am
    It is simply incorrect to say, as several here have stated, that the rich got richer and the poor got poorer under the Coalition. The gap between rich and poor actually narrowed between 2010 and 2015.

    That’s correct.

    It’s worth mentioning:

    1. Reducing pension tax breaks for well-off.
    2 Introducing grants for the worse off students.
    3. Poor pupil premium
    4. Raising the tax threshold for those on low incomes.

    The Lib Dems in Coalition got some things wrong and some things right.

    It’s worth having a judicious discussion about our record. good article.

  • Denis Loretto 10th Jul '19 - 2:29pm

    Having come across this thread and laboriously read through most of it I am in the camp that says it is not a particularly useful exercise right now. It is too early for a definitive historical analysis of the coalition and we have a lot more to think and campaign about right now. My local experience in a strong Labour constituency is that they are beginning to forgive us out there and going on about it is potentially counter-productive.

    What is more germane in looking at the future – and maybe the short term future – is what do we do if and when the next general election produces no overall majority for any party? My own view is that in the campaign we should be frank about the fluidity of the situation, fight (more realistically than we could have done before) to win and do not get hooked up on promises not to work with other parties in a hung parliament. If and when we were to find ourselves in a situation similar to 2010 we might well be better considering a supply and confidence agreement rather than seeking cabinet places and the strait-jacket of cabinet responsibility.

  • @Joe Bourke

    “The great bulk of global trade is in manufactured goods rather than services”

    Um… maybe but the UK actually has a trade surplus in services of 5.5% of GDP against a deficit of 6.7% in goods which suggests we should if anything be in services rather more.

    “As manufacturing has declined in the UK and shifted offshore more and more demand is satisfied by overseas producers. High paying jobs are replaced with lower paying service jobs.”

    Um.. the decline in manufacturing is only relative it has actually grown it’s just that services have grown more.

    Manufacturing is not a good place to be. A pair of Nike trainers is may be manufactured for a few pounds in the Far East but they sell may be for £100. a large amount of the mark up goes to Nike in the States in the intellectual property of the “brand value” it has built up through service jobs.

    A medicine may cost a few pence to make but billions in research to develop – again essentially service jobs.

    An iPad may be assembled in China but a large amount of value goes to Western nations in chip development, software, r&d, brand value etc

    A lot of service jobs software, IT, websites, TV, film, computer game development, financial services, r&d are very good, well paid jobs.
    But we need to be aware China and India are coming after these jobs and sectors.

    By the time a child born today is ending their careers there will be no manufacturing jobs left in the UK – they will have gone to the new massive armies of workers in developing countries especially in Africa and fairly intelligent robots.

    But we will have more people in employment today

  • Accepting a deal that meant possible reform of the House of Lords and Commons, instead of the certainty of reform for one of them. A bird in the hand, and all that.

  • Peter Martin 10th Jul '19 - 8:00pm

    @ George Kendall,

    The approach I recommend to everyone who insists that the Govt should run a low deficit, or even a surplus, is to peg its currency at a level lower than its market rate and so run an export surplus. Something like 5-10% of GDP.

    Let’s just go through my examples one at time in alphabetical order. So we’ll start with Denmark.

    I’d say they’ve adopted the approach I’m recommending very successfully. Or maybe you disagree? You think Denmark is a failed state?

  • @ George Kendall. They might have responded George but they haven’t produced any evidence – unlike the Rowntree Trust, the IFS, Kings College, the Trussell Trust and most recently the UN Alston Report. I could add my own experience as a Social Care Convenor when I saw spending on such as Sure Start and Social Care for children’s and adults services eviscerated. I’m also chair of a Food Bank – opened in 2013 and expanded five fold since.

    One thing I have picked up in a long life is, never expect a politician or any of their more tribal supporters to apologise.

  • Peter Martin,

    Denmark is considered one of the most expensive holiday destinations in Europe. The Danish economy is based upon high wages and high taxation (with public spending at 55% of GDP) making everything appear very expensive for visitors from outside Denmark. It has an unemployment rate below 4%. Denmark is not part of the Eurozone. but the Danish Krone is pegged to the Euro as part of the Exchange Rate Mechanism (ERM II).] This is a near as you can get to being in the Eurozone with actually adopting the Euro.
    Copenhagen has seen the same kind of house price inflation as London, Paris, San Francisco or Sydney and as a result has the same problems with rise in homelessness as other capital cities.

  • Peter Martin 11th Jul '19 - 6:39am

    @ JoeB, @ George Kendall

    I take it you think Denmark is doing OK? Let’s suppose they started to do what we do and let their krone float freely. If you think Denmark is expensive now, it would be even more expensive with a krone that was 15% -20% (my estimate) higher on the forex markets. Tourism would fall. Danish bacon would be less competitive in the export markets and we’d all look for cheaper alternatives. Danish workers would lose their jobs.

    But, at least initially, the higher krone would give Danes more purchasing power internationally. It would make more sense to buy goods and services overseas than domestically. Foreign holidays would be cheaper. So their current 7.5 % GDP external surplus would soon become something like our 3% external deficit.

