Lib Dem rebellion over cuts highlights post-2015 dilemmas

The decision by Tim Farron and four other Lib Dems to rebel against local government cuts is a reminder of the more open debate needed about the austerity to come.

Largely unnoticed, there was a small but significant Lib Dem rebellion over cuts to local government last night. Party president Tim Farron, former defence minister Nick Harvey, Andrew George, Stephen Gilbert and Adrian Sanders all voted against this year's funding settlement. Harvey, who led the rebellion, warned during the debate: 

The whole model of local Government funding is now so fundamentally broken that there needs to be a cross-party endeavour to rebuild something from scratch on a blank sheet of paper. The situation that we are in now is untenable. Somehow or other, Whitehall convinces itself that by putting this degree of hardship on to local government, the public anger at seeing some of the services that impact on their daily lives most directly will miraculously be focused solely upon the local authorities that send out the bill. I say to my right hon. and hon. Friends that I simply do not believe that that is a sound political calculation. The public are not stupid and they will see the difficulties that local government, regardless of the party running any particular council, is facing at this time, and they will hold central Government to be responsible for it.

He is right to highlight both the undesirability and the unsustainability of the huge cuts to local government. By the end of 2015-16, the budget of the Department for Communities and Local Government will have been reduced by a remarkable 60.6 per cent, with several years of austerity still ahead. On the current timetable, publicly-funded libraries, swimming pools, youth centres, museums and parks will soon cease to exist in parts of the country. 

The rebellion last night, then, is a reminder of the far more open debate needed over the pain to come after 2015. Vince Cable has long argued that it is untenable to ring-fence some areas (the NHS, pensions, schools, international development) from austerity, while cutting others (local government, working age welfare, universities, the police) to the bone. As he said last March, "You get a very unbalanced approach to public spending. I went along with the overall ringfencing approach in this parliament – as part of the coalition we have had to work as a team – but I think as a long-term approach to government spending, it isn't very sensible." But we have heard little from him, or any other major Lib Dem figure, on this subject recently. 

With the party set to back the triple lock on the state pensions, it is worth asking whether it will take the same approach to the NHS, schools and international development. Back in 2010, Nick Clegg declared: "We’re not entering into this dutch auction about ring-fencing. Good outcomes aren’t determined by drawing a redline around government departmental budgets." But more recently he has argued: "I am absolutely convinced that at a difficult time like this, protecting our NHS spending, protecting spending on schools and honouring our international obligations to developing countries around the world was a big decision, was a controversial decision but I think was the right one to take."

The alternative, of course, to cuts to protected departments is greater tax rises. But none of the measures proposed by Labour and the Lib Dems to date, such as a mansion tax or the reintroduction of the 50p tax rate, even come close to bridging the fiscal gap. As the IFS has warned, around £12.5bn of tax rises are required merely to keep departmental cuts at their current pace. One left-wing economist, speaking very much off-the-record, recently told me that the parties ultimately may need to discuss openly the possibility of raising the only taxes that reap reliably large revenues: the basic rate of income tax, National Insurance and VAT. But that is the kind of genuinely "tough choice" that all sides seem desperate to avoid before May 2015. 

Liberal Democrat president Tim Farron was one of five Lib Dem MPs to vote against cuts to local government. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Brexit is teaching the UK that it needs immigrants

Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past.

Why did the UK vote to leave the EU? For conservatives, Brexit was about regaining parliamentary sovereignty. For socialists it was about escaping the single market. For still more it was a chance to punish David Cameron and George Osborne. But supreme among the causes was the desire to reduce immigration.

For years, as the government repeatedly missed its target to limit net migration to "tens of thousands", the EU provided a convenient scapegoat. The free movement of people allegedly made this ambition unachievable (even as non-European migration oustripped that from the continent). When Cameron, the author of the target, was later forced to argue that the price of leaving the EU was nevertheless too great, voters were unsurprisingly unconvinced.

But though the Leave campaign vowed to gain "control" of immigration, it was careful never to set a formal target. As many of its senior figures knew, reducing net migration to "tens of thousands" a year would come at an economic price (immigrants make a net fiscal contribution of £7bn a year). An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent. For the UK, with its poor productivity and sub-par infrastructure, immigration has long been an economic boon. 

When Theresa May became Prime Minister, some cabinet members hoped that she would abolish the net migration target in a "Nixon goes to China" moment. But rather than retreating, the former Home Secretary doubled down. She regards the target as essential on both political and policy grounds (and has rejected pleas to exempt foreign students). But though the same goal endures, Brexit is forcing ministers to reveal a rarely spoken truth: Britain needs immigrants.

Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. On last night's Question Time, Brexit secretary David Davis conceded that immigration woud not invariably fall following Brexit. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (while sounding rather unconvinced), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

The UK’s vote to leave the EU – and May’s decision to pursue a "hard Brexit" – has deprived the government of a convenient alibi for high immigration. Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past. Brexit may have been caused by the supposed costs of immigration but it is becoming an education in its benefits.

George Eaton is political editor of the New Statesman.