Why we need a Lib Dem-Tory alliance

It’s time to strengthen the liberal-right in British politics.

Nearly two years into the coalition, both of the governing parties are promoting their distinct identities to garner supporters. This is because the Conservatives want an outright majority. The Liberal Democrats just want survival.

But as David Laws commented in a keynote speech to Bright Blue this week, now is not the time to stress differentiation and split the coalition. A better strategy - for both parties and, most importantly, for the country, especially in this period of economic turbulence - is to stress the shared agenda of the two partners and the longevity of the current government.

In actual fact, it's time to seriously consider a long-term relationship, even a merger, between the two parties which lasts beyond 2015. The liberal-right needs a strengthened political identity in this country, to dilute the influence of ideologues and reactionaries, and to maintain progressive policy-making.

The Conservatives face a weak opposition and Cameron is popular with the electorate. But it is not enough. Polling by Michael Ashcroft of voters in key marginal seats shows that those who failed to give the party the votes they needed for a majority, are still sceptics today. Low-income women and ethnic minorities are particularly doubtful. Teaming up with the Lib Dems would help reassure such voters that the party really is decontaminated, modern and liberal-minded.

The Lib Dems can never govern alone. They rely on coalitions. The problem is, transferring from one party to the other looks like flip-flopping, and they will be punished by voters. Their best hope of long-term influence lies in a merger with one of the major political parties. A liberal-right alliance would be consistent with their Gladstonian traditions and allow greater distinctiveness and influence than a Lab-Lib pact.

Finally, and most importantly, the country would benefit from a new liberal-right alliance. The truth is, since the 1990s, most senior minsters and civil servants have subscribed to economic and social liberalism: a belief in a competitive, market-based economy with protection and enhanced opportunities for the most vulnerable.

So all recent governments have sought low taxes, light-tough regulation and private sector engagement in public services. But, at the same time, there has been commitments to tax credits, enhanced investment in hospitals and schools, better workers' rights and a determination to protect personal freedom. This consensus on policy-making has - apart from notable anomalies - been followed by Cameron, who followed Blair, who followed Major.

Yes, there are problems with our economy and our society. More still needs to be done. But these liberal, pro-market reforms - based on close inspection of evidence - have made this country, slowly but surely, better. Satisfaction with our health service is at an all-time high. Educational standards are up. Crime and levels of poverty are down.

But the liberal-right - on the modernising wings of the three main parties - who are open to evidence and passionate about progress are under constant pressure from ideologues, who are nervous and uncomfortable about the direction of modern Britain. To keep these voices happy, archaic and ridiculous narratives, as well as ill-considered policies, are often trumpeted.

So, for example, we have Cameron proposing a transferable tax allowance for married couples, a throw-back to the 1950s which will do nothing to boost marriage rates. Clegg, meanwhile, went into the last election calling for the scrapping of tuition fees, despite the fact that the new funding arrangements have not harmed university access for the most deprived. In the Labour party, there is stubborn opposition to private sector involvement in the health service, despite a wealth of evidence illustrating that increased competition enhances the performance and efficiency of hospitals.

Such thoughtless policy positions are championed simply to gratify unthinking, prejudiced viewpoints, which spread and are slavishly adhered to in political parties. Ideologues that enjoy the belligerency and tribalism of politics rise up the ranks and wield too much power, distorting steps to social and economic progress.

A new liberal-right alliance could change that. There would, of course, be room for those on the modernising wing of the Labour Party. Those who are passionate about good policies and open to new ideas, not dogmatists and tribalists, would be more influential. And the silent majority in this country - who simply long for a better life for their families, whichever party is in power - would benefit from a new sort of politics: discursive, progressive and evidence-based.

Ryan Shorthouse is the Director of Bright Blue

Ryan Shorthouse is the Director of Bright Blue, a think tank for liberal conservativism 

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George Osborne's mistakes are coming back to haunt him

George Osborne's next budget may be a zombie one, warns Chris Leslie.

Spending Reviews are supposed to set a strategic, stable course for at least a three year period. But just three months since the Chancellor claimed he no longer needed to cut as far or as fast this Parliament, his over-optimistic reliance on bullish forecasts looks misplaced.

There is a real risk that the Budget on March 16 will be a ‘zombie’ Budget, with the spectre of cuts everyone thought had been avoided rearing their ugly head again, unwelcome for both the public and for the Chancellor’s own ambitions.

In November George Osborne relied heavily on a surprise £27billion windfall from statistical reclassifications and forecasting optimism to bury expected police cuts and politically disastrous cuts to tax credits. We were assured these issues had been laid to rest.

But the Chancellor’s swagger may have been premature. Those higher income tax receipts he was banking on? It turns out wage growth may not be so buoyant, according to last week’s Bank of England Inflation Report. The Institute for Fiscal Studies suggest the outlook for earnings growth will be revised down taking £5billion from revenues.

Improved capital gains tax receipts? Falling equity markets and sluggish housing sales may depress CGT and stamp duties. And the oil price shock could hit revenues from North Sea production.

Back in November, the OBR revised up revenues by an astonishing £50billion+ over this Parliament. This now looks a little over-optimistic.

But never let it be said that George Osborne misses an opportunity to scramble out of political danger. He immediately cashed in those higher projected receipts, but in doing so he’s landed himself with very little wriggle room for the forthcoming Budget.

Borrowing is just not falling as fast as forecast. The £78billion deficit should have been cut by £20billion by now but it’s down by just £11billion. So what? Well this is a Chancellor who has given a cast iron guarantee to deliver a surplus by 2019-20. So he cannot afford to turn a blind eye.

All this points towards a Chancellor forced to revisit cuts he thought he wouldn’t need to make. A zombie Budget where unpopular reductions to public services are still very much alive, even though they were supposed to be history. More aggressive cuts, stealthy tax rises, pension changes designed to benefit the Treasury more than the public – all of these are on the cards. 

Is this the Chancellor’s misfortune or was he chancing his luck? As the IFS pointed out at the time, there was only really a 50/50 chance these revenue windfalls were built on solid ground. With growth and productivity still lagging, gloomier market expectations, exports sluggish and both construction and manufacturing barely contributing to additional expansion, it looks as though the Chancellor was just too optimistic, or perhaps too desperate for a short-term political solution. It wouldn’t be the first time that George Osborne has prioritised his own political interests.

There’s no short cut here. Productivity-enhancing public services and infrastructure could and should have been front and centre in that Spending Review. Rebalancing the economy should also have been a feature of new policy in that Autumn Statement, but instead the Chancellor banked on forecast revisions and growth too reliant on the service sector alone. Infrastructure decisions are delayed for short-term politicking. Uncertainty about our EU membership holds back business investment. And while we ought to have a consensus about eradicating the deficit, the excessive rigidity of the Chancellor’s fiscal charter bears down on much-needed capital investment.

So for those who thought that extreme cuts to services, a harsh approach to in-work benefits or punitive tax rises might be a thing of the past, beware the Chancellor whose hubris may force him to revive them after all. 

Chris Leslie is chair of Labour's backbench Treasury committee.