    If money was net leaving the country to pay for Danish net imports the Danish government would be running a budget deficit to keep the economy topped up with krone. Those dreaded sectoral balances again! They would, no doubt, soon have more than a few Danish George Kendals who’d pop up and say “we are living beyond our means. We have to cut back. We are creating a debt burden which our grandchildren will have to repay etc etc”.

    So very soon Denmark would look to be doing not quite so OK after all. The govt would cut back on grants to councils. Copenhagen wouldn’t look quite so clean and tidy. Unemployment would be higher as a consequence of the less competitive nature of Danish agriculture and industry. There would be more resentment against immigrants who would be perceived as taking away jobs from Danish people.

    I’m sure you get the picture. Letting the krone float may not be such a good idea after all. And if it’s not a good thing for them why is a floating pound a good thing for us?

  • Peter Martin 11th Jul '19 - 7:04am

    @ George Kendall @ Michael BG

    “In contrast, between 1992 and 2008, there was not a single quarter with negative growth”

    A single quarter’s results are relatively meaningless on their own. If we have -0.1% one quarter and then -0.05% the next quarter we are in technical recession. Two quarters of negative growth. But what about the error margin on those figures? If it’s 0.1% we might not be in recession at all. Or the recession might be worse than we thought!

    Climate change deniers play the same game. If the figures show the world to be 0.1deg C cooler this year than last, they’ll claim global warming has ended. No it hasn’t. They can’t say that.

    Another factor to consider is that we might have been slightly better in the 2000s with our accuracy than we were in the 1950s. It was all done with pen and paper then.

  • Peter Martin,

    Denmark’s targeting of its exchange rate means the central bank must always adjust its interest rates in order to ensure a stable exchange rate and consequently cannot at the same time conduct monetary policy in order to stabilize domestic inflation or unemployment rates. This makes the conduct of stabilization policy fundamentally different from the situation in the UK, in which the BofE has a central stabilizing role. Denmark is presently the only OECD member country maintaining an independent currency with a fixed exchange rate.
    This is the so called Trilemma or impossible trinity that refers to the trade-offs among a fixed exchange rate; national independence in monetary policy; and capital mobility. Large capital inflows to Denmark in recent years put upward pressure on the currency. Interest rates are forced down to negative levels to compensate. Denmark typically runs deficits within the EU’s ceiling of 3% and cyclical surpluses to stabilise inflation in line with the EU target of 2%.
    The UK allows sterling to float freely and uses monetary policy to target an inflation rate of 2%.
    Denmark, like any country, has to choose two options only of pegging its currency; maintaining an independent monetary policy; or capital controls. It cannot have all three.
    Denmark has one of the highest standards of living in the world although it has its problems with inequality like everywhere else.

  • Peter Martin 11th Jul '19 - 12:48pm

    @ JoeB,

    Interest rates can be a problem if Govts are trying to keep their currency value artificially high. Then high interest rates are needed to attract an inflow of foreign currency. The Tories were stupid enough to allow this to happen in the early 90s. Until it all fell apart on Black Wednesday. Big mistake.

    On the other hand if Govts want to keep their exchange rates low, they want to keep out foreign capital with low or even negative interest rates. That’s not a problem.

    The Danish government still has some fiscal leeway for regulation. If there lots of export money coming in that need not even mean running a deficit. They’d just have to vary the size of their surplus. People like George wouldn’t have a problem with that. It’s when Govts have to run deficits that they get their knickers in a twist. That’s when the austerity starts and they b*gger up the economy!

    So if it works for Denmark why can’t we do that too? You don’t seem to want to answer that question.

    PS I’m not saying that this is the only Govt policy needed. It’s not going to fix inequality, as you say. Or provide a cure for cancer!

  • George,

    Indeed I was using annual growth rates. I normally think about economic growth in terms of annual rates. However, you haven’t responded to my main point which was that Labour did not run excessive deficits – 2005-2007. 0.89% in 2006 and 0.5% in 2007 are not excessive. While I think 1.38% in 2005 is little high my reason is because economic growth for the year was 3.1%, which is 0.1% above what I think the annual growth rate should be.

    Please can you explain why you think
    S + T + M = I + G + X is not true when the economy is in equilibrium?

    S Savings, T Government Taxes, M Imports, I Investment G Government spending X Exports.


    I now have more sympathy for those who engage in debate with you, after you seemed to not understand my position with regard to https://www.libdemvoice.org/ending-relative-poverty-in-the-uk-is-easy-61353.html and you didn’t answer some of my questions (of course you could if you wanted go to that thread and answer them).

  • Peter Martin,

    “So if it works for Denmark why can’t we do that too? You don’t seem to want to answer that question.”

    The answer is above – any country, has to choose two options only of pegging its currency; maintaining an independent monetary policy; or capital controls. It cannot have all three.Denmark has rejected membership of the Euro in a referendum and is presently the only OECD member country maintaining an independent currency with a fixed exchange rate. Its neighbours Norway and Sweden, choose the option of a floating currency and do equally well.
    The UK has tried reducing exchange rate variability by pegging sterling to the dollar under the Bretton Woods system until 1971 and subsequently trying a variable peg within the European exchange rate mechanism until crashing out in 1992. That is why the UK uses a free floating currency system.

