While the national polls aren’t looking great for the Liberal Democrats, to say the least, in key seats there’s more of an air of, if not confidence, at least hope. Campaign teams are busily getting on with what needs to be done for them to win their seats, buoyed by increasing membership and a never-ending list of jobs to do. Ben Lazarus, who write the Telegraph’s Morning Briefing tried to fathom the other day what he called the “Lib Dems’ curious optimism”:
For a party that, since 2010 has now lost three quarters of their support, the Liberal Democrats seem remarkably calm. There are reasons for this. They know that a hung parliament could give them real power again after May . And, according to YouGov’s Peter Kellner, despite the abysmal polling, there are two factors that may help them save more of their seats than those headline figures suggest. First, the party usually gains support nationally during election campaigns. The party benefits from TV exposure – although they no longer have the advantage of being a protest party unaffected by the rigours of government, it is likely their exposure by the main broadcasters will still be an aid. Second, Liberal Democrat MPs often have a strong personal following. Where Lib Dems are seeking re-election, their chances are often better than the national polls suggest; the party is deliberately playing to this strength, fighting lots of local campaigns instead of a national one.
With all the talk about Ukip and the Greens, the Lib Dems are sometimes forgotten. But don’t rule them out. They may prove more resilient than many expect, and thus play a pivotal role in the messy events that follow the election.
And it’s about what goes on following the election that I want to think about. I wrote last week that we need to keep our options open and not throw any babies out before the bath has even been run. While I understand the logic that letting the SNP be in charge of the UK would be a bit like letting Farage take charge in Europe, we don’t know what orders the people are going to give us, what hand we are going to be dealt. And, frankly, we will have to find the best future for liberal democrat ideas within that. It might be in government, it might not be.
Have you wondered why the Conservatives are making such a massive thing about the disaster of the SNP being in Government? Heavens, they’ve brought out their old guard from way back to talk up the possibility of utter chaos. On one hand you have Kenneth Baker saying we may need a Tory/Labour coalition to stop the SNP and on the other you have John Major challenging Ed Miliband to rule out a coalition with the SNP.To me it seems simple. It’s not about any constitutional crisis, it’s about trying to get a Tory majority government. You see, their old arguments about the fragility of coalitions that they trotted out in 2010 don’t work any more because, thanks to the Liberal Democrats, they’ve been in a successful one for five years, one that has delivered many Liberal Democrat policies that the Tories would never have thought of in a million years. The very last thing they want is more coalition where they are stopped from doing their worst. Mark Pack did a list of 18 policies the Tories would have implemented without us holding them back and I’m not sure he’s even got them all. Actually, the Tory idea of capping Child Benefit after a certain number of children has been around for a while. They would have done that in this Parliament and tried to get through their idea that the young should work for their benefits too. We know from that ugly Tory conference last year that, essentially, a Tory majority government would be government by the Daily Mail, as I wrote at the time.
Human rights, health and safety, decent employment, brought in as a result of brutal slaughter, horrendous and avoidable workplace accidents and mistreatment of workers, all stand to be swept away if this lot are allowed an overall majority. Our job is to stop that happening. We need to show people why this is relevant to them. After all, if you can make one person’s trial a little bit unfair, you can do it to me too. If you can decide to ban certain legal activities for Terrorists, and the National Front, then why not for Greenpeace or animal rights groups, or the Stop the War Coalition. This could all end in a very bad place. Best to keep the gate to the slippery slope firmly locked.
Of all the potential outcomes of the election, a Tory majority is the one that scares me most. It’s the one which would have the most harmful effects on the poor and vulnerable, those people whom liberals instinctively want to protect (and, yes, I get that there are occasions when we could have done that better in this Parliament). A Labour majority would be awful for civil liberties and long term economic competence, but untrammelled power for the Tories doesn’t end well for the poorest. What Major and Baker want is to create so much fear about the SNP that it does two things. First of all, if they can get Labour to rule out a coalition with the SNP, it will actively drive people into the arms of the nationalists, meaning fewer Labour seats which obviously gives the Tories an advantage. Secondly, they want to spread fear everywhere by suggesting that only they, and not the rest of the dodgy rabble (as they see the rest of us), can be trusted to form a stable government. The last five years gives the lie to that one. It’s also legitimate to ask in passing that if the Tories can’t stand the SNP so much, why on earth did they prop up their minority government between 2007-11? Salmond would never have got anything through without his Tory helpers.
On one hand you have the Tories saying vote for us to avoid constitutional and governmental armageddon, on the other hand, you have Miliband at the Labour conference in Scotland today saying “vote Labour to keep the Tories out.” It’s a strategy that worked for them in Scotland in 2010, when Scotland clung to them like a security blanket to avoid a Tory government. Labour need to wake up to the reality of how politics has changed in north of the border and start offering something positive. They are showing absolutely no signs of doing so, We can only hope that they have the sense to ignore John Major’s advice. Ed Balls and Ed Miliband seem to be at loggerheads on this issue as well as everything else. Miliband has just avoided the issue because he doesn’t want to talk coalitions while Balls has said he couldn’t imagine doing a deal with the SNP. Perhaps if they spent more time talking up a stronger Scottish Parliament rather than pretending it wasn’t happening, they might engage more people.
