The New Statesman endorsement for the Liberal Democrat leadership: Tim Farron, pictured here outside parliament. Photo: Daniel Berehulak/Getty Images
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The NS leader: why we're endorsing Tim Farron for the Liberal Democrat leadership

The road to recovery will be a long one. It is Mr Farron who offers the Lib Dems their best hope.

More than any other British political party, the Liberal Democrats face an existential crisis. They have been reduced from 57 MPs in 2010 to just eight – the same number as the Democratic Unionists – and have become a byword for hypocrisy and opportunism following their role in the coalition government. The Scottish National Party, the UK Independence Party and the Greens have all, in different ways, captured the political territory they once occupied. An increasing number of commentators call for them simply to dissolve themselves, or to merge with Labour or the Conservatives.

Next month Liberal Democrat members will elect a leader to inherit what remains of their party. The two candidates, representing a quarter of their number in the Commons, are Tim Farron, the former party president, and Norman Lamb, the former health minister. It is Mr Farron (interviewed in this week's magazine) who offers the Lib Dems their best hope of recovery. Unlike Mr Lamb, he is untainted by service in the Tory-led government and voted against policies such as higher tuition fees and the bedroom tax. He won his constituency of Westmorland and Lonsdale from the Conservatives in 2005, ending nearly a century of rule by a single party, and transformed it into one of the safest Lib Dem seats in Britain through Stakhanovite campaigning. He is devoted to the causes the Lib Dems must embody if they are to survive, let alone flourish: constitutional reform, civil liberties, environmentalism and social justice. Like his late mentor Charles Kennedy, he is a sincere and humane communicator. The revival of the Lib Dems will be the work of many years; Mr Farron is the best man to begin the long journey back across the wasteland.

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Now listen to George, Stephen and Caroline discussing Tim Farron's leadership prospects on the NS podcast:

 

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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR