“Osborne’s waving an enormous red flag” – Social Liberal Forum’s warning to Lib Dems over Autumn Statement

by Stephen Tall on December 11, 2013

Prateek Buch, director of the Social Liberal Forum, has an article in today’s Independent – The Lib Dems should not sign up to Osborne’s austerity straitjacket – issuing a stark warning to his fellow Lib Dems to take note of the “enormous red flag” he says was waved by George Osborne in last week’s Autumn Statement.

That flag was the Chancellor’s pledge for the economy to move into surplus by 2018/19, within the course of the next parliament. To achieve that – what, in effect, was the original Alistair Darling plan to eliminate the deficit over two parliaments – will be no mean task, as the Institute of Fiscal Studies made clear in its assessment of the Autumn Statement:

[Osborne] has said that he wants to extend the effective consolidation for another year, into 2018-19 by freezing total spending that year. Since “annually managed expenditure” [ie, social security payments, including pensions] will still be rising then that implies another hefty cut to departmental budgets. He doesn’t need to do that to meet the Government’s fiscal targets. And, if he is still in number 11, he may not find it easy given the pressures on spending that will without doubt have built up by then. As the Office for Budget Responsibility has pointed out, achieving this would require “general government consumption to fall to its lowest level as a share of national income since consistent data began in 1948”. … This would actually imply an acceleration in the rate of public service spending cuts – from 2.3% a year between April 2011 and March 2016, to 3.7% a year between April 2016 and March 2019. Simply to avoid such an acceleration in cuts in this kind of spending would require cuts in welfare (or other “annually managed expenditure”) spending of a further £12 billion a year by 2018-19.

And here’s Prateek’s version for a Lib Dem audience:

The Liberal Democrats cannot, or rather should not, sign up to the Chancellor’s plan to lock in austerity – deeper than planned at any stage since 2010 – up to and beyond 2018. For one, it is economically illiterate. For another, the ink is barely dry on a hard-fought deal struck by the party to fight the next election on our “own distinctive economic policies,” including fiscal plans to aid investment in “people, business and infrastructure,” not on the same terms as Tory austerians. Any deal to balance the budget in the next Parliament no matter the state of the economy – and more importantly, peoples’ living standards – flies in the face of that independent economic position.

The Lib Dem leadership don’t accept Prateek’s analysis. They say all three parties signed up to eliminate the deficit (ie, ‘balance the books’) over the course of two parliaments – but how this would be done will differ. The Conservatives will clearly look to achieve it through deeper spending cuts. The Lib Dems will be far more likely to advocate more tax increases on the wealthy, including Vince Cable’s mansion tax, and fewer and different spending cuts, including to wealthy pensioners’ benefits. So they’re quite content to sign up to the overall plans while disagreeing on how they would be implemented and putting that to the voters.

The Independent also carries an editorial on the party leadership’s economic positioning, In supporting George Osborne’s ‘fiscal contract’, Nick Clegg mapped out his party’s future – and his own:

Despite the grumbles we report today, events of the past few months have strengthened Mr Clegg. After a good party conference, he has rarely had more authority as leader. If he were replaced, for instance by Vince Cable or Tim Farron, they would inherit policies that they may have opposed privately, or indeed publicly, not so long ago – assuming they stick with the Tories. If it is a Lib-Lab administration it would be even worse; a new Liberal Democrat leader would have to renounce the central planks of economic policy proposed only weeks earlier at a general election. This is Cleggonomics: by tying his party to the Coalition’s economic agenda, Mr Clegg has tied his party to him.

It’s conclusion is abruptly supportive of what it terms ‘Cleggonomics’:

Committing the Lib Dems to a continuation of Coalition strategy puts his party in an unfamiliar position: promising less than it could deliver if it gave itself a freer hand to negotiate with Mr Cameron and Mr Miliband. But it is the mark of a serious party; and, moreover, it is the mark of a party of government .

* Stephen Tall is Co-Editor of Liberal Democrat Voice, and editor of the 2013 publication, The Coalition and Beyond: Liberal Reforms for the Decade Ahead. He is also a Research Associate for the liberal think-tank CentreForum and writes at his own site, The Collected Stephen Tall.