All parties should be very wary of taking John Major’s advice. It’s not being given for our benefit, that’s for sure. I don’t often agree with Dan Hodges, but he basically said in his column that Major should have a bit more respect for Scottish voters:
I’ll tell you what jeopardises the Union. It’s the spectacle of politicians in London telling voters north of the border that their votes don’t count. Or, in the case of Sir John’s intemperate demand, insisting they are presented with an ultimatum – “vote for the right party, or when it comes to negotiations over forming your next government you’ll find yourselves effectively disfranchised”.
The SNP has reminded us that single party majority governments are not a good idea, even in a parliament elected by proportional representation. It’s the last thing we need at Westminster. Labour and the Tories are out to re-establish the old, uncomplicated binary. Let’s make sure we stop them.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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The scariest scenario for me would be a majority Tory government at Westminster, with the SNP taking as many seats as currently predicted. Refusal by the Tories then to budge on another referendum – along with the appointment of an English MP as Secretary of State for Scotland – would probably mean another SNP landslide at the Holyrood elections in 2016. What then? Would the SNP just declare independence, and challenge Westminster to stop them? Some of them would certainly make this case.
I think there are a lot of voters out there who are thinking of not voting on the 7th of May. For them the scariest outcome will be an endorsement of the status quo.
The Lib Dems need to get their messaging, tactics and policies right from now to May 7th. There is still a lot to play for. Where a Lib Dem candidate is standing they should be supported, but in my opinion in future deals with other local parties will have to be made in order to not “split the small l liberal vote”.
Regards
They know that a hung parliament could give them real power again after May .
Real Power AGAIN! So arguing that we couldn’t stop the ‘nasty Tories because we didn’t have enough MPs was just not true? ……. No wonder Nick is willing to support the government in debate…..
Caron, you are quoting someone called Lazarus ?
The scariest result of the General Election would be any result that did not cause an immediate and significant change at the top of The Liberal Democrats.
Any result that leads to “more of the same” will certainly kill the party.
A resurrection as remarkable as that of the original Lazarus is what is needed after the 8th May.
You don’t help the poor by allowing 600,000 mainly low-skilled workers in from Europe per year to drag everyone’s salary down to the minimum wage! Ok, I’m not taxed as much as I used to be but the percentage of people on the minimum wage or just above has massively increased since the EU immigration began at its current unprecedented level. Liberal Democrats don’t give a damn, because most of your voters are well-paid public sector workers & teachers. So, don’t try to fool us that you care about the poorest – it’s just lip service to make yourselves feel better in your comfortable lives.
While Dan Hoges has a point about not lecturing Scottish voters, I think the partisan motives you attribute to John Major ignore the fact that he has always been a passionate Unionist. Indeeed he originally opposed devolution because of his Unionism, not in spite of it: his fear was that it would lead down a one-way street to eventual separation. One can disagree with his analysis without disputing the sincerity of his Unionist convictions.
Unlike a fair number of Tories and Tory commentators, he does not want to cast off the Scots and turn the Tories into an English nationalist party. So in that context inveighing against a coalition or other deal with the SNP (particularly if it were to result in the SNP tail wagging the Labour dog) is entirely consistent with his previously expressed views and it would be surprising if he thought otherwise.
Anxiety about the SNP holding the next government to ransom is hardly confined to Tories. It is based on the fact that, by definition, their interest is in policies that would speed up the severing of ties between Scotland and the rest of the UK. These policies would be unlikely to be acceptable to the rest of the UK and might well provoke a constitutional crisis (which is precisely what the SNP are counting on as the way to reopen he independence question). Alex Salmond would relish his role as the bete noire and head of an irreducible redoubt at Westminster, safe from the fury of English voters.
Lots of Labour people recognise this, which is why there is mounting pressure on Ed Miliband to rule out such a scenario. Of course, by doing so he would be ruling out the most straightforward way in which he could ‘get over the line’ and assemble a working majority (assuming there is another hung parliament and that the SNP make the sweeping gains in Scotland that the polls are indicating while the Lib Dems win 25-30 seats across the UK). But the counter-argument (made by Philip Collins on Newsnight yesterday) is that within 6 months of any link-up with the SNP the Labour party would be facing a massive backlash from voters in the rest of the UK and internecine strife.
Interestingly, whereas you contend that if Labour ruled out dealing with the SNP it would drive voters to the nationalists and thus indirectly help the Tories by reducing the number of Labour seats, Collins makes the opposite argument. Namely that the prospect of Labour linking up with the SNP in Westminster allows otherwise Labour-inclined voters in Scotland to believe that a vote for the SNP would be a ‘cost-free’ way of maximising Scottish influence on government policy while ensuring a left-of-centre UK government. In his view this is directly contributing to the haemorrhaging of Labour support in Scotland and only ruling out such a deal would staunch that, since it would make it explicit that a vote for the SNP would reduce the chances of a Labour government. (Of course, many Scottish voters are not so keen to have a Labour-led government that this would deter them, but there are others who might feel preventing a Tory-led government is a higher priority, so such a strategy stands a chance of partial success.)
