by Stephen Tall on June 12, 2012
Lib Dem Voice has polled our members-only forum to discover what Lib Dem members think of various political issues, the Coalition, and the performance of key party figures. Some 560 party members responded, and we’re publishing the full results.
54% of Lib Dems back ‘new approach’; but 27% say ‘stick with Plan A’
LDV asked: Thinking about the government’s economic policies, which of the following best reflects your view?
27% – Borrowing more at a time when we already owe so much will simply make matters worse, as the country will have to pay back even more money in the longer term. We have to bring the debt and the deficit under control even if it has some painful effects for the economy in the short term.
54% – While it is right that we cut the deficit and I broadly support the government’s austerity measures, the frailty of Europe’s economies requires a new approach – we should take advantage of low interest rates to increase borrowing for capital investment to boost growth in the UK.
11% – The government’s spending cuts and tax rises are hurting the economy. It should cut spending less severely and less fast, even if that means we go on borrowing more for longer – because given how much we already owe, borrowing an extra few billion pounds cannot do much more harm.
6% – Other
1% – Don’t know / No opinion
Our survey shows a clear majority of Lib Dem members, while broadly supportive of the Coalition’s public spending cuts, want to see far greater investment in the country’s infrastructure through a Keynesian-style stimulus. This is an approach which has been strongly advocated by economists such as the Financial Times’s Martin Wolf, as well as by Prateek Buch of the Lib Dems’ own Social Liberal Forum.
There is, however, also a sizeable minority — more than 1-in-4 Lib Dem members — who back wholeheartedly the Coalition’s current austerity programme as the only way to solve the UK’s accumulated problem of massive public and private debt, with the economy overly reliant on debt-driven personal and public consumption spending.
A smaller minority, little more than 1-in-10 Lib Dem members, reject entirely the Coalition’s approach as damaging, and advocate instead a slow-down of austerity to maintain levels of public spending in order to boost growth. Here’s a selection of your comments:
We need to be smarter about what is cut. It’s unwise to cut things which bring a rapid net return to the government. Such investments are not always capital projects. For example, investing more in HMRC could massively improve tax collection rates, e.g. for business taxation.
Keynes not Hayek. Deficit spending is actually positive in deep recessions. Countries doing in the 1930s what are now doing suffered most – and ended in chaos.
I agree with the second option, but austerity measures at the moment affect those on lower incomes considerably more than others. To be ‘all in it together’ means that those on higher incomes should have to make the same compromises in their lifestyles as people who are losing their jobs and can’t pay the rent or mortgage.
My view has always been that the Lib Dems should NOT have fallen in line with what has now been shown to be a catastrophic and ideological Thatcherite policy line.
We have to reduce the government debt but doing so by cutting expenditure, which equals cutting jobs, in a time of recession reduces economic activity, economic confidence, government tax revenues and increases government expenditure. It is therefore counter productive. what we should be doing is raising taxes, which though it tends to have the same effect raises revenue sooner and causes problems more slowly.
A truly effective public sector would ultimately make itself redundant. Government spending should always be in the form of sustainable investment that reduces needs and costs in the long run.
If there is an option to lock-in the low interest rates we currently have for long period loans, then it would be financially sensible to borrow more, possibly significantly more. Ideally, the government should look at fixed-rate perpetual bonds (consols). If long-term low rates are not available, then the risk is too great to borrow on short-term loans, and the cost too great to borrow on long-term higher rates.
The important thing is to act based on evidence rather than be seen to stick to an ideological position. We need to react to the continued weakness of the economy with measured caution, not throwing away the hard-won credit for the deficit reduction pan. But not to ignore circumstances either. There is much merit in the “Plan C” suggestions put forward by the SLF.
I agree with the IMF. We have been proven right up to now but there is room for some reduction in VAT
We absolutely must not relax the targets on the revenue account, but a stimulus based on capital expenditure (ideally coordinated across the continent) or even quantitative easing can help kick start the economy.
LVT should be introduced and more progressive taxation of income and wealth is needed. Shift more of the burden from expenditure to higher taxation
It appears that the major countries not addicted to debt such as Germany and Japan are much more successful than those that are addicted to debt such as USA and UK.
Borrowing more and building more of the economy on state spending is returning to the ways of Brown. We have to rebalance the economy so the private sector can grow, even with short-term pain caused by the way Labour left things.
We must have a balance between keeping a good credit rating (ie having a sensible approach to the deficit) and encouraging growth. This balancing will change and therefore government policy cannot be too rigid.
As Liberal Democrats we need to stick with our principles which must mean that we need to cut unemployment and give the economy a boost by a Keynsian capital investment programme.