  • Peter Martin 11th Jul '19 - 2:31pm

    @ Joe B,

    ” Its neighbours Norway and Sweden, choose the option of a floating currency and do equally well.”

    NO. They don’t. Sweden has a “managed” float. And the currency isn’t managed to keep it high!


    Norway is something of a special case with very large oil revenues. But in any case it also “manages” its exchange rate, even if it doesn’t call it that, by exporting capital using its “wealth management fund”.

    Ideally I would like a free floating currency too. But I’m coming around to the conclusion that the economic illiteracy of the general population, as exemplified by George Kendall’s stated ‘viewpoint’, means that we should deliberately gear our economy to running a trading surplus by “managing” (that sounds a nicer word than manipulation) our currency.

    By “managing” I don’t mean repeating the mistakes of the past. We keep our currency on the low side not try to maintain an overvalued pound.

    It’s only by doing that that we can also run a Govt surplus, or at least minimise a Govt deficit, and stop the austerians from wrecking our economy as they have in the last decade.

  • Peter Martin 11th Jul '19 - 2:56pm

    @ Michael BG,

    I do understand your position. You want to try to alleviate poverty levels by increasing social benefits. Other Lib Dems (I’m not sure about your view) want to extend the principle to include a Universal Basic Income in those Social Benefits. It’s the unconditionality and universal nature of these benefits that bothers me. We’ll end up paying out lots of money for no return at the same time as we are having to recruit overseas workers because employers will say they can’t recruit British workers.

    And why would British workers want to pick apples, or work in the NHS, or do any of the other jobs that supposedly we need overseas labour to fill if social benefits are so generous that everyone is kept out of poverty. Which is your stated aim.

    We both want to keep workers out of poverty. I want to do that using a system of guaranteed minimum wages and guaranteed jobs. That doesn’t mean we can’t keep some benefits for child support and those who are sick etc. But the emphasis should be towards including everyone in our society. This does mean that the able bodied do have an obligation to make a positive contribution.

  • Peter Martin 11th Jul '19 - 3:42pm

    @ JoeB

    I can’t see there can be a problem for any country to intervene in the market to ensure that currency movements aren’t too sudden. This isn’t the issue. Developing countries should be allowed some leeway to build up an allowable level of foreign currency reserves.

    The problem is the mercantilistic and wealthy countries who are hooked on one trade surplus after another. Denmark is a currency manipulator. Period. It does that to give its Bacon producers an unfair advantage against British competition. Danish surpluses create British deficits. At Govt level too.

    Of course it’s not the only one. We have Germany and Holland behaving just as badly.

    So maybe if we can’t beat ’em, we should join em!

  • Peter Martin,

    I know a little about bacon having worked in a meat processing factory during summer holidays in my school days.
    Bacon and eggs became the traditional breakfast of the working classes in the 19th century because it was cheap and affordable on average wages. Costs today are high in Denmark and the industry there is highly regulated, but the country has nevertheless developed a competitive advantage through large-scale integrated organisation by its co-operatives. There are no markets or auctions in this system. Prices are set on a weekly basis by a committee of Danske Slagterier (a division of the Danish ministry of Agriculture and Food), thus making a large saving on transportation costs as there is less need to move animals around.
    Although the Danes still rear pigs in their large farming cooperatives, almost all the curing and packing has been moved to Poland, so the Danes themselves have to import Danish bacon. In the UK, slicing and packaging of Danish bacon continues to be carried out in UK plants owned by the farmer-owned co-operative Danish Crown.
    Such is the globally integrated world of conmerce we live in.
    Total trade in goods and services between the UK and Denmark was valued at £11.1 billion in 2016. The UK exported £2.5 billion in goods and £3.2 billion in services to Denmark in 2016. Imports were £5.4 billion. Denmark was the UK’s 23rd largest export market in 2015.

  • Peter Martin 11th Jul '19 - 7:26pm

    @ JoeB,

    That’s all very well but it doesn’t change anything.

    The big net exporters of goods and services, and I would include Denmark in this category on the basis of a 7.5% GDP surplus, can only do that by artificially keeping their exchange rates low. Can you think of an exception?

    Denmark pegs its currency to the euro at a low rate. Germany is embedded in the euro at too low a rate.

    Trump calls it currency manipulation. Whatever we think of him, he has a valid point.

  • George,

    Without studying the figures I once thought that the Labour government should have spent more and have a larger deficit in 1997-2002. However economic growth was 4.3% in 1997, 3.3% in 1998, 3.2% in 1999, 3.5% in 2000, 2.8% in 2001 and 2.5% in 2002. Therefore it was only in 1999 and 2000 that the surplus was too large. In 1999 it should have been reduced by 0.167% down to about 0.4% and in 2000 by 0.4167% down to 1.0%.

    Looking at the years after 2002. Economic growth was 3.3%, 2.3%, 3.1%, 2.5% and 2.5%. If the deficit had been smaller in any of these years economic growth would have been less. It is only in 2003 and 2005 that I would support a smaller deficit by only by 0.25% in 2003 and 0.083% in 2005.

    So why would you want economic growth to have been lower in 2004, 2006 and 2007?