Two things: Lib Dems in another coalition. I was dead keen on our involvement but when you are a junior partner you are almost certainly doomed to shut down. Another such involvement would probably kill us off for a decade. Secondly as John says Clegg still the leader, but the signs from Hallam are that the voters there are going to vote differently to how they did in the locals last May and we will have a hard task to hold on. .
I think Keith Legg provides the worst situation of all and one which is quite likely, with many of the points Caron makes about the Tories being very valid.
Overall, I see two broad situations relating to the party after the election.
1) a Govt. with no Liberal input – this would be terrible for the country.
2) a Govt with Liberal input – this would be terrible for the party.
Both are scary!
I remain a supporter of our decision to be part of this Govt as I fear the problems the country faces now would have been vastly, vastly worse than if we hadn’t – but we need this party to survive, not ust for the next 5 years of a parliament but for the next five decades and beyond. As such, do we put the short term interests of the country ahead or the party?
I’m a Liberal, I want to go towards the sound of gunfire – but not when the battle being fought is akin to the Charge of the Light Brigade. Standing on the sidelines is not something want to support, but perhaps it is necessary. I don’t anything but scary options after the next election. Therefore, the right outcome for us to might be to not have anything to do with any of them, rebuild and be ready for 2020.
A Tory/Lib Dem coalition where the Lib Dems have been reduced to 9 MPs, have one minister, the very recently-ennobled Lord Clegg, who handkerchief to cheek, murmurs “but what else could we have done? the people have spoken” as the NHS is finally, utterly dismembered, as bankers dance in the streets.
Someone said to me yesterday – we are marching to wards the sound of gunfire, it’s all aimed at us, and like the troops at the Somme we just keep on marching…
Tony
I am known, if at all for droning on & on about how Labour are going to collapse so The Tories do have a real chance of a majority on less than a third of the vote. The good news is that they would soon begin tearing themselves apart. Next year they are committed to a referendum where they will campaign on both sides.
Our primary focus after May has to be on rebuilding our Party & encouraging splits in Tories & Labour & both those will be easier outside government, for now.
paul barker 7th Mar ’15 – 5:51pm
“..Our primary focus after May has to be on rebuilding our Party & encouraging splits in Tories & Labour & both those will be easier outside government, for now.”
Once again I agree with Paul Barker (I hope Stephen Hesketh is watching).
So many scary possibilities. I agree mostly with ATF.
I am scared about the prospects of the Party in Scotland and that Jo will not be re-elected.
Perhaps the least scary for the Party and possibly for the Country would be a Labour government on about 320 seats. More likely however is that Labour support will continue to ebb away until polling day. Depending on expectations some will say we did worse and others will say we did better than expected; SNP will have many gains, but UKIP will not have any more seats than they have already. If there is no overall majority, Lib Dems will feel obliged to enter into negotiations, but there will be nothing substantial on the table for us and the Party at large will have little or no desire to go through another coalition with the Tories and in any case would feel that it had lost its mandate. Besides no Lib Dem will want to have anything to do with a Cameron led ‘renegotiation’ and referendum over the EU.
Scariest of all is an horrendous mess in 2020 in the wake of a vote to leave the EU, but where the Tory popularity has sunk to an all time low. The poisoned chalice of 2010 would seem mild in comparison.
The Charge of the Clegg Brigade
Half a vote, half a vote,
Half a vote onward,
Into the general election
strode the six hundred.
“Forward, the Clegg Brigade!
“Charge for the ballots!” he said:
Into the lost deposits
Rode the six hundred.
The scariest result – Clegg carrying on as Leader – the country needs a Liberal and Democratic Party more than ever.
“Forward, the Liberal Democrats!”
Was there a man dismay’d?
Not tho’ the candidates knew
Someone had blunder’d:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and cry:
Into the general election
Rode the six hundred.
Tories to right of them,
Labour to left of them,
UKIP in front of them
even the greens thunder’d;
The best result would be a Tory Minority Government as long as
The people of Sheffield Hallam Votes Nick Clegg out and he loses his seat.
Giving the party a clear indication that the country does not support a Tory Lead coalition government.
Whilst the Tories try to run as a minority Government, with Libdems refusing a confidence and supply agreement.
Liberal Democrats regroup under a new leader, Hopefully Cable or Farron and steer the party back towards the left.
In the mean time Labour and Libdems come up with a way of winning back Scottish Voters, I think Scotland would would think twice about voting SNP again the their droves as they would be concerned about another Tory Government and many would be hopeful that Labour and Libdems would have learnt a harsh lesson by the kick they had been given in May 2015
Come October 2015 the Minority Conservative government loses a vote of no confidence and we go back to the polls and hopefully end up with either a Labour Government or the numbers add up for a Labour / Libdem coalition.
Scariest outcome – Tory minority government dependent on UKIP / DUP support.
Best outcome – Labour minority government dependent on Green / SNP / Plaid support.
@JUF, I fear a Tory Majority more than a Tory+DUP majority, because the latter is by definition a very small majority indeed and we could probably find some Tory rebels on certain key issues (for example, there are a few Tories who oppose repeal of the Human Rights Act). Ditto vis-à-vis UKIP, who would likely be in single digits.
