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Lib Dems can deliver economic growth better than the Conservatives

October 15, 2013

Going into the 2010 General Election, the Lib Dems – particularly Vince Cable – had a reputation for economic competence. However, as a 3rd party that had been out of government for a century, the Lib Dems lacked a credibility or track record on managing the economy. For decades it has been the Conservative Party that the electorate has turned to when the economy turns bad. The shocking deficits racked up by Labour in the good years from 1997 to 2008 have reinforced the view that Labour cannot be trusted on the economy.

With hindsight, the 2010 Coalition Government has disturbed this easy contrast between the two major parties. Government no longer oscillates from one to the other. The Lib Dems are in the frame and in government, with a different approach and some different priorities.

This article sets out how the Lib Dems can usurp the Conservatives on what is normally their own territory. To make the case first requires an understanding of what the Conservatives do well, and how the Lib Dems have supported them. The second part of the case deals with the policies that deliver better economic growth, and how the Conservatives and Lib Dems differ.

Dealing first with what the Conservatives do well. They are well linked into the financial markets, and understand how governments reassure markets and get the markets to support the government. This has been no easy feat in the UK since 2010, and the Conservatives must take credit for low borrowing costs for the massive UK debt, which in turn has created flexibility for other policies and has helped to avoid a much deeper recession.

The majority of Lib Dems have understood and supported the need for the Coalition to have a robust fiscal policy and to bring the budget deficit down. From the beginning of this government, targets have been set to balance the books. It is this policy that must be hard-wired into Lib Dem thinking. Without this commitment to budget responsibility, the Lib Dems could never claim to be the best party for economic growth.

 

I now turn to how UK plc builds a stronger economy. And I want to start by ignoring all the ups and downs that come from temporary changes in demand. These ups and down often reflect the sentiment of the moment, a readiness or unwillingness to borrow money and a surge or drop in demand that can be reversed a year later. Building a stronger economy is about businesses having more customers, about new ideas, about new exports and about new jobs.

I will identify here four important elements for successful business, and contrast the approaches of the Conservatives and the Lib Dems.

 

1. Encouraging the entrepreneur

A country that values and promotes new ideas and new business will have more entrepreneurial activity. Government can help in small ways like having light touch regulation for small businesses, and helping to keep costs down. Business rate relief for businesses in small premises has been a good example of this. The Conservatives have the edge on this agenda.

 

2. A motivated and fired up workforce

Successful businesses get the most out of their employees, and that means a happy business environment with long term employment and a culture of debate and discussion. The Lib Dems naturally reflect this sentiment – ‘enabling everyone to get on in life’. The Conservatives can take a more brutal view with a greater readiness to get rid of people. It harks back to an ‘us and them’ attitude, somewhat out of line with modern thinking.

An excellent example of businesses valuing their employees is apprenticeships. They are enjoying a renaissance under this government, and the imprint is a Lib Dem one.

 

3. Government support to make businesses better, and to support key sectors.

Vince Cable is doing some radical stuff at the Department for Business, Innovation and Skills. He believes in government helping business. He’s not talking about government supporting individual businesses, he’s supporting business sectors. For example, he spends a great deal of time supporting the UK Automotive Industry and helping these companies source more of their supply chain in the UK. He’s doing the same for the aerospace industry, and government is helping to build a stronger UK renewables industry.

This contrasts quite starkly with the Conservative view which is to leave things to the free market. This has been a disaster for British manufacturing.

George Osborne’s visit to China neatly illustrates the different approaches. The Conservatives want Chinese money and want the Chinese to buy into British business. The Lib Dems want UK businesses that are already here to get better and grow organically. The first is a quick fix, a transfer of finance and ownership. The second is long term growth of UK manufacturing.

The example of the potential new nuclear power station at Hinckley Point is revealing. The Conservatives are busy getting in foreign technology. Lib Dems are, through the Industrial Strategy for Nuclear, supporting the development of technology needed for a UK nuclear industry.

