David Cameron and Nick Clegg address a press conference at 10 Downing Street on July 10, 2014. Photograph: Getty Images.
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How the Lib Dems' attacks on the Tories help Labour

The two-against-one dynamic harms the Tories while exposing Clegg's party to the charge of hypocrisy. 

In the early months of the coalition, Labour figures frequently lamented the two-against-one dynamic that allowed the Tories and the Lib Dems to pin the blame for the financial crisis on them. The argument that it was overspending by the last government that "got us into this mess" gained credibility by being made by both parties. 

In recent days, it has felt as if this dynamic has been reversed. Nick Clegg and Danny Alexander have sounded like opposition politicians as they have accused the Tories of planning to "inflict unnecessary pain" on the country (Alexander) and of "kidding" voters over the feasibility of their deficit reduction plan (Clegg). After the Autumn Statement, and just five months away from the election, the Lib Dems are seeking to differentiate themselves from the Conservatives in two respects: their willingness to impose tax rises on the wealthy to eliminate the remainder of the deficit, rather than cuts alone, and their preparedness to borrow for investment. Both of these stances are shared by Labour, which has also pledged to introduce a mansion tax on properties above £2m and has left room for deficit-funded capital spending. 

Although there are differences with Ed Miliband's party too - the Lib Dems would follow the Tories in eliminating the structural current deficit by 2017-18, rather than by "the end of the next parliament" - Clegg is focusing on distinguishing his party from the Conservatives. There is a specific psephological reason for this. Of the Lib Dems' 56 seats, the Conservatives are in second place in 37. To hold on to these constituencies, the party needs to focus on winning tactical votes from left-leaning Labour and Green supporters (as it has done in the past). By talking up the dangers of a future Tory government, it hopes to persuade progressive voters that the safest option is to vote Lib Dem.

There are two important ways in which this helps Labour. The first is that the party's positions gain greater credibility by being supported by the Lib Dems. It is harder for the Tories to dismiss Labour's economic stances as nonsense when they are endorsed by the people they have been in government with for more than four years. When the Conservatives refuse to introduce any further tax rises on the wealthy and reject calls to borrow to invest in housing, they look like the odd ones out. Moderate Tory MPs have long complained that the Lib Dems have "retoxified" their brand by taking credit for the "nice" things the government has done and blaming them for the "nasty" things. 

The second is that the Lib Dems' attacks on their coalition partners expose them to the charge of hypocrisy and inconsistency (one swiftly made by George Osborne yesterday). When Clegg's party complains about the "unncessary pain" planned by the Conservatives, Labour will remind voters that they supported the bedroom tax, the tripling of tuition fees and the top-down reorganisation of the NHS. If the Tories are as nasty as the Lib Dems suggest, why vote for the people who have sat in cabinet with them since 2010?

It is this argument that troubles Lib Dems such as Jeremy Browne, who argue that Clegg has made a dangerous error by distancing the Lib Dems from the government (for instance through his absence at last week's Autumn Statement). Rather than attacking the Tories, they argue that the party should devote more time to claiming credit for the coalition's achievements. Browne told the Huffington Post that the "biggest danger for the Lib Dems is having one foot in government, and one foot out" and warned against moving from "being a party of protest to a party of protest-in-government." It is notable that, far from recovering in the polls, the Lib Dems have lost further support since embarking on "aggressive differentiation" from the Tories. Based on the results so far, Labour should hope that it long continues. 

George Eaton is political editor of the New Statesman.

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Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump