The Liberal Democrat post-credit crunch economic policy. A blow by blow account.

John Harris wonders why the Liberal Democrat party faithful seems so incapable of defining what the Liberal Democrats stand for, unlike the masterful Vince Cable. A clue may come in the fact that the party’s core message on the economy has changed in a significant way on at least eleven separate occasions over the last two years despite very few of these shifts actually being party policy.

Let’s look at Liberal Democrat policy since the credit crunch (assuming for a moment that September 2007 is effectively Year Zero). In terms of tax policy alone, we started with a policy paper overseen by Vince, itself the second in as many years, which essentially called for a 4p cut in the basic rate in income taxes to be paid for by increasing taxes on pollution and the rich. Oh, and to replace council tax with a local income tax which would come to, roughly, 4p in the pound. Clear?

By spring 2008, with the storm clouds already starting to look very grey indeed, Nick Clegg started flying kites about tax cuts. By the summer, that had coalesced into a commitment to identify £20bn of public spending “waste” and a vague promise to cut taxes if after identifying all our spending commitments there was a bit left over. At the start of September however, Clegg had announced that he and Cable had agreed that the “vast bulk” of this £20bn would be passed on in the form of tax cuts, a statement which had the predictable effect of sending the party into a complete tiswas.

A few days after that, manifesto chair Danny Alexander further clarified Clegg’s clarification by explaining that Clegg was in fact referring to the “vast bulk” of money left over after the party had fulfilled all its spending pledges, not the vast bulk of the £20bn overall. This of course begged the question of where the small amount of money that was neither going on tax cuts or public spending was supposed to be going. By the autumn 2008 conference, things had got even more confusing. Nevertheless Cable and Clegg managed to get their proposals through conference, although this involved people supporting them on the grounds that we probably wouldn’t end up cutting taxes overall at all.

This new policy, which by now no-one understood, lasted a whole fortnight before the banking bail out rendered the entire thing moot. Unperturbed however, in April 2009, the pledge to drop the basic rate of income tax was replaced by a pledge to raise personal allowance. In July 2009, after what was by all accounts a tense and at times explosive policy committee meeting to agree the party’s pre-manifesto, Nick Clegg announced that the Lib Dems’ “shopping list of commitments” at the next election would be “far, far, far, far, far shorter” despite the fact that the pre-manifesto itself says no such thing. On Tuesday last week Cable published a pamphlet proposing £14bn of government spending cuts which would have to be made to pay off the national debt. This seemed to be suggesting that the party’s list of spending commitments would not merely have to be shorter but essentially non-existent. This vision of doom opened up enough space for Nick Clegg to open conference on Saturday announcing an intention to drop the commitment to scrap tuition fees and to start talking about “savage cuts”. And the position changed yet again on Monday with Cable announcing a new “mansions tax”, a policy which had apparently been written on the back of the cigarette paper which David Cameron had been experimentally attempting to slip between the Lib Dems and Tories the day before. By Monday evening he was arguing for a watering down of the party’s commitment to a local income tax.

Is it really that surprising that we mere mortals are somewhat confused?


  1. Many people attack Clegg for being anonymous, and for not making a greater impact on our polling numbers. These same people usually have no idea about what to do better, and so can be easily dismissed. I really think that the Lib Dems are swimming against a tide of anti-Labour feeling, faint pro-Tory feeling, and, if not media bias, then certainly media indiffference.

    What the leadership can be blamed for is awful, awful messaging of the sort demonstrated above. Another example: in the written copies of one of Clegg’s speeches recently, handed out beforehand to the media, he called for ‘savage’ cuts. Yet, faced by a crowd at conference, this turned into ‘serious’ cuts. Danny Alexander has to explain to the press what the hell Clegg means, confusion reigns. This is Clegg’s major fault; making snappy, apparently extemporaneous, soundbites (‘vast bulk’, ‘far, far, far, far, far…’, ‘savage’). The ‘mansion tax’ was an awful debacle as well. Why didn’t we just restate our devotion to local income tax if we wanted to show our interest in social justice? It would have been a lot less – yes, that word again – confusing.

    I have no problem with changing policy per se, but I wish the leadership actually knew what it’s doing, and didn’t look so slimy in the process.

  2. I should also like to express my dislike of the idea that wealth is ‘created’ by an elite of geniuses who deserve every single penny they can screw out of their respective inventions. Clearly, someone who creates an idea that is truly transformative (be it computer software or a new type of vacuum clearner) deserves reward, which is given to them in spades in our economic system. But so do the people who actually make the vacuum cleaner, or who do the drudge work of coding the software, or whatever. They too are vital for the creation of these goods, and are too often repayed with low salaries, poor job security, and a quality of life from which the Dysons, Gateses and Jobses of this world are completely insulated from.

    We are nearly all (in differing ways and to differing extents) wealth creators! None of these tax changes proposed seriously impinge of the idea of incentive – we’re a long way (thank God) from 90% income tax. Less of the Randyan dreams of the Great Man, more of the democratic aspirations of the little one!

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