The Lib Dems have the better long term vision here. Their vision creates long term jobs.

 

4. World Trade and the EU

The Liberal Party is historically the party of free trade. This policy evolved out of the campaign against the Corn Laws. The case for free trade – in contrast to protection – was and is that it makes for a better standard of living, more trade in imports and exports, more innovation, more jobs and a more dynamic business environment. The counter argument is an interest based policy which protects the interests of the existing established business.

Liberal Democrats see free trade as a facilitator of prosperity. Conservatives see free trade more pragmatically, a policy that can be supported or discarded depending on the political winds. This is well illustrated at the present time with Euroscepticism, which is a sentiment threaded through with nationalism and protection. Similar arguments existed one hundred years ago.

Modern trade is increasingly collaborative rather than exploitative, and Lib Dems should be proud of that – it reflects a modern free liberal world. Business is about working with other peoples in other countries, working together and all taking the benefit. Too often the Conservative philosophy is making money out of people,

 

In conclusion, across many of the building blocks of a successful economy, the Lib Dems have the better ideas and are implementing them in government. However, for the Lib Dems to build the reputation for economic competence requires us to recognise and absorb what the Conservatives do well, and to build it into our political narrative.

The Lib Dem Challenge: Coalition Government is Better Government

August 31, 2012

Fast forward to 2015, and the upcoming General Election.

The Conservatives are telling the country how much better they will govern if they weren’t held back by the Lib Dems. Labour will be telling us that they will save the NHS and have the answers to getting Britain out of stagnation. The Lib Dems will not feature in either of these plans. In fact, the Tories and Labour both hope that the Lib Dems are wiped out.

So what will the Lib Dems be saying to the electorate. We’ll be telling them what we’ve achieved in government, and what we’re aiming to do. If that’s all, we’ll get out our core vote of 10%, pick up another 5% here and there, and lose the remaining protest vote that has worked so well for us in the past.

This is why the Lib Dems need another narrative, and that narrative is about how coalition government is better. Good coalition government brings the best out of each coalition partner, it means policy is the best bits of each party. There’s a more open debate, an emphasis on the need to persuade, and the policy results are grounded in a wider consensus.

The mid term Lib Dem approach of differentiation from the Conservatives supports this approach, but only if Lib Dems are prepared to say which bits of policy are shared with the Conservatives, and which bits are part of the compromise between parties with different outlooks. A classic example is the debate  on the 50p income tax rate. I don’t find it a problem that Lib Dems state very openly that this was a change that we accepted as part of the Conservative agreement to raising the tax threshold more quickly than expected.

Coalition governments aren’t about two parties coming together for 5 years and acting as one party. Coalitions are about two parties working together in the national interest and bringing in legislation that is a compromise for both parties and for that reason gains wider public support.

Wider public support for government bills is better government. That’s what coalition government can deliver. The benefit of coalition government is our core message to the British people in 2015.

Euroscepticism is Destroying Long Term Manufacturing Growth, Mr Hague

May 13, 2012

William Hague has updated Norman Tebbitt’s “on your bike” exhortation from the 1980s. The Telegraph reports:

In a blunt message to the country’s bosses, he said they should stop complaining and get on with the business of wealth creation.

His comments, in an interview with The Sunday Telegraph, are a direct riposte to business leaders who criticised the lack of measures for economic growth in the Queen’s Speech.

“There’s only one growth strategy: work hard,” Mr Hague said. “I think they should be getting on with the task of creating more of those jobs and more of those exports, rather than complaining about it.”

Asked if his comments could be compared to Lord Tebbit’s “on your bike” message to the unemployed in the 1980s, Mr Hague said: “It’s more than that. It’s ‘Get on the plane, go and sell things overseas, go and study overseas’.

I think that William Hague is talking directly to UK manufacturers like me. The business I own is a niche market industrial textiles business in Rochdale. We are between the textile and rubber industries, supplying into aerospace, automotive and heat protection.