    Looking at unemployment in about March 2001 it fell to 4.9%. The best figure is 4.7% in about May 2005, rising to 5.5% in 2006. By March 2008 it had fallen to 5.2% before rising again. None of these figures are acceptable to me. If the deficit was smaller in 2004, 2006 and 2007 then unemployment would have been higher. Why would you have wanted unemployment to be higher?


    I have posted a reply to your comment of today at 2.56pm on the thread – https://www.libdemvoice.org/ending-relative-poverty-in-the-uk-is-easy-61353.html. Please can you go there and answer my questions?

  • nvelope2003 11th Jul '19 - 8:10pm

    In Spain the unemployed receive 95% of their former income for a certain time. Maybe that explains the high unemployment rate and the need to bring in immigrants to do the work.

  • The FT asks today – Is the UK on the brink of recession?
    “GDP data highlight weakness of the economy but experts are divided on growth prospects” https://www.ft.com/content/4bb4e658-a2f6-11e9-a282-2df48f366f7d

    “If the outlook fails to improve, the run-up to the October 31 Brexit deadline will be a nervy affair for economists as well as politicians. Most expect that a no-deal outcome would depress growth. If the starting point was relatively weak, it would not need much to tip the UK economy over the edge.”

    Should LibDems become part of a coalition government during the course of the coming 12 months we will need to be clear about our approach to economic policy in these circumstances.

  • Peter Martin 12th Jul '19 - 7:35am

    @ JoeB

    “Treasury Department has issued five reports on the subject over the last couple of years saying no country has met the criteria to be labeled a currency manipulator.”

    I don’t know what passes for logic in the minds of the authors of these reports but any country that pegs its currency against another country’s currency at a lower rate than it would be otherwise is, by definition, manipulating its currency. Period. That’s all there is to it.

    Yes, it would be good if we didn’t have these kinds of currency disputes and everyone used a currency that was fair value. Tell that to the Germans, the Danes, the Swedes, the Dutch, the South Koreans, the Singaporeans. These are just some of the countries who game the system to suit themselves.

    If there is a currency war going on neither the UK not the USA should just ignore it. Even though we haven’t started it we might well have to join in just to limit the damage caused.

    The UK economy has been on the brink for years. We haven’t really recovered from the 2008 GFC. Fortunately the US had been relatively expansionary in their policies under Obama and the US has pulled the world economies along with it. If the US had had the same neoliberal/ordoliberal mindset as the EU PTB we’d have all been in real trouble by now.

    The economics of the EU are not a force for good in the world. But, hey, if we do leave the EU and there is a world slump at pretty much the same time, you’ll happily be able to blame it all on Brexit. I’m surprised that no-one in the Lib Dems has cobbled together a theory that the the UK’s inate sceptism on the EU, our refusal to join the euro etc, was itself the reason for the 2008 crisis.

  • David Allen 12th Jul '19 - 4:38pm

    This party has for far too long been in denial about its disastrous decision to abandon its principles and go gung-ho into coalition with its supposed greatest enemies. If anyone thinks that grudging partial recantation of fault is an effective campaigning style, just look at the Churches on sexual abuse, or at Labour on antisemitism.

    Our opponents won’t let the subject drop. Our interviewers won’t let the subject drop. If we tell them they should drop the subject, or that we deserve to be treated with kid gloves over it, then we just look shifty and incapable of recovering from our past.

    That said, both our leadership candidates have moved things forward. The balance between admitting mistakes and claiming credit for the (few) good things is getting a little more credible. It still has some way to go, before the party can truly expect credibility and to shake off its “pink Tory” image.

    The awkward question which Cathy of Channel 4 asked our candidates was “Which do you think was our best postwar government?” To which Jo answered that the Coalition had to be “up there”, while Ed was perhaps even more bullish. Well, frankly, our taget voters just won’t agree. Don’t alienate them! Next time, please guys, mention Attlee and the NHS, mention Heath getting us into Europe, and only then, perhaps you can also mention the Coalition and gay marriage.

  • Paul Holmes,

    Perhaps I can provide the answer Michael Meadowcroft has failed to give you. Last night I read an article by Michael Meadowcroft in issue 100 of the Journal of Liberal History in which he wrote, “Throughout post First World War history a premature general election has been a setback for the Liberal Party – 1924, 1931, 1951, 1966, Oct 1974 and 2017 were all electorally bad for the party. Those who in 2010 favoured allowing the Conservatives to become a minority government should reflect on this” (page 32).

    He ignores the December 1923 general election which was a premature general election where our vote increased slightly (0.9%) and we gained 43 seats. In the October 1931 election it is hard to judge party performance. Those MPs who called themselves Liberal increased from 59 in 1929 to 72. Vote share collapsed but this is likely due to only putting up 159 candidates (the Conservatives put up 518 candidates out of 615 seats).

    With regard to 1951 he is correct, we only stood 109 candidates down from 475 and we were reduced from 9 to 6 MPs. He doesn’t mention 1959 where we stood 216 candidates and maintained our number of MPs at 6.

    However the 1966 general election seems like a successful one for us; we gained three more MPs but stood in 54 fewer seats and our vote share fell by 2.7%.

    In October 1974 we were reduced by 1 MP down to 13 and our vote share fell by 1%. If losing 4 or 5 MPs and 1.3% of our vote share had been the price of not going into coalition I expect most of us would happily have paid that, than the price of being in coalition – 49 MPs and a 15.1% fall in our vote share.