I prefer a Labour majority to a Labour minority propped up by a party with even worse policies on the deficit than Labour, because although the two EDs would be spendthrift and irresponsible, the two EDs+ the SNP/Plaid/Greens would be even more spendthrift and irresponsible. As Nick said at conference today, there is nothing progressive about spending £59bn every year on servicing our debts.
My fear is that we fail to learn the lesson.
Scariest outcome – Conservatives with tiny overall majority, but need Nick to lead the few Lib Dems left as support to keep Cameron’s loony wing in line. Nick duly gets his negotiating team to oblige, bounces the party into coalition by getting it all agreed and announced in the news before conference can meet, and gets a grand sounding ministry for himself but no others. No leadership election (Nick is in Government); Ryan gets mega bonus (Nick is in Government), party loses another half of its councillors and is renamed the National Liberals. Nick’s strategy is vindicated and in 20 years there is no liberal party left for a new Jo Grimond to build on.
Scariest outcome by far is a Tory/DUP/KIP arrangement, most preferable is a Lab/LD arrangement. Most likely is Lab/SNP though, although I really don’t think kiliband is up to the job.
Had some respect for Cameron but his messing up over the tv debates and his latest hypocritical cant that Labour should rule out working with the SNP (who wanted Scotland to stay, Mr Cameron?) whilst he won’t rule out working with the Right wimg kippers or DUP has put me off. Anyway, Scots will be enjoying their moment of attentiom, and won’t pay any attention to what he says – after all, it’s taken 300 years or more for the Union to get to the point where they might not, for once, be ignored.
I don’t think though that whoever is in power after this next election will be in power again for a long time, and that would,include us, if it happens!
Finally, let’s not let griping about the voting system yielding unlikely outcomes go unpunished. Broken systems get broekn outcomes, and politicians should respect what the people say and do.
First the Leadership (whoever that might be after the election need to realise that a minority government is now possible with the fixed term parliament.
Secondly real work needs to be done on how a no majority parliament and government should be organised. Pre-legistrative debates and votes are needed so that government effort is not wasted on issues which are not to be supported.
A real campaign for STV to be mounted after the result. Whatever the outcome it will not reflect the views of the electorate.
Conservative-UKIP coalition.
Conservative-Ukip coalition.
I disagree with Martin’s view that Labour support will ebb away. As the election nears, I believe that people like myself will , for possibly the first time, vote tactically to keep this nightmare scenario from happening. In North Yorkshire Labour comes second to he tories, so along with the help of Ukip biting into the tory vote, I hope that I have moved to an area where the sitting tory can be ousted.
David Evans 7th Mar ’15 – 11:08pm
Precisely.
JohnTilley 7th Mar ’15 – 5:58pm
paul barker 7th Mar ’15 – 5:51pm ((“..Our primary focus after May has to be on rebuilding our Party & encouraging splits in Tories & Labour & both those will be easier outside government, for now.))
Once again I agree with Paul Barker (I hope Stephen Hesketh is watching).
Oh I am watching John – but clearly Caron wasn’t !
One has to wonder how you got such a comment through the filters. Paul has a reputation to maintain and his silence may indicate him to be considering his options in case you endorse any of his future comments 🙂
Caracatus 7th Mar ’15 – 6:05pm
Alfred Lord T is far too grand and heroic. Clegg’s time as Leader is better summed up by Dr Mearns —
As I was walking up the stair
I met a man who wasn’t there.
He wasn’t there again today.
I wish, I wish he’d stay away.
There isn’t an outcome to the general election that would be good for the future of the country. Forget about Green and UKIP involvement in coalitions – they are going to have a maximum of three seats between them. The Liberal Democrats have spent the last five years providing stable government because that is what the country needed after the 2008 crisis, but for all the mistakes that we have made we have paid an unfairly heavy price for our principled decision. Another five years propping up a government of any description would finish the party off, and I believe the survival of a party that embodies liberalism is more important than the exigencies of the next five years’ politics. I don’t believe that Labour is ready to govern again, or has a clue about what they would do if they won, and a Tory majority would finally demonstrate Cameron’s complete lack of personal ideology as he became the prisoner of the party’s rather large lunatic fringe. That just leaves the massively destabilising factor of the SNP: if they win a majority of Westminster seats in Scotland they are not going to compromise on their raison d’ etre.
If the Lib Dems are so worried about a Tory government, then why on earth did they join them in Coalition?
My list of what I see as the plausible results in rank of worseness:
1: Con/UKIP/DUP coalition
2. Con/LD coalition
3. Con Majority
4. Lab/SNP coalition
Option 2 will destroy the Lib Dems, and all the other options are awful.
If there is a second election this year (which is quite plausible) then that would be scary: I would expect a repeat of what happened in the 1951 election where we stood in only a fraction of the seats and ended up with 2% vote share and single-digit MPs.
Scariest? We have only 5 MPs and they all want to he leader.
See Indy today.
Why would “Lab/SNP coalition” be awful?
