The Liberal Democrats are not lurching to the left or the right

We are seeing the biggest income tax cuts for working people for a generation

Danny Alexander
Wednesday 11 December 2013 16:00 EST
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In 2010, Liberal Democrats and Conservatives came together to repair and restart the British economy. The difficult decisions are starting to pay off. By taking and sticking to some of the most difficult fiscal choices made by any government for decades, we have restored Britain's financial credibility and the deficit is forecast to be halved by next year. The recovery would not be happening without the Liberal Democrats in government.

There is a lot more work to be done to secure the recovery and ensure it is balanced, sustainable, and its fruits are widely shared. But now is also the right time to start thinking about how Parliament’s commitment to the current deficit reduction programme can be strengthened. That is why the autumn statement, last week, announced a review of the current fiscal framework that will report next year.

The UK’s fiscal policy framework requires the government to set out its fiscal policy objectives and fiscal mandate before Parliament in the “charter for budget responsibility.” Indeed in Budget 2010, we said we would revisit the future of the fiscal framework once the public finances were closer to balance.

Liberal Democrats are committed to ensuring that the structural deficit, that has undermined our prosperity, is eliminated. On the Office for Budget Responsibility’s latest forecasts that will occur in 2018-19. And while we will disagree with the Conservatives in the next Parliament about how it is achieved, the mix of tax and spend, we believe we have to finish the job we set out to do. At our party conference in September this was once again agreed.

In the longer term, Liberal Democrats have been clear that once the structural deficit has been cleared there will still be a big job to be done to reduce the high level of our national debt. It would not be fair to leave a mountain of debt to be paid by our children – and doing so would leave our economy less resilient to the next set of economic problems. Liberal Democrats will present our own detailed fiscal rules that entrench responsibility for the long term in our manifesto.

To be clear, this is not binding Liberal Democrat and Conservatives into the same long term fiscal policy. It is about finishing the job that we started in 2010.

Some Conservatives are ideologically wedded to continuous cuts as the route to a smaller state – they see endless budget surpluses funded only by ever more spending cuts as the means to that end. Indeed they have hinted that they think the remainder of the deficit can be cleared through public spending cuts alone