    I think most of us regard 2017 as a small success we only lost 0.5% in vote share but increased our MPs by 4. (In 1964 and 1966 we only gained 3.)

  • Peter Martin 12th Jul '19 - 6:42pm

    @ JoeB,

    “a significant bilateral trade surplus with the United States is one that is at least $20 billion”

    There’s an obvious flaw with this criterion. Small countries can much more easily get away without breaching the rule than larger ones.

    Unlike GK Chesterton et al there’s nothing wrong with my logic, or rational thought, if you prefer. Any country pegging its currency to the dollar or euro is manipulating its value. By definition.

  • George,

    I note you have not answered some of my questions yet –

    Why you do think S + T + M = I + G + X is not true even when the economy is in equilibrium?

    Why would you have wanted economic growth to have been lower in 2004, 2006 and 2007?

    Why would you have wanted unemployment to have been higher in 2004, 2006 and 2007?

    (See above why I think you wanted these last two things.)

  • David Evans 13th Jul '19 - 8:34am

    The problem that this article and most of the comments on it exemplifies is that so many Lib Dems are still unwilling to even countenance the fact that the party and they personally totally ignored the big picture while we were in coalition.

    The simple fact is that we went into coalition with a reputation for working hard for our communities. We had 57 MPs, just under 4,000 councillors, 60,000 members and people trusted us to work for a better future for all. We came out with 8 MPs, 1,810 councillors, about 45,000 members and a reputation for breaking promises.

    What made it worse though was that we had allowed the Conservatives the luxury of forgetting about their extreme right wing for five years simply because they could rely on our votes in parliament. With the spotlight taken off them, UKIP and the ERG strengthened and rebuilt and in 2015 we were almost destroyed. Nigel Farage was resurgent and the Brexit referendum and the polarisation of the UK was just a blink away.

    Many things went wrong in coalition, but we can’t change what it did, to do that needed concerted action at the time and not personal regret now. All we can do is learn from it, but until we are willing to address all the mistakes and not a comfortable few that we can now (much, much too late) say “mea culpa,” we won’t even make that step forward.

  • Peter Martin 13th Jul '19 - 10:15am

    “The biggest benefit of the euro is that it is managed by the European Central Bank……Therefore is more insulated from political pressure…….to meet any one nation’s needs.”

    I would say that is its biggest drawback. Any currency unit is an IOU of the issuing government. To try to share a currency without sharing a government is never going to work. Some countries, like Ecuador, try to use the US dollar. But the US calls the shots with the dollar. It is a US dollar. Its not an Ecuadorian dollar. Just like the Germans call the shots with the euro. It’s their euro. It’s just a rebadged DM.

    You don’t need a common currency to trade. The Canadians could share a currency with the Americans if they wanted to. Sensibly they don’t. They know better than to try to copy the Ecuadorians.

    “China and Russia have called for a new global currency…… disconnected from individual nations”

    They are wasting their time. It probably would be even less successful and more problematical than the euro. The Chinese and Russians don’t need US dollars to trade with each other. The UK and the EU don’t need US dollars. You don’t need US dollars to buy oil. The price can be agreed in any currency. Pounds. Euros. Vietnanese Dongs.

    The dollar is just another currency. There’s nothing special about it apart from everyone thinking that it is somehow the world’s reserve currency. What does that mean? That people want to keep their money in US dollars? OK but they could do that in Pounds, Euros and Swiss Francs if they wanted to.

    BUT the big euro using countries and the Swiss don’t want inflows of foreign capital. That would create a surplus in their capital accounts which would have to be mirrored in a deficit in their current acoount.

    ie they’d be running trade deficits. That doesn’t suit their psyche at all. Until they get over this mental block they won’t be creating any competition for the US dollar.

  • Peter Martin 13th Jul '19 - 1:56pm

    @ Michael BG @ George

    MBG writes:

    “However, you haven’t responded to my main point which was that Labour did not run excessive deficits – 2005-2007. 0.89% in 2006 and 0.5% in 2007 are not excessive.While I think 1.38% in 2005 is little high my reason is because economic growth for the year was 3.1%…….”

    If we have a bigger economy we need to have more money in it. Sustainably, this can only come from Government. If we have 3% growth but tiny deficits we have to ask where the extra was coming from. Was it coming from exports? No. The UK was running a trade deficit of around 3% of GDP at the time.

    Therefore it must have been coming from too much private sector borrowing. In other words the Labour Government at the time were at fault because they were running a monetary policy which was too loose and fiscal policy which was too tight to try to compensate.

    “Too tight” means that those deficits were too low!

    “…..economic growth for the year was 3.1%, which is 0.1% above…”

    0.1% is neither here nor there. If the Govt pushes for too much growth then we’ll have an inflation problem. Are you also saying we had demand led inflation as a consequence?

  • David Evans,

    you say that the problem exemplified here “is the party and they personally totally ignored the big picture while we were in coalition” and then go on to spell out the consequences in terms of votes and seats lost, finally noting that all we can do is learn from it.

