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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.

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