Serious questions for Messrs Clegg and Cable
A week in, this new form of government will get more than the benefit of the doubt. It has the quality of a “government of national unity” and that will be helpful given the economic rollercoaster that is to come.
It is clear that coalition involves compromise, and both parties have junked parts of their manifesto, and even adopted diametrically opposite viewpoints. Fine. It’s looking like a hybrid of the better bits of both manifestos rather than a Frankenstein’s monster so far.
I do, however, have serious questions about one massive U-turn from Messrs Clegg and Cable – their adoption of the Conservative plan for £6bn of in-year cuts.
It’s not so much that they viciously attacked this policy during the campaign, which they did. It is two other factors.
Firstly both Mr Clegg and Mr Cable framed this issue as a matter of dispassionate economic judgement. Vince Cable said he had “five objective tests” to meet before the recovery would be sufficiently entrenched for cuts to be made.
As Mr Clegg said on 16 March:
“It’s like cutting back a tree – do it at the wrong time of year, and you will kill the tree.
“Do it at the right time, and you help it to grow strong.
“That is why Vince Cable and I have set out five objective economic conditions that we will assess when judging when public spending should begin to be cut.
“These are: the rate of growth; the level of unemployment; credit conditions; the extent of spare capacity in the economy and the cost of Government borrowing.
“Our working assumption is that the conditions will be right for cuts from 2011-12, but not before.”
Both Mr Cable and Mr Clegg need to answer whether or not they feel the economics have changed on this in the past fortnight, or their mind has changed, or openly admit that their judgement can be swayed by the ministerial Jag.
Their case can be made, and has been made, most notably by the governor of the Bank of England, but not yet by them.
Secondly, Mr Clegg, uniquely and specifically identified that, in the event of a hung parliament, he would not vote in parliament for the policy of cuts this year. On 13 March at the Lib Dem Spring forum, and in an interview on Channel 4 News, he said the following:
“Self evidently I think, we think, that merrily slashing now is an act of economic masochism… So if anyone had to rely on our support, we were involved in government, of course we would say ‘No, do it sensibly’.”
Now I make no judgement on whether or not this is the right call, events in Brussels and Greece could have changed the equation, for example. It’s just that there is still considerable debate in economic circles, from the OECD, the IMF, Richard Koo, Blanchflower, the IFS, Ken Rogoff etc about the right approach.
It is a matter, not just of economic dogma, but of judgement too. The Lib Dems not only came down heavily on one side of the debate, but also specifically identified it during the campaign, as an issue which they would not give way on in the event of a then hypothetical hung parliament.
Both Cable and Clegg have so far failed to give a clear explanation. Is this the true face of the “new politics”? The yellow party need some to give some clear answers quickly.
* Of course it may well be that “this year’s cuts” of £6 billion will be used on job-creation schemes worth billions (as hinted at, but not explained in the Coalition agreement), and therefore £6bn has really become £2-3bn, but no clarity on that yet. And if this is the case, the Coalition plans can be seen in a rather different light.