    I would say that what should be learned is taking on the responsibility of government is quite a different proposition from the function of holding the government to account from the opposition benches or rallying protest votes from a politically homeless minority and necessitates an entirely different mindset.

    When an MP is elected they will often state that whether you voted for me or not, I will endeavour to represent the entire constituency. This too is the responsibility of the executive – to govern for the country as a whole. At times that may necessitate decisions that are electorally unpopular. However, if you try to govern on the basis only of what is popular with your base, particularly as part of a coalition, you will do little good and end up like Donald Trump – not running an effective administration but non-stop campaigning for the sole purpose of reelection. That is a recipe for irrelevance.
    In government, decisions have to be taken on the basis of the national interest. When they are not we end up with the kind of chaos we have seen over the last three years since the EU referendum.
    If we find ourselves in a position of the smaller partner in a coalition again the sensible approach would be to take full responsibility at Secretary of State level for key departments like education; environment; health; DWP or local government. Running such departments in the national interest and on the basis of Liberal Democrat principles would probably do far more to establish the party’s reputation for competent government than any amount of differentiation or electioneering strategy that might be employed in a coalition government.

  • George,

    The government and the Bank of England are jointly responsible for controlling inflation, ensuring there is economic growth every year and unemployment is minimised. You should have your own view on what you think these levels should be and you should know how the actions of the government and the Bank of England affect these outcomes to be able to judge if any policy is correct. If you don’t know these things how can you judge if an opinion of an economist is correct or not?

    In the 1980s and before UK social democrats believed that the economy should be run to achieve full employment. I don’t understand why any social democrat would give up on this being the main economic aim of government. Isn’t the main tenet of social democracy social justice meaning that every human being should be valued equally and not living in poverty? If this is so, then all social democrats should be committed to ensuring that unemployment is kept as low as possible as the main aim of government and they should see that having a Job Guarantee scheme would assist in this.


    You should know context is everything. The context is that I believe that generally the UK economy can grow by 3% each and every year and this should be the main economic aim of government as the means to minimise unemployment.

    The RPI rates of inflation were 2003 – 2.9%, 2004 – 3% 2005 – 2.8%, 2006 – 3.2%, 2007 -4.3%. The CRI rates were 2003 – 1.4%, 2004 – 1.3% 2005 – 2.1%, 2006 – 2.3%, 2007 -2.3%. Therefore in 2003 it seems that the size of the government deficit was not causing a problem, while in 2005 inflation was above the 2% target. However, you are correct, to be out by 0.1% from my target for economic growth should not be a great problem especially if it is for only one year.

    My main point was, that even while I might question the size of the deficit in a couple of years, I was refuting George Kendall’s idea that there was something fundamentally wrong with the size of the Labour government deficits in the period 2003 to 2007. I think it is important to challenge the neo-liberal interpretation of the Labour government’s economic policies.

  • Peter Martin 13th Jul '19 - 11:55pm

    @ JoeB,

    It is very unlikely we’ll ever see a return to the Gold standard IMO. Trump or no Trump. The present system allows those who rather hold gold rather than dollars, or euros or pounds to do just that. So there isn’t even a problem in need of a solution.

    Even most neoliberal/mainstream economist advocate an inflation target of something like 2% p.a. for a modern economy to function effectively. So unless continually improving mining technology means Gold is going to be relatively cheaper by 2% p.a, too, the difference between the real price of gold and its supposedly guaranteed price will widen on a year to year basis.

    This is what happened in the 50s and 60s. In the end the US government decided they’d rather keep the gold in Fort Knox than sell it for $35 per ounce. This wasn’t the cause of ‘stagflation’. There were too many other things going on at the time.

    @ MichaelBG,

    I’m agreeing with you about the size of the Labour deficits. They weren’t too large. I’d go further and say they were too small. But George has never understood the difference between you and I running a deficit and the Govt running a deficit. George doesn’t really get it.

    In his parallel universe, the Government can be in surplus, the rest of us can all be in surplus and every country can be like Germany and run a trading surplus too.

  • Joe (Bourke) Thank you for your response, but what it shows is the shallow high level waffle so beloved of senior managers and strategists used to justify failure when they are standing in the midst of the rubble of their own creation. It is precisely this approach that led to our failure in coalition and it is that approach that we have got to jettison if we are ever to be a success in national government.

    The high level facts show the judgement of the British people on the Lib Dems in coalition and the tinkering at the edges you propose will lead to the same failure.

    You say “taking on the responsibility of government is quite a different proposition from the function of holding the government to account from the opposition benches or rallying protest votes from a politically homeless minority and necessitates an entirely different mindset.” But in saying that you follow exactly the same old mindset that our leaders adopted in coalition which totally failed and squandered our hard won reputation for working for our community (in this case the whole of the UK) and not the demands of an over centralised bureaucracy.

    If you hadn’t noticed the Lib Dems stand for a fair, free and open society, decentralised, diverse and participative not adopting and accepting the old failed approach of “The government right or wrong” – a system supported by the two main parties that has led our country to the state it is in today. This demands a new way of thinking about government, not one that sacrifices our values to support an intrinsically wicked and evil party because that is the way government has always been done.