The Dec 1910 election provides an interesting precedent: with Lib and Con almost tied on 272/271 Asquith went into coalition with the Irish Parliamentary party (74) in exchange for an Irish Home Rule Bill. [Labour had 42 seats.]
The SNP’s current demand is very similar – for a full Home Rule bill, not for independence; it is the unionist parties that are talking up a second independence referendum.
And on the economy, I like Nicola Sturgeon’s plan for a modest loosening of austerity. When are we going to recognise that Neoliberal economics is as flawed a bit of maths applied to real societies as most other economic theories?
[I recommend Professor Wren-Lewis’s recent article The Austerity Con in the London Review of Books.]
Paul In Wokingham 8th Mar ’15 – 8:02am
“Option 2 will destroy the Lib Dems, and all the other options are awful.”
Paul, on that basis surely we can not even remotely contemplate option 2 … under any circumstances … whatsoever.
Denis Mollison 8th Mar ’15 – 8:28am
“Why would “Lab/SNP coalition” be awful?”
This is my personally favoured option. Such an outcome would give us the space (and hopefully time) to ‘reclaim Liberalism’, at least start to rebuild and then fight on a much more level playing field in 2020.
All options involving the Lib Dems having to go into government with either Labour or Tory mean curtains for what remains of the party.
Any option where we are no longer the punchbag for everyone’s feelings about everything from (sadly totally necessary) government cuts to energy prices and the cost of living will be a blessed relief and allow us to rebuild.
Bill Le Breton — Did you mean this?
http://www.independent.co.uk/news/uk/politics/generalelection/lib-dem-mp-norman-lamb-takes-first-step-towards-succeeding-nick-clegg-as-party-leader-10093587.html
Ming Campbell’s revenge for the shoddy, underhand disloyalty he got from Clegg when Ming was leader, perhaps?
@Denis and @Stephen – yes, I agree on the economics front that Lab/SNP is least bad.
I thought Vince Cable’s poorly reported speech at Mansion House was absolutely spot-on : http://www.theguardian.com/business/2015/mar/05/vince-cable-calls-for-relaxation-of-spending-controls) but don’t relish the prospect of government by a combination of illberal, authoritarian parties.
The front page story on The Guardian right now is Ed Miliband saying Labour would pass a law to require TV debates. Yeah. Make a new law. How very Labour.
Paul In Wokingham 8th Mar ’15 – 9:13am …
What is “suggested” is that “The new system would work on similar lines to the current rules for planning the number, length and timing of party political broadcasts, under which parties are consulted but not given the power to stop them happening.”
I’d far rather that than the veto, on style and content, being imposed by No. 10
Nicola Sturgeon can afford to loosen austerity by borrowing because she doesn’t plan to be around when the debts fall due- the rump UK will bear the burden.
If the SNP were willing to raise taxes to pay for their spending that would be different.
@g To stop the Tories from forming a minority government and winning a majority at a second election: it is the majority Tory government that is feared.
@Paul in Wokingham
It may have escaped your notice but most parties make new laws. Presumably we can look forward to members of the coalition campaigning against the coalitions proposal to legislate for plain packaging. How very, er, Labour.
Phillip Thomas
@g To stop the Tories from forming a minority government and winning a majority at a second election: it is the majority Tory government that is feared.
This is a post-hoc justification and certainly wasn’t ever given as a reason at the time, besides they couldn’t form a majority government in 2010 and they certainly can’t form one now.
I wish the Liberal Democrats would state unequivocally that there would be no coalition with the Tories after May 7th then I could decide where to put my support.
@ACN That isn’t going to happen. The closest you could get is the “red lines”: No Repeal of the Human Rights Act is a Lib Dem red line, for example. If the Tories make Repeal of the Human Rights Act a red line, then there will be no coalition between the Lib Dems at the Tories.
The manifestos should make this clearer…
Red lines, especially LibDem ones, have become rather ‘elastic’…
@ACN
Pacts before elections, of any kind, to me are a poor way of going into elections. It almost makes a party a subset of another by saying you wouldn’t go into partnership with another. The public should decide who works with who, not us.
I don’t think we need to worry about a second coalition with the Tories. We members have the say over that and, for many of the reasons I previously outlined, I highly doubt that we would vote for one. I’ve supported our role in this Govt. and I am 80/20 against doing so for a further five years.
ATF – How does your idea work in practice?
“The public should decide who works with who, not us.”?
If you read the Laws book about 2010 — you will see that the views of the voters were the last thing on his mind.
Although one particular voter called Marshall may have had some influence.
@ Paul in Wokingham
Cable seems to be arguing that capital spending should be excluded from the government’s deficit reduction targets – which, the Guardian notes, “aligns” him with Ed Balls. Presumably all the Cable fans in these parts who take it as given that Ed Balls is fiscally irresponsible regard something as irresponsible when advocated by Balls but the height of economic enlightenment when espoused by Vince.
