This week's Liberal Democrat conference displayed considerable fiscal realism, in contrast to the other two main parties. But as its dismal poll ratings show, this is a far from popular political message
Finally, some realism, after two weeks of what have felt like wishful thinking. Last week the Conservative party conference added £7bn to the pre-existing target of £37bn for public spending cuts in the next Parliament. To give that some colour, the addition alone is equal to the resource budgets of the Department for Culture, Media and Sport, Department for Energy and Climate Change, Department for Transport and Foreign and Commonwealth Office, combined. The Labour party said in the previous week that the health budget would be not only protected from cuts if they were in government but increased by £2.5bn; and the only people facing tax rises would be the small number with houses worth more than £2m.
After all that, it is the Liberal Democrats who have looked this week like the party that has got its head around the scale of the challenge for UK public finances in the years ahead. Not only that, it’s going to level with voters on what that challenge means. At the most strategic level, Vince Cable has said that closing the deficit cannot be done by spending cuts alone. Even the 80-20 ratio between cuts and tax rises used by the Coalition may not be sustainable. He didn’t rule out that as much as 40% of the fiscal consolidation to come may be achieved through tax rises.
This may be purely rhetorical, except that the Liberal Democrats have shown some form on tax rises this week as well. To fund their pre-manifesto commitment to increasing the personal tax allowance, rather than grasping for additional and theoretical spending cuts, the party has suggested increasing the rate of capital gains tax and reducing the threshold at which it is paid from £10,000 to £2,500. Steve Webb, the Pensions Minister, has made no secret in fringe meetings of his view that pensions tax relief needs reform too: the relief for the highest earners should be reduced, with some of the savings diverted to improving relief for pension savers on lower incomes and the rest to plugging the deficit.
The leader’s speech does carry a spending commitment. Instituting waiting time targets for access to treatment for mental health problems will cost £120m per year. That’s a modest sum and it’s attached to a reform with a more plausible case for creating savings down the line than most others. The realism inherent in Liberal Democrat statements about tax and spending is apparent in their ambitions for policy action too. All that Nick Clegg is saying is that 75% of people will start a treatment within 18 weeks. No mental health patient or their family will be overjoyed by that promise but they might recognise that it represents a significant step change in current performance and has some hope of being achieved. This is a politics of reasonable improvements rather than a politics of heroic promises.
While a focus on mental health provides a positive agenda for the party, higher education has been a much more painful policy area. The latest episode in the trauma is the growth in alternative providers of higher education, some of whom are reputed to provide a poor quality experience, or as Vince Cable put it in a fringe meeting, 'dross'. But his response is not to ban them from the system. He remarked that doing so would make him vulnerable to legal challenge. Rather than expressing his frustration at that, the Secretary of State seemed to accept that the rule of law is a proper constraint on his discretion. His party’s full-throated support for civil liberties and human rights stems from the same outlook. After merely four years in power after decades without it, strangely it’s the Liberal Democrats who are appearing more comfortable with the rights and responsibilities of government.
Their challenge is whether they will win enough votes and seats in the general election next year to have a legitimate claim to govern in coalition with either of the other two main parties. For now their polling scores are dismal and even this week they have struggled for the media coverage they will need to turn them around. While the mantle of fiscal responsibility appears to be theirs for the taking it’s far from clear that our politics is structured around realism right now. Joining the revolt against reasonableness and hard choices is proving much more popular.
Emran Mian is director of the Social Market Foundation
