Nick Clegg is perilously short of friends – but his enemies seem determined to help him

Lib Dem strategists are brimming with gratitude to the two big parties for making single-party government seem an unattractive proposition.

It is a measure of how bad things once looked for the Liberal Democrats that progress for them consists of having a leader who is disliked only as much as every other politician.
 
Nick Clegg is no matinee idol but neither is he the object of mass derision. At the peak of his ignominy, immediately after reneging on a pledge not to raise university fees, the Lib Dem leader’s villain status transcended political animus. He entered the cultural lexicon as a byword for dishonour.
 
Most of Westminster deemed the wound fatal. Yet he will address his party’s annual conference as a man determined still to be in government after the next general election – and with reasons to think it possible. There is growing confidence in Clegg’s inner circle that parliament will stay hung after 2015. Their calculation is that Labour can mobilise enough anti-Tory energy to obstruct David Cameron but not enough enthusiasm for Ed Miliband to sweep to victory.
 
Every election campaign is a culture war between challengers pledging change and incumbents offering more of the same. Clegg is persuaded that, for the time being, grudging continuity has the edge. One lesson he has drawn from recent history is that risk-averse British electorates need exceptional reasons to evict serving governments – prolonged periods of abject failure (the Tories in the run-up to 1997), or colossal crises (the great economic bust that did for Labour in 2010). In the past 35 years, voters have handed power to the opposition only three times. As a senior Lib Dem adviser puts it: “More of the same usually wins in Britain.”
 
The Lib Dems cannot be seen to have preferences for post-election scenarios. Their line is to await the verdict of the electorate and follow the parliamentary arithmetic towards any future coalition. But in private conversations Clegg’s allies exude prejudice in favour of renewing the existing partnership with Cameron. The roseate glow of coalition’s early days has passed but so has the rancour stirred by battles over constitutional reform, leaving a workaday habit of doing business. By contrast, top Lib Dems discuss with foreboding the prospect of dealing with a Prime Minister Miliband.
 
Clegg is said by friends to have been unimpressed by the indecision he witnessed during his closest collaboration to date with the Labour leader – the negotiations over a royal charter for press regulation. Unflatteringly, comparisons are made with Cameron, with whom he can at least disagree quickly, cut a deal and move on.
 
That pro-Tory bias runs against the tide of opinion among ordinary Lib Dem members, many of whom anticipate a 2015 deal with Labour. There is deep concern that serving another term as adjuncts to the Tories would signal an irreversible centre-right alliance. It would be wrong to mistake resistance to that idea for ideological comradeship with Miliband. The Lib Dems gifted a parcel of their voters to the opposition the second they signed up to coalition. That leaves Clegg’s army numerically diminished but more resolute in its independent identity.
 
The boundary with Labour is less porous than believers in a “progressive coalition” think it ought to be. A handful of councillors have swapped sides but there have been no high-profile defections. The Lib Dems who squirm on the government benches say they feel no magnetic pull from the other side of the chamber, when Labour seems only to half-oppose benefit cuts or immigration crackdowns. “The things that make us angry with our own party are things that Labour are useless on,” says one disillusioned MP.
 
That doesn’t mean Clegg will have an easy conference.
 
There is deep unease in the grass-roots party. An army of councillors that it took decades to amass has been whittled away in local election routs. The opinion polls look permanently grim. The party’s finances are a disaster. In parliament there is impatience with the whips’ insistence on discipline for its own sake. The demand to act at all times like a serious party of government, not a flaky protest group, is losing currency – especially when Tory backbenchers treat the coalition agenda as an à la carte menu of things to back or not back, according to taste.
 
Few Lib Dems expect as savage a cull of MPs in 2015 as the opinion polls seem to forebode. The party will fight a defensive ground campaign, pooling activists in support of incumbent MPs.
 
Private polling by Clegg’s office shows that the main hurdle for voters who would consider backing the Lib Dems is a fear of accidentally lubricating either a Cameron or Miliband victory. That isn’t a great sign, because it shows how vulnerable Clegg is to being squeezed out of a campaign in which his rivals will both insist the nation faces a binary choice. The upside is that it creates fertile terrain for tactical voting.
 
The challenge for the Lib Dems is to turn that negative anxiety about who might end up in Downing Street into a positive – confidence that whoever it is can be moderated by coalition. It is what one Clegg aide calls “the leash on the dog question”.
 
Lib Dem strategists are brimming with gratitude to the two big parties for making single-party government seem an unattractive proposition. Between the vagueness of Miliband’s offer and the spectre of a Cameron administration taking dictation from rampant Tory backbenchers, the Lib Dems hope to present themselves as a hedge against either side winning outright. It is the opposite of the old “wasted vote” charge. Not the most ambitious pitch, but part of the Lib Dems’ graduation to being a grown-up party means abandoning the pretence that they campaign for anything grander than a hung parliament and junior membership of a coalition.
 
As a small party, the Lib Dems will go into the next election looking perilously short of friends. Their consolation is to have unintentionally helpful foes.
Nick Clegg arrives to speak at the Mace Montessori nursery on September 2, 2013 in London. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 16 September 2013 issue of the New Statesman, Syria: The deadly stalemate

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The Future of the Left: A new start requires a new economy

Creating a "sharing economy" can get the left out of its post-crunch malaise, says Stewart Lansley.

