I’m going to attempt to live blog Vince Cable’s speech on economics at the packed Social Liberal Forum conference.
Currently we’re hearing Liberal economist Ed Randall setting out why the deficit reduction strategy is ideologically-driven and wrong.
Ed is quoting from a Japanese economist, Richard Koo. His alternative is tackling social and economic inequality; dealin with the crisis facing the environment; and challenging/changing the financial system. He thinks Vince is tryig hard but faces a wide range of forces set against him (institutional as well as political)
Ed now quotes Will Hutton (who spoke earlier) and others evidencing the sharp rise in inequality, both in terms of life chances and income. (In other words, social mobility is only half the answer)
On the environment, he quotes Stern: ‘Climate change is a result of the greatest market failure the world has ever seen.’
On institutional reform, he cites the US in the last decade as seeing ‘the largest wave of financial crime in modern history’. (the same sort of economics that the pub companies have used in the UK to destroy community pubs, sonething Vince has it in his power to change).
(Having never live blogged before, please excuse me if i get something wrong, and for more typos than usual)
Vince is now speaking. Welcomes what Social Liberal Forum is trying to chieve; there is a disconnect between the leadership and the party; we need a ‘process of dialogue and challenge’ and argument too.
He half-agrees with Ed (on the Richard Koo approach) and agrees with Prateek Buch’s Plan C approach (but says that the need to be on-message means he has to call it a Plan A Plus). Applause.
Vince doesn’t agree with Ed on the deficit though: he says reduction is unavoidable.
We have a very profound crisis, gathering momentum in the last decade, a financial bubble out of control, an ‘almost Icelandic’ banking sector, a property bubble, and systemic inequalities. When the bubble burst, the legacy problems are severe – the economic equivalent of a heart attack. The real debate now is how to deal with the structural problem.
Differeences of emphasis within the Coalition: Tories say it’s all about the deficit, his view is that the structural problems are much more fundamental.
The Plan A is tight fiscal policy and loose monetary policy. It was unavoidable, whoever did it. We are already seeing consequences, good and bad; negative interest rates, as a result of taking measures to avoid the European financial crisis (classic Keynes). This is necessary but not sufficient. Secondly (last and this agovernment), the fall in exchange rates has helped exporters. The political pain comes from thre squeeze in living standards. Why? We’re actually a poorer country by about 6% following the financial crash, about 10% poorer than where we would have been.
Our personal wealth (property) has reduced in value in many places. Debts have remained the same, and that impacts on people directly. Commodity price rises are also squeezing living standards; this is a period of contraction and pain.
So how do we progress into getting some growth? First, supply side measures (deregulation etc.) How do you get demand going? Use Government to co-finance investment; the Green Investment Bank is potentially a major investment. Stimulate demand through Chris Huhne’s Green Deal.
But (quotig Prateek) this isn’t enough. We need to rebalance te economy (a surprising shared narrative with the Conservatives on this). An economy with more emphasis on regional investment and manufacturing. Money on apprenticeships is changing behaviour in industry. It isn’t enough just to sort out the public finances.
Second, radical reform of the bankin system is fundamental. Osbourne has bought into ideas such as thr separating of banking functions, and has crossed an intellectual threshold. Unbelievable a year ago.
Third, green growth. Dealt with constructive through an agenda Liberal Democrats are driving. Not easy, as manufacturing itself is energy-intensive and. ‘Responsible capitalism’ needs to be added; more long-term. Changes in the takeover code; consultations on long-termism. Measures to tackle the issues of executive remuneration. All bein done in a low-key way.
Fifth, progressive taxation, and Vince is proud of what the Lib Dems have achieved on this, while recoognising we have to do a lot more. We need to act on propert and land: a headling yesterday ‘Oligarchs priced out of Central London’ says it all. Those people don’t pay tax. Jokes on mansion tax he got his fingers burned: ‘I didn’t realise how many millionaires there were in the Party!’.
Vince sits down to applause. Now to the questions.
Colin Darracott: will our coalition partners commit to more progressive taxation?
Neville Farmer: investment in R&D and higher education goes against the Plan. What will you do to reverse it?
John Loughton: social mobility is a driver to stimulate the economy; young people are key, what are we doing to get young people back to work an what are the drivers to social mobility?
Vince to Colin: we have to try! As with banking reform, political reality means the Conservatives have to be careful to see who they are seen to side with. The 50p rate is a live issue: what is it replaced with? They have signed up to action on tax avoidance.
To Neville: we have saved the science budget, are investing in technology innovation centres. Higher education a difficult subject; the consequence is that more money will be invested. We have changed the basis of how HE will be funded, but there will be more investment, not less.
On social mobility, support into education for part-time students and those from deprived backgrounds has been improved. But more critical is protecting the FE sector, which we have done.
Ed: the scope for reducing our tax giveaways is enormous. Higher income earners get more help on pensions from Government than the lower paid, for example. The response on austerity has to be more intelligent.
Final questions.
Nigel Quinton: the environment – can we do more to get the message across?
Catherine Barron: aren’t public-private partnerships not modern piracy?
Ed: Huhne and Cable have to be braver in addressing the serious effects of policy. But the level of debate has to be raised. Not ideologically hostile to PPPs, but the terms of partnership have to be got right.
Vince: There were some rip-off PPPs, but some worked. Investors look at Government behaviour, and we need to raise public investment without damaging public finances. The need for honesty in public finance means we can’t do what Labour did. On the environment, who pays? We fully buy into the agenda, but we need to persuade a sometimes sceptical public.
End of session. More feedback shortly.
