Nick Clegg and Ed Miliband attend a ceremony at Buckingham Palace to mark the Duke of Edinburgh's 90th birthday on June 30, 2011. Photograph: Getty Images.
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Clegg's pledge to borrow to invest moves the Lib Dems closer to Labour

The Deputy PM's rejection of "austerity forever" is an important point of difference with the Tories. 

Nick Clegg's first speech since the Lib Dems' disastrous election results is an attempt to respond to criticism from both the left and the right that voters no longer know what his party stands for. In the address at Bloomberg's London HQ today, he will say that the Lib Dems have a "unique mission" to advance "liberal values" and that he is "not interested in coalition at any cost". This is a qualification of the stance previously outlined by Danny Alexander, who earlier this year ruled out Lib Dems support for a minority government, a position which some in the party feared would make it harder to achieve its negotiation priorities (since there is no threat of a veto). 

As part of his attempt to provide the Lib Dems with greater definition, Clegg will announce the rules that will govern his approach to tax and spending in the next parliament. Most significantly, he will say that while committed to reducing the national debt as a share of GDP (the "debt rule") and to eliminating the current deficit (the "balanced budget rule"), he supports borrowing for capital projects that enhance growth or financial stability.

It is a move that aligns the Lib Dems more closely with Labour than the Tories. Unlike George Osborne, who has pledged to achieve an absolute budget surplus by the end of the next parliament, Clegg has recognised the case for borrowing to invest in infrastructure programmes (such as housing, transport and communications) that benefit the economy. This puts him on the same page as Ed Balls, who has pledged to eliminate the current deficit and to reduce debt as a share of GDP by the end of the next parliament, but has left room to borrow for capital spending. Clegg's refusal to clear the remainder of the deficit through spending cuts alone, as the Tories propose, and to raise taxes on the rich, through measures such as a mansion tax, is another important point of agreement with Labour. 

There are some differences that remain. Labour has pledged to eliminate the deficit by the end of the next parliament (2020), while Clegg wants it gone by 2017-18, and Clegg's stance precludes borrowing to invest in schools and hospitals, which Labour's may not. As he will say: "Gordon Brown used to slap the words 'capital spending' on anything and everything just so he could get away with borrowing to pay for it. That can never be allowed to happen again. Sound investment yes, reckless borrowing, no."

But it is the contrast with the Tories that is most notable. As he will say of Osborne's position: "We are not the Tories. We don’t believe in an ever-shrinking state. We are not so ideological about making cuts that we’ll deny people the things they need.

"We’re not so dogmatic about borrowing that we’ll jeopardise Britain’s economic health. Responsibility – yes; austerity forever - no."

We can now add borrowing for investment to the striking number of shared Labour and Lib Dem policy positions. As I've previously noted in the NS and the Times, both favour a mansion tax on properties worth more than £2m, EU reform without a guaranteed referendum, a voting age of 16, an end to the use of unqualified teachers in state schools, radical devolution to city regions and local authorities, a mass housebuilding programme, greater oversight of the intelligence services, a 2030 decarbonisation target, scrapping winter fuel payments for wealthy pensioners, reform of party funding and the maintenance of the Human Rights Act.

While the personal animosity between Clegg and some Labour figures, and the enduring tribalism of many in Miliband's party, means a coalition would not be smooth to assemble, it is far easier to see what a Labour-Lib Dem government would do than what another Tory-Lib Dem administration would. 

George Eaton is political editor of the New Statesman.

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What will Labour's new awkward squad do next?

What does the future hold for the party's once-rising-stars?

For years, Jeremy Corbyn was John McDonnell’s only friend in Parliament. Now, Corbyn is the twice-elected Labour leader, and McDonnell his shadow chancellor. The crushing leadership election victory has confirmed Corbyn-supporting MPs as the new Labour elite. It has also created a new awkward squad.   

Some MPs – including some vocal critics of Corbyn – are queuing up to get back in the shadow cabinet (one, Sarah Champion, returned during the leadership contest). Chi Onwurah, who spoke out on Corbyn’s management style, never left. But others, most notably the challenger Owen Smith, are resigning themselves to life on the back benches. 

So what is a once-rising-star MP to do? The most obvious choice is to throw yourself into the issue the Corbyn leadership doesn’t want to talk about – Brexit. The most obvious platform to do so on is a select committee. Chuka Umunna has founded Vote Leave Watch, a campaign group, and is running to replace Keith Vaz on the Home Affairs elect committee. Emma Reynolds, a former shadow Europe minister, is running alongside Hilary Benn to sit on the newly-created Brexit committee. 

Then there is the written word - so long as what you write is controversial enough. Rachel Reeves caused a stir when she described control on freedom of movement as “a red line” in Brexit negotiations. Keir Starmer is still planning to publish his long-scheduled immigration report. Alison McGovern embarked on a similar tour of the country

Other MPs have thrown themselves into campaigns, most notably refugee rights. Stella Creasy is working with Alf Dubs on his amendment to protect child refugees. Yvette Cooper chairs Labour's refugee taskforce.

The debate about whether Labour MPs should split altogether is ongoing, but the warnings of history aside, some Corbyn critics believe this is exactly what the leadership would like them to do. Richard Angell, deputy director of Progress, a centrist group, said: “Parts of the Labour project get very frustrated that good people Labour activists are staying in the party.”

One reason to stay in Labour is the promise of a return of shadow cabinet elections, a decision currently languishing with the National Executive Committee. 

But anti-Corbyn MPs may still yet find their ability to influence policies blocked. Even if the decision goes ahead, the Corbyn leadership is understood to be planning a root and branch reform of party institutions, to be announced in the late autumn. If it is consistent with his previous rhetoric, it will hand more power to the pro-Corbyn grassroots members. The members of Labour's new awkward squad have seized on elections as a way to legitimise their voices. But with Corbyn in charge, they might get more democracy than they bargained for.