I would make a few observations about Cable’s stance:
1. He may not have noticed but the “fiscal mandate” pursued by the coalition is both cyclically-adjusted and applies only to the current (non-investment) budget. Net capital spending is not part of the current budget and cuts to it do not contribute to the government’s own chosen measure of deficit reduction. So in that respect Cable is merely describing the existing practice and
2. Some might retort, why in that case were there large cuts to capital spending in the first couple of years of this Parliament? The reason for this is that the government’s main fiscal mandate puts no constraint on the overall amount the government can borrow, or the rate at which it can accumulate new debt to add to the huge pile of debt that was run up during the financial crisis and the period of heavy annual deficits that ensued.
@Philip Thomas
Oh dear and still it continues. Firstly the point about relaxing the LD s austerity agenda is to boost the economy and decrease the deficit ( following the failure of the LD s strategy which apparently was their main reason for going into coalition) . Secondly the SNP have always made clear that it expects an independent Scotland to take its share of existing UK debt.
… Oops, pressed ‘post comment’ by mistake there!
… Given that a target for the current budget balance does not constrain overall borrowing and therefore debt accumulation, both the last Labour government and this government recognised that it needed to be bolstered by a commitment to stabilise/constrain the debt-to-GDP ratio. Ed Balls seems to be saying the same thing regarding the next parliament. In this context capital spending cuts do contribute to the achievement of the target, and governments of all colours have relied on them to do a lot of the heavy lifting, since they have been unwilling to cut (or often even reduce the growth of) current spending: deferring capital projects is both more ‘cashable’ for Chancellors and politically easier than facing down their colleagues in Cabinet.
Chancellors Roy Jenkins in 1968-69, Denis Healey in 1976-77, Norman Lamont and Ken Clarke in the mid-1990s, and Gordon Brown in the late 1990s all cut capital spending in preference to making economies in day-to-day spending. There is no evidence that supposedly left-of-centre or Keynesian Chancellors have calibrated this balance any more sensitively – or indeed any differently – than their Tory counterparts, whatever their proclaimed enthusiasm for public investment. Indeed, if anything (with the exception of Ken Clarke in the single year of 1996-97) Labour Chancellors have if anything relied more heavily on capital investment cuts.
Ed Balls may be talking about allowing prioritising investment spending, but that was not Labour’s practice in any of the previous periods when they had to undertake a fiscal tightening, including when he was Gordon Brown’s eminence grise at the Treasury. I note that, while he has sought to give himself “wiggle room” to relax austerity as future Chancellor, he has not indicated what level of capital spending he envisages, or indeed what level of current budget surplus (since he says he wants a current surplus) he envisages. Without any idea of this (and Cable too is silent on these matters) the commitment to prioritise “productive capital investment” is little more than a debating point.
3. I noted that there were large cuts in capital spending in the early years of this parliament. They were, however, smaller than the cuts to investment budgets set out in Alistair Darling’s plans. George Osborne took an early decision not to cut any more from investment spending than Darling had planned, and to deliver his somewhat tighter overall stance through a combination of additional tax rises (in the first Budget) and a tougher approach to current spending than Labour had planned – moving from overall real-terms increases of around 0.8% per year to more or less an overall freeze. With the economy stagnating in 2011-12 Osborne later topped up investment budgets so that capital spending has been reduced less sharply in this Parliament than Labour planned in 2010.
Caron pleased to see some realism in print, yes hope is all there is. My hope is we can get 15 seats, have a small group from which to build, obviously not lead by NC.
What’s the scariest outcome of the General Election? Not having been sent enough stamps/money/help to hang on to our hard won seats. Big thanks to Bill Le Breton, John Tilley and the Lord Greaves on here for their assistance.
4. The theory behind excluding net capital spending from fiscal targets is that it is productive investment that generates a future return, rather than day-to-day revenue spending. Another way of putting it is that it is permissible for governments to increase their liabilities as long as they are also increasing their assets.
However, as I said, in practice there will need to be an upper limit on such borrowing-to-invest, to avoid the debt ratio moving ever upwards. For example, British governments in the 1950s and 1960s ran large capital investment programmes, especially in the nationalised industries but also on ‘social ‘ infrastructure projects like housing. Yet they also ran current budget surpluses that look very large by today’s standards. In 1969-70 Roy Jenkins ran a current budget surplus of 7.9% of GDP! (Admittedly this was a rare year in which there was an overall surplus in the government accounts, but no government ran a current budget deficit at any time in the postwar period until 1974. So current surpluses, at least in part, offset borrowing for investment projects and limited the scale of the overall deficits so as to keep the debt ratio on a downward path.)
5. Moreover, as the IFS and others have noted, this distinction is easier to state in theory than to delineate in practice. And while including capital spending in fiscal targets may create a bias against investment, given that Chancellors see it as an easy option when economies in public spending are required, excluding it also creates perverse incentives. We had a clear demonstration of this under Gordon Brown, who used to reclassify items that any accountant would regard as revenue spending as capital investment. Indeed he used the term ‘investment’ not in any strict economic sense but as a rhetorical weapon against political opponents who might (though all too rarely did) question his fiscal rectitude. It is to be hoped that the OBR will be a bulwark against such financial engineering should future governments be tempted to follow the Brown example.