    You also say rightly, “This too is the responsibility of the executive – to govern for the country as a whole.” And then spoil it by creating a real Aunt Sally to knock down “At times that may necessitate decisions that are electorally unpopular.” Quite simply, what we got wrong in coalition wasn’t doing electorally unpopular things, but by allowing the Conservatives to doing things that were in the interests of their Party, and not that of the whole country.

    Putting it simply, there is one law in Politics that supersedes all others and that is “If a Conservative says something is the National Interest, what he means it is that it is in the interest of the Conservative party”. And until we as Lib Dems understand and accept that they will beat us time and time again.

  • Joseph,

    Mostly there is not a clear policy which everyone agrees is in the national interest. This is because one’s political philosophy determines what one sees as being in the national interest. Even amongst people in the same party there can be disagreement over what is in the national interest. It seems to me that you think that following the Conservative economic policy in 2010 and 2011 was in the national interest, but I disagree and the downturn in the economy which it caused was not in the national interest. What would have been in the national interest would have been following our economic policy of a fiscal stimulus in 2010 and only reducing the deficit when the economy was growing strongly enough to cope with deflationary fiscal policies.

  • Michael BG,

    I think that the Conservative economic policy in 2010 and 2011 was a mistake that delayed the economic recovery be a couple of years. I also think that this was recognised (even if not stated) by 2012/2013 and once this was corrected economic growth began to pick-up until it was derailed again in 2015/2016.

    If we find ourselves part of a coalition again with either Labour or Conservatives as the dominant party we may again have limited influence on economic policy. In such circumstances, we would be better served by taking full responsibility at Secretary of State level for key departments where Liberal Democrat political philosophy and values can be directly translated into policy.

  • Peter Martin 15th Jul '19 - 6:31am

    @ Michael BG @ JoeBG

    “Mostly there is not a clear policy which everyone agrees is in the national interest. This is because one’s political philosophy determines… “

    This is true to some extent. Such as on questions of public ownership etc. But the main disagreement over the coalition years has been on the imposition of fiscal austerity. Even many of those of a relatively right wing political disposition, as Joe has just done in his last comment, now grudgingly accept that mistakes were made and fiscal policy was way too tight. There are still a few who are insisting otherwise, like George, but that’s mainly because they don’t know what they are talking about. And, usually, they don’t want to know.

    Why would it make sense, from a rightish political perspective to unnecessarily run the economy into a state of recession? How’s that going to help businesses make a profit and grow? How will that help at the next election? Why do that from a centrist viewpoint, if you want very much to see the EU succeed? How can it make sense to create such social discontent that the EU will bear the brunt of popular ire and help lead to a vote for Brexit? At least VC has acknowledged some blame on that one.

    This doesn’t just apply to the UK. If you’re keen for a political project such as the EU to succeed why would anyone want to deliberately sabotage it by writing such stupid fiscal rules as we see in the so-called Stability and Growth Pact. The economic austerity we’ve seen throughout the EZ has led to the demise of the centre left and the rise of the far right. When people lose their livelihoods they don’t march and demand that Govts should run a more relaxed fiscal policy!

    We all know what they do demand though.

  • Innocent Bystander 15th Jul '19 - 9:52am

    “There are still a few who are insisting otherwise, like George, but that’s mainly because they don’t know what they are talking about. And, usually, they don’t want to know.”

    Please ignore this stuff. You are very much on the right track and I, too, have been treated to the same level of abuse. I only reply to those who remember their manners.

  • Joseph,

    I think that the Conservative economic policy in 2010 and 2011 was a mistake that delayed the economic recovery by a couple of years” (slightly edited – one letter changed).

    I don’t think I have seen you write this before. I am glad you think this now. Please in the future when defending the coalition make it clear that it had the wrong economic policy in the first two years. I hope all our MPs can get on this page as well, instead of pretending that the coalition’s economic policy was the same as the Labour Party.


    You wrote that you take a different view from Peter Martin. Therefore please can you explain why it seems you think that (T-G) + (S-I) + (M-X) = 0 is not a useful equation when considering government deficits?

  • nvelope2003 15th Jul '19 - 3:59pm

    Peter Martin: The centre left has not died but is on the rise in Spain, Finland, Denmark, Britain and other places and the populist right is in decline except in Britain where it has latched on to the anger over Brexit. You have been informed of this several times but you keep repeating this mistake. Even in the US Trump only won, despite getting 3 million votes less than his Democrat opponent, because of the contrived workings of the electoral system. Why should anyone believe your statements when you cannot even get a simple fact correct ?

  • @ Joseph Bourke, “Welfare reforms have been poorly managed and undercut by withdrawal of funding, an unnecessary sanctions regime and poor administration.”

    Are you saying that the 57 Liberal Democrat M.P.’s elected in 2010 failed in their duty to scrutinise the necessary legislation, Joseph ?

  • Joseph,

    I think you have failed in the past by omission to make it clear that the Coalition government had the wrong economic policy when you have defended it. If I see that again I hope I can remember where you have stated that the economic policy in 2010 and 2011 was wrong.

    The Labour Party didn’t have as its policy in 2010 to increase VAT by 1%. We attacked the Conservative for having secret plans to increase VAT and then joined them in doing it! It was a terrible policy which we should never have supported.