I have understood a couple of years ago that the UK manufacturing base is now too small for my business to survive long into the future. Turning the business into a European business is my priority.

The bad news is that William Hague’s xenophobia and euroscepticism is making exporting harder. I’ll be exporting to the Eurozone, my customers will be paying in Euros. Being a manufacturer in Britain sometimes feels like being in the mid-Atlantic. Exporting for my business is not about marginal competitiveness when £ Sterling devalues or appreciates against the Euro or Dollar. Manufacturing is a long term business, it is more than anything about trading and competitive stability.

It isn’t easy for manufacturers to build long term technical and supply relationships with Eurozone companies while the Conservative Party is preaching nationalism and cutting constructive links with our European partners. All that will happen, and is happening, is that international companies are moving their manufacturing into the Eurozone and into countries that are better linked into the Eurozone.

William Hague’s hope is that the Euro collapses. Scarcely a day goes by without the shrill doom laden carping from British eurosceptics. But when it doesn’t?

Rebuilding Britain

March 13, 2012

The Liberal Democrat Spring Conference in Gateshead showed a party confident in its ideas and confident in discussing and disagreeing about ideas. This is good news for the party, because coalition government is absolutely about discussing and winning the argument.

There’s no doubt that raising the tax threshold for the low and average paid while raising taxes for the wealthy is Lib Dem, as is the Pupil Premium that allocates education money directly to the children who start life at a disadvantage. While we are still in the midst of the NHS debate, it’s increasingly clear that the Lib Dems are the party who are protecting the NHS against the acquisitive Tory business interests lining up to cream off services and make some serious money on the way.

But it was Vince Cable that really got me thinking. He’s already been thinking about how we rebuild Britain’s manufacturing, and has identified some serious problems. Not least that everything seems to be foreign owned.

However, one sentence sprang out at me from his speech to the conference: ‘Bringing the supply chain back to Britain’.

From a Rochdale manufacturing perspective, the outlook is about slowly reversing the flight of manufacturing out of the country. It will be backed by funding initiatives like the Regional Growth Fund, or the Green Investment Bank. Vince will champion the new industries, like green energy, and will do his best to ensure Britain can manufacture this capital equipment.

This is a good start, but I favour an even more interventionist approach. Government initiatives are targeted at specific deprived areas and at specific product areas. These need to be widened. It won’t be good enough to set up a new bank just for Green investment, what is really needed is banks that invest in new manufacturing plants and processes across the country and across sectors. The publicly owned banks should be the vehicle for this.

There needs to be a fundamental shift of money from the City of London into the wealth creating industries of the whole of Britain. For the last 25 years, financial interests have sucked out wealth from the rest of Britain. It’s now time for the money to move in the opposite direction.

UK Trading Companies, UK Corporation Tax

February 7, 2012

How often have we heard of flagship UK businesses paying little or no UK corporation tax? A lot.

It is not, however, a subject loved by the companies themselves or their shareholders. If tax can be avoided off-shore, then the companies themselves and their shareholders can benefit – and the UK government and UK public services suffer.

There have been some high profile cases in the last few years. Amazon recently has been exposed for registering its UK operation in Luxembourg and gaining a tax-competitive advantage over UK booksellers. Vodafone were exposed for using Luxembourg to avoid tax, then doing a cosy deal with HMRC.

The real question is why the UK should tolerate any tax evasion by companies who are trading and making money within Britain. Trade in Britain and you pay tax in Britain. That should be the expectation and the requirement.

Liberal Unionism in 2012

January 14, 2012

This post first appeared on Lib Dem Voice.

There’s no escaping history in our party, and current debates of nationalism, unionism and secession should prompt Liberal Democrats to delve back into the Gladstonian past.

The Liberal Party split over the Union. Gladstone favoured Home Rule for Ireland, Liberal Unionists didn’t, and ultimately joined the Conservative Party. This cemented the Conservative Party as the party of the Union, and it is a position the Conservative Party still holds.

The purpose of this article is, however, to challenge the Conservative Party’s stranglehold over being British.