6. Investment spending produces benefits for both current and future generations, while the additional debt taken on entails servicing costs which must be borne largely by future taxpayers (whereas borrowing to fund revenue spending saddles future taxpayers with the costs but few, if any, benefits). There is thus a general balance to be struck in terms of distributional fairness, in addition to the cost-benefit analysis of specific capital projects. It is neither the case that borrowing for investment is axiomatically a good thing, nor that any borrowing to finance investment is unfair to future taxpayers. There is a case for saying that, as the benefits of investment will be shared between current and future generations, the costs should likewise be shared and investment spending should be financed by a mixture of revenue and gilt issuance. This would mean that, when the economy and the public finances are in a state of reasonable equilibrium, some portion of net investment spending (perhaps up to half) could justifiably be financed by borrowing, but not the whole of it.
7. If instead you think it’s fine for all investment spending be financed by borrowing, whether the economy is in recession or booming, this is in fact a recipe for runaway government deficits and debt – since, when the economy turns down, the government will inevitably also find itself borrowing to cover its day-to-day spending. So what looks like a justifiable distinction designed to boost productive investment ends up as a dangerously lopsided and ‘asymmetric’ policy over a full economic cycle. This is precisely what happened under Gordon Brown’s interpretation of the ‘golden rule’. He borrowed to finance the whole of his investment programme and did not run any offsetting current budget surplus throughout the 2002-07 period (indeed he ran substantial current deficits). Then, when the financial crisis and recession came, the current deficit exploded from an already weak position. So the corollary to borrowing for investment purposes is that the current budget must at the very least be allowed to accumulate cyclical surpluses and arguably structural surpluses. In practice this means the government should not be borrowing to finance all of its investment in normal times (recessions are another matter).
8. Finally, I would point out that although in principle there is a justification for allowing some borrowing to finance investment, consistent with a stable or falling debt ratio, this takes no account of the starting point or the ‘legacy costs’ of the financial crisis and recession. Given that the debt ratio has more than doubled in the space of eight years – to more than 80% of GDP in net terms and closer to 100% in gross terms – there is a strong argument for reducing it steadily and not merely stabilising it at such a high level. Failing to do so will leave a future government faced with a downturn in the economy with precious little headroom to absorb it, let alone conduct Keynesian ‘fiscal stimulus’ policies should these be appropriate.
And while merely reducing the deficit to (say) 1% or 1.5% of GDP per year should probably be consistent with a declining debt ratio, progress would be glacial, compared to an alternative policy of running an overall surplus of the same magnitude. The effects of these debt dynamics build over time: the IFS has calculated that, if the Autumn Statement plan to deliver a 1% of GDP surplus by 2019-20 were to be achieved, and the surplus held at that level over the ensuing decade, the debt ratio would fall by 27 percentage points; whereas if merely the current budget was balanced, allowing an overall deficit (in their example) of 1.2% of GDP, the debt ratio would fall by just 9pp. So whatever the theoretical justification for borrowing to invest, and the distinction between this and borrowing for current spending, there is a strong argument for managing down the debt ratio more aggressively through a policy of overall surpluses while the economy is growing.
@hireton The failure to reduce the deficit under this government is largely the fault of the Triple Lock, which means that the single biggest item on the welfare budget continues to increase at above the rate of inflation. Almost a thousand pounds increase in the state pension since the start of the government, £12bn added to the welfare budget. Since a Liberal Democrat invented the Triple Lock, we must indeed take the blame for this. But I don’t think that is what you meant. You think that you can boost the economy simply by borrowing and spending: but that is how we arrived at this mess in the first place. The economy will recover on its own: creating an artificial bubble is positively harmful.
As for an independent Scotland taking its share of the national debt, that still means Sturgeon has incentive to incur more national debt and use it to boost national spending- Scotland has more than its share of national spending, so the net result is more money for Scotland.
Absolutely, Philip. Also, in response to Hireton, why has the anti-austerity tune not changed since 2012? In case you haven’t noticed, the economy is now growing strongly and has been for some time. It is growing at close to 3% per year, somewhat above its trend growth rate even if you assume the financial crisis has done no permanent damage to our ability to grow. If now is not the time to cut borrowing, when is? What rate of growth do you wish to see? Are you confident that the British economy could sustain annual growth of (say) 4% per year, when it has not been able to before?
The reality, it seems to me, is that many of those who opposed ‘austerity’ ostensibly on the grounds of timing were using the macroeconomic demand-management argument as a figleaf. They oppose budget retrenchment tout court. It is not a question of timing, or indeed of economics. If it were, then they would now say, we were right to oppose fiscal tightening a few years ago but, as good Keynesians, we accept it is now appropriate and indeed ought to intensify as the economy and private sector recovery strengthen. Oddly, they do not seem keen on the Keynesian proposition that the necessary counterpart to deficit financing in recessions is retrenchment during the recovery and growth phase.
They might benefit from studying the famous 1944 Employment Policy White Paper, which endorsed Keynesian methods and which postwar governments took as a commitment to ensuring a ‘high and stable’ level of employment.
The Paper was in fact full of qualifications as to what it was, and was not, sanctioning or endorsing. It certainly endorsed the operation of what we would now call ‘automatic fiscal stabilisers’, the tendency for the public finances to weaken during a downturn in response to a weakening of private demand.