  • Joseph Bourke 16th Jul '19 - 1:53am

    Michael BG,

    this was a reply your good self a couple of months back https://www.libdemvoice.org/time-for-some-lib-dem-sunshine-60904.html#comment-499460
    I don’t think many would argue against the proposition that cuts to capital spending in the early years of the coalition were ill-timed and ill-advised. Vince Cable acknowledged as much last September in an interview with Sky TV when he said ” One of the aspects of austerity that did most harm was the massive cutback in public investment.”
    “…Government spending has increased in real terms every year since 2013 but at a slower rate than economic growth, hence total spending as a % of GDP has been reduced to a little under 40% while private sector spending as a % of GDP has recovered to historically normal levels.”
    As regards Labour plans to increase VAT to 18.5% see https://www.thisismoney.co.uk/money/article-1648148/Darling-planned-to-hike-VAT-to-185.html
    As it turned out, Vat was returned to 17.5% from 15% and a new 50p top rate of income tax introduced instead coupled with cutbacks in investment spending in the last labour budget. The subsequent increase in VAT to 20% during the coalition was offset by tax reductions arising from increases in the personal allowance.

  • Peter Martin 16th Jul '19 - 8:47am


    I used the word “demise” rather than “death” to describe the European Centre left. Demise can mean failure according to the Oxford English Dictionary. Sure, you’ll be able to find some examples of a counter trend. I always acknowledged that the UK Labour Party at the time of the 2017 election was just such an example. However, to make a prediction, it will be a long time before Labour reach 40% again.

    On a European scale the Guardian presented the results of the May elections under the headline of:

    “Voters boost Greens and far right as centre left and right lose out”

    You don’t believe a word I say, so presumably you think I’m lying about that! 🙂

    Maybe you’d like to check with Google.

  • Joseph,

    Quoting someone else is not the same as you actually saying it. Also the Vince quote doesn’t say what you said. You have now come out and stated that you think it was a mistake for the Coalition government to implement the Conservative economic policy in 2010 and 2011 which delayed the economic recovery.

    Looking at the government’s 2013 effects of illustrative tax change bulletin, increasing VAT by 1% would raise about £5.4 billion a year. Therefore 2.5% equals about £13.5 billion. (The VAT increase came in on 4th January 2011.) Reducing the Income Tax Personal Allowance by £100 reduces revenue by about £600 million. The rate for April 2011 was increased by £1000 costing about £6 billion. Therefore in the year 2011 the government took out of the economy more than £7.5 billion (which was about 0.5% of GDP). Everyone had to pay more for things with the standard rate of VAT on, including those on benefits who didn’t get the tax cut. I think VAT is a regressive tax unlike income tax.

    The VAT increase was deflationary was why are you defending it?

    The Daily Mail even reports that the idea of increasing VAT to 18.5% by Alistair Darling after the next general election were rejected in 2008. So Labour didn’t plan to do it during the 2010 general election.

  • joseph Bourke 16th Jul '19 - 1:34pm

    Michael BG,

    let ne make it clear so there is no misunderstanding. I think that the Conservative economic policy in 2010 and 2011 was a mistake that delayed the economic recovery by a couple of years. The biggest problem was the deep cuts to investment spending before the economic recovery was fully established. It would have been preferable to maintain the planned spending until later in the economic cycle. I do not think that the Libdems made a mistake in implementing it or in supporting a rise in VAT. That was a trade-off in respect of implementing Libdem policies like the big increases in personal allowances and extra spending on the pupil premium that were phased-in over the next few years. These are the compromises that coalition government involves.
    Nor do I think that the increase in the top rate of tax to 50% by the Labour government instead of increasing VAT to 18.5% was a mistake or the supplementary tax on bankers bonuses that labour introduced. Both tax increases were justified.

  • nvelope2003 16th Jul '19 - 2:54pm

    Peter Martin: The Guardian is expressing an opinion which you and they are entitled to do. I have been studying elections for years and I do not agree with their interpretation. I would class the Greens as centre left, particularly in Germany where they seem to have replaced the Social Democrats as the main opposition to the CDU. In Greece the centre right won the election and the far right lost all their seats. Syriza dropped from 35 to 31% but the extreme left did not make gains although what is left of the centre left did. My estimates are made in respect of national general elections, not the EU elections where turnout tends to be lower and voters use them to protest in a way which does not change the Government.

  • Joseph,

    I think it very strange that you condemn the Conservative economic policies of 2010 and 2011 which the Coalition implemented and state it delayed the economic recovery, but support the policy to increase VAT by 2.5%, which even when offset by the £1000 increase in Personal Allowances deflated the economy by more than £7.5 billion. This means the economy was reduced by about 0.5% because of this policy.

    It is likely that both having a higher 50% income tax rate and a tax on banker bonuses also deflated the economy, as economic growth in 2010 was only 1.7%. However, as this only affected those with high incomes it is possible that their deflationary effects were not as bad as one which affected everyone as the increase in VAT did. Increasing VAT back to 17.5% from 1st January 2010 would also have deflated the economy in 2010 by about £13.5 billion (about 0.9% of GDP). It would have been better to phase the return to 17.5% over two years, maybe 1% from 1st January 2010 and 1.5% from January 2011.

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