Introducing (ish) Da Dr Pack & Mr Tall Debate… What’s the Lib Dem economic narrative now?

by Stephen Tall on December 3, 2011

“Y’know those times when you don’t have enough time to write a post…? Well, why not let’s just email each other til we have enough words?”

I paraphrase, but that was the pitch Dr Mark Pack, my LibDemVoice Co-Editor, made to me when I was sortofgrumbling that I lacked bandwidth to contribute more to the site.

The first result is available here in its original format (with vigorous comments thread) at Da Site, and blatantly copied ‘n pasted below (we never resolved the copyright issues) for those who prefer to read it in the here & now…

In the week of the Chancellor’s autumn statement, LibDemVoice co-editors Mark Pack and Stephen Tall debate what it all means for the Lib Dems…

Stephen Tall: So we now all know the painful financial reality. With growth forecasts revised down by the Chancellor in his autumn statement, austerity is here to stay.

Both Lib Dems and Tories had hoped and expected that three years of painful cutbacks would be followed by a year or two of pre-election giveaways — the Lib Dems would press for a balanced mix of increased public spending on areas that had suffered most, together with more tax-cuts for the low-paid, while the Tories would focus on their tax-cutting priorities like inheritance tax and fuel duty. Both Coalition parties would have popular measures they could sell to the electorate, and which reinforced our respectively distinct identities. And both would be able to say to voters, ‘If Labour had been in power you’d still be looking at a couple more years cuts. We took the tough decisions early, now we’re all feeling the benefit’.

But all these calculations have now been turned on their head. When Danny Alexander was asked on Newsnight on Tuesday if the Liberal Democrats would go into the next election promising nearly £30bn more austerity, he replied: “I’m afraid so.” So where does this leave the party? Have we now signed-up by default to fighting the next election on a platform of more cuts until 2017? If so, does this in effect commit the Coalition parties to fighting on a united programme — albeit with different candidates and different manifestos — in 2015 against Labour?

Mark Pack: Predicting where the economy will be in six months time let alone three, four or five years is a highly uncertain business. It is not just the government’s economic forecasts that keep on changing, so too do independent (eg, OBR) and international (eg, OECD) ones. Labour too has been changing – it was forecasting 3.25% growth this year and when quizzed about this not even Ed Balls was willing to say Labour would have achieved that.

So it is not wise to put too much weight on current intentions for what will be done in 2015, save for what it tells us about political and economic instincts. One is that Danny Alexander wants to see the Liberal Democrats firmly committed to tough financial responsibility. That is not the same as signing up to Conservative policies – unless of course you take the absurd view that all tax cuts or increases are the same as if changing the top tax rate is no different from changing the bottom one. The same fiscal targets can be achieved in politically very different ways.

The second is that the assumption in senior Liberal Democrat circles is that Labour will eventually take up a similar position about financial responsibility, so that Alexander’s views do not end up being compatible with only a deal with the Tories in another hung Parliament. If that does not happen, then there will be very lively debate in the party.

Stephen Tall: In fact, the party is in no different a position than we would’ve been if we were a majority governing party right now (rather than the junior coalition partner), as our 2010 manifesto did not commit us to eliminating the deficit within the lifetime of one parliament. Sticking to that would’ve made post-2015 cuts inevitable if we were to balance the budget; the problem is simply more acute now because of the sluggish state of the western economy and the Eurozone’s problems.

And you’re right of course that Labour is in exactly the same position – indeed, Alistair Darling’s pre-election plans were for the cuts to last until 2017 – and today sees the launch of ‘In the black Labour’, a group of party activists determined to regain for their party the economic trust which they’ve so catastrophically forfeited. They make a crucial point, one which applies just as much to the Lib Dems as the other progressive force within British politics: “Labour must put fiscal sustainability at the absolute core of its policy agenda, to ensure low interest rates and steady economic growth. Not just for electoral reasons, but because fiscal stability is vital in securing social justice”.

That is precisely the argument the Lib Dems must continue to make (while Labour continues to dither) between now and the 2015 election. It’s crucial to Lib Dem success that we can demonstrate our ability to be financially responsible while making the political choices that show we’re very different from the Tories – our emphasis on taking the poorest out of tax is a case in point.

Mark Pack: Even within the Liberal Democrats, little credit is usually given to the very different approach to tax that the Liberal Democrats have achieved in coalition from what the Conservatives wanted – because so many of the changes happened quickly last summer (capital gains tax increases, pension tax breaks for the richest cut and so on) and because some of the most important things are those which have been stopped (marriage tax breaks, for example). It would therefore be unwise to assume that there will automatically be political credit to be won over taxes but there most certainly is a great opportunity there, as long as the party sorts out its views on wealth taxes.