But it remained sufficiently orthodox as to make it clear: None of the main proposals contained in this Paper involve deliberate planning for a deficit in the National Budget in years of sub-normal trade activity. The implication was that running down a surplus during a downturn would have the same effect on demand as running a deficit, but without the associated debt build-up.
It said that responsible fiscal policy “does not mean a rigid policy of balancing the Budget each year regardless of the state of trade. There is nothing to prevent the Chancellor of the Exchequer…from taking into account the requirements of trade and employment in framing his annual Budget.
Yet it insisted that over the trade cycle as a whole, the overall budget should be balanced: “At the same time, to the extent that the policies proposed in this Paper affect the balancing of the Budget in a particular year, they certainly do not contemplate any departure from the principle that the Budget must be balanced over a longer period.”
The authors of the White Paper had enough foresight to realise that the adoption of Keynesian techniques might create a lopsided set of incentives – giving politicians a pretext to borrow in good times as well as bad. But, perhaps in vain, it hoped politicians would be sufficiently principled as to take a self-denying ordnance rather than buy votes. Instead they should educate the public in the need for surpluses as a quid pro quo for deficits.
“Measures to increase total expenditure at the onset of a depression may be welcome; but the restraining measures appropriate to a boom may meet with opposition unless they are seen and understood as the price that must be paid for the success of that policy over a longer period.”
In the event, it turned out that these hopes were misplaced and the cautionary words and qualifications fell on deaf ears. Politicians took the discovery of Keynesian remedies as permission to borrow as much as they could get away with, until the markets – that is to say their creditors – ultimately forced a humiliating and painful retreat.
While I appreciate that government bond yields are currently at historic lows, this should not become the latest pretext for lax fiscal policy. Given our state of indebtedness, it is as well that yields are so low. Even as it is, interest payments are swallowing up a large enough chunk of the public budget. If and when interest rates rise in response to economic recovery, borrowing will become more expensive pretty quickly. And the government’s continuing ability to borrow cheaply to fund the large deficits it will be running in the next few years should not be put a risk by inadequate plans to manage the debt ratio downwards in the medium term.
@John Tilley
The tried and tested Most seats/votes has the first chance to try and form a government . No fail safe formula is available, which is a weakness to that argument, but I can’t see whatever option is available really.
More generally, the more I think about it though, the more certain I get that we should not be involved with the next government. 2015 is very different from 2015. The economy is yet to be working for everyone, to understate the point, but I’d say the real challeneges that we will soon face are foreign policy and not economic . As such, the need for a stable govt is less ans matters of war, after the Syria vote, now seem to be matters for the legislature and not the executive.
Also, I think party members are much more clued up on what they need to do in May than in 2010. I think many just got caught up in the rush of forming a government without ever planning much beyond that week. Would include myself in that camp.
*2010 is very different from 2015
Darn typo.
The scariest outcomes are a very low turnout or a Government formed with less than 50% of the popular vote. Scariest of all would be both conditions. Those scenarios would indicate democracy being broken. Those who lived through Wilson, Heath, Thatcher and Major, who will be historical figures for the youngest voters, know the country will survive somehow and nothing can ever be as scary as Thatcher with a landslide. Any Government that arises in 2015 will be weak and compelled to compromise at times.
Caracatus :
“. . . .even the greens thunder’d”
That would be the repetitious Brussels sprouts, then? 😉
Even Thatcher didn’t contemplate withdrawal from the EU and the ECHR.
But we shouldn’t be afraid of having a referendum and making the case. If anyone is scared of that then they clearly think the case for staying in is weak. A referendum will shut up UKIP and the Tory right for another 40 years.
I would be happy with an EU referendum on the European Parliament franchise, although I think if there was a close result the Europhobes would demand a rerun. I don’t think the ECHR is an appropriate subject for a referendum.
But there’s a difference between “weak” and “unpopular”. I don’t want a referendum on abolishing income tax, not because I think the case against abolishing tax is weak, but because I don’t want to take the risk.
Philip: I think the justification for a referendum lies in a different direction. It is appropriate where the question is a constitutional one, a matter of where power is exercised as opposed to particular policy decisions. For the latter, we have a representative democracy and Parliament. But where the decision-making power is itself transferred away from Parliament to other bodies (upwards to the European Union, or downwards to Devolved assemblies, city mayors etc) there is a strong case for that transfer being endorsed by a plebiscite. In the case of the EU, the relevant question is whether, 40 years on from the last referendum and in the context of a completely different political and institutional landscape, a new mandate (one way or the other) should be sought directly from the people. I say it should.
Well, I have already said I would agree to it. I’m just saying that opponents of the referendum don’t have to think the case for the EU is weak.
Stevan Rose
“A referendum will shut up UKIP and the Tory right for another 40 years.”
I used to think that. But it doesn’t seem to have worked that way for Scottish independence.
An EU referendum in the next few years is probably inevitable, and at least holding it will strengthen the argument of the Ins against Outs claiming that we’re scared of the people’s voice. But just as “because we might lose it” would be the worst argument for refusing a referendum, “because it will end the campaign for withdrawal” is probably the worst reason for agreeing to it.