Despite the opportunity created by the 2008 crisis, British social democracy is today largely directionless. Post-2010 governments have filled this political void by imposing policies – from austerity to a shrinking state - that have been as economically damaging as they have been socially divisive.

Excessive freedom for markets has brought a society ever more divided between super-affluence and impoverishment, but also an increasingly fragile economy, and too often, as in housing, complete dysfunction.   Productivity is stagnating, undermined by a model of capitalism that can make big money for its owners and managers without the wealth creation essential for future economic health. The lessons of the meltdown have too often been ignored, with the balance of power – economic and political – even more entrenched in favour of a small, unaccountable and self-serving financial elite.

In response, the left should be building an alliance for a new political economy, with new goals and instruments that provide an alternative to austerity, that tackle the root causes of ever-growing inequality and poverty and strengthen a weakening productive base. Central to this strategy should be the idea of a “sharing economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. This is not just a matter of fairness, it is an economic imperative. The evidence is clear: allowing the fruits of growth to be colonised by the few has weakened growth and made the economy much more prone to crisis.

To deliver a new sharing political economy, major shifts in direction are needed. First, with measures that tackle, directly, the over-dominance of private capital. This could best be achieved by the creation of one or more social wealth funds, collectively held financial funds, created from the pooling of existing resources and fully owned by the public. Such funds are a potentially powerful new tool in the progressive policy armoury and would ensure that a higher proportion of the national wealth is held in common and used for public benefit and not for the interests of the few.

Britain’s first social wealth fund should be created by pooling all publicly owned assets,  including land and property , estimated to be worth some £1.2 trillion, into a single ring-fenced fund to form a giant pool of commonly held wealth. This move - offering a compromise between nationalisation and privatization - would bring an end to today’s politically expedient sell-off of public assets, preserve what remains of the family silver and ensure that the revenue from the better management of such assets is used to boost essential economic and social investment.

A new book, A Sharing Economy, shows how such funds could reduce inequality, tackle austerity and, by strengthening the public asset base, rebalance the public finances.

Secondly, we need a new fail safe system of social security with a guaranteed income floor in an age of deepening economic and job insecurity. A universal basic income, a guaranteed weekly, unconditional income for all as a right of citizenship, would replace much of the existing and increasingly means-tested, punitive and authoritarian model of income support. . By restoring universality as a core principle, such a scheme would offer much greater security in what is set to become an increasingly fragile labour market. A basic income, buttressed by a social wealth fund, would be key instruments for ensuring that the potential productivity gains from the gathering automation revolution, with machines displacing jobs, are shared by all.  

Thirdly, a new political economy needs a radical shift in wider economic management. The mix of monetary expansion and fiscal contraction has proved a blunderbuss strategy that has missed its target while benefitting the rich and affluent at the expense of the poor. By failing to tackle the central problem  – a gaping deficit of demand (one inflamed by the long wage squeeze and sliding investment)  - the strategy has slowed recovery.  The mass printing of money (quantitative easing) may have helped prevent a second great depression, but has also  created new and unsustainable asset bubbles, while austerity has added to the drag on the economy. Meanwhile, record low interest rates have failed to boost private investment and productivity, but by hiking house prices, have handed a great bonanza to home owners at the expense of renters.

Building economic resilience will require a more central role for the state in boosting and steering investment programmes, in part through the creation of a state investment bank (which could be partially financed from the proposed new social wealth fund) aimed at steering more resources into the wealth creating activities private capital has failed to fund.

With too much private credit used for financial speculation and property, and too little to small companies and infrastructure, government needs to play a much more direct role in creating credit, while restricting the almost total freedom currently handed to private banks.  Tackling the next downturn, widely predicted to land within the next 2-3 years, will need a very different approach, including a more active fiscal policy. To ensure a speedier recovery from recessions, future rounds of quantitative easing should, within clear constraints, boost the economy directly by financing public investment programmes and cash handouts (‘helicopter money’).  Such a police mix – on investment, credit and stimulus - would be more effective in boosting the real economic base, and would be much less pro-rich and anti-poor in its consequences.

These core changes would greatly reform the existing Anglo-Saxon model of capitalism and provide the foundations for building support for a new direction for progressive politics. They would pioneer new tools for building a fairer, more dynamic and more stable economy. They could draw on experience elsewhere such as the Alaskan annual citizen’s dividend (financed by a sovereign wealth fund) and the pilot basic income schemes launching in the Netherlands, Finland and France.  Even mainstream economists, including Adair Turner, former chairman of the Financial Services Authority, are now talking up the principle of ‘helicopter money’. For these reasons, parts of the package are likely to prove publicly popular and command support across the political divide. Together they would contribute to a more stable economy, less inequality, and a more even balance of power and opportunity.

 

Stewart Lansley is the author of A Sharing Economy, published in March by Policy Press and of Breadline Britain, The Rise of Mass Impoverishment (with Joanna Mack).