The existing Conservative argument goes that a Conservative Britain is a Britain that stands proud and takes no nonsense from anyone on the other side of the Channel. In contrast, Liberal Democrats, as a pro-European party, don’t stick up for Britain, they sell out, and they give away our national identity. It is a superficially compelling argument. It is a Conservative argument for a Conservative vision for a unionist Britain. It is certainly not the only unionist vision.

The rise of nationalist Scotland and the success of Ireland within Europe and the Euro demonstrate the problem of Conservative Unionism. Ireland has demonstrated the effectiveness of independence from Britain within Europe. The SNP share a similar vision forScotland. The EU offers full national identity with the chance for economic self-determination. The EU, as a group of independent nations, respects and values national identity. Cross the Channel to France to see how they combine a full commitment to Europe with retaining their French identity.

For the Irish and for many Scots, identity is achieved by being Irish and Scottish within Europe. The flaw of Conservative Unionism is about the Scots being British rather than being Scottish. Britain is the identity, they say, and the Union is run from Westminster. The Conservative government of the 1980s and 1990s opposed devolution.

In contrast, Liberal Democrats are practical unionists. We share much with Labour, whose record under Blair has been impressive. We have supported the cause of devolution for decades. We have played a constructive and important part in setting up the Scottish Parliament. The new Home Rule Commission set up by Willie Rennie and chaired by Sir Menzies Campbell will work through how the Scots can further shape their own future while sharing risks, security and international relations in an uncertain world.

Liberal Democrats believe in the Union with devolution just as we believe in the EU with subsidiarity. We see a world with global, European, national, regional and local problems, and we seek to build political structures where decisions are taken by the right people in the right place. We are unionists because we believe in Britain with our shared language, our shared history and our shared culture.

The debate on Scottish independence gives the Liberal Democrats a golden opportunity to set out a distinctive unionist vision for Great Britain. Unionist within Europe. Pro-European, totally committed to being at the heart of the EU, sticking up for Britain and better preserving and enhancing our Scottish, Welsh, Irish, English and British identity.

The Options for British Decline

December 11, 2011

David Cameron has decided, on behalf of the Conservative Party, to isolate Britain– either temporarily or permanently –from all other continental European countries. This course of action is just one of two options that Britain can take as it manages its decline as an empire.

Since 1945, Britain has given freedom to its former colonies and lost its empire. Its key ally since then has been the USA. Britain has slowly failed to build alliances with other European countries, it wasn’t in at the beginning of the European project, and has been a rather detached bystander as the EU expands and grows together.

Britain now finds itself drifting politically out into the Atlantic, with its linkages into the EU severely damaged. However, its alliance with the USA is also becoming weaker as Britain becomes weaker. Britain shares a great deal with the USA, but so does the EU. As the EU’s relationship with the USA becomes more equal, Britain’s relationship with the USA becomes more one sided. Britain on its own is no longer a dominant European economic power. The special relationship is in decline. Historians may write that the usefulness of the USA/ UK alliance lasted from the end of the 2nd World War to the fall of the Berlin Wall.

Our international world is increasingly based on large economic blocks with large populations. This is a relatively recent development, driven by China, and it is very hard to see how small countries will ever again challenge the economic superiority of economic blocks like the USA together with Canada and Mexico, China, India, and the EU.

There are two strategic options for Britain.

The first is the progressive option: to join the EU block, pool sovereignty and help to make the EU a great force for good in the international world.

The second is the conservative option: it is to remain British. This is the route favoured by eurosceptics and the majority of the public at the moment. There will be permanent economic decline but the British people will have signed up for that in return for feeling that they are in control of their own destiny.

There are times in history for big choices. This is one of these times. The dominant political force of the 20th century, the Conservative Party, is now totally eurosceptic and set on a course of nationalism. Liberal Democrats favour joining the EU block.

There will be an In / Out Referendum at some point in the future. It’s time that the options and their consequences are more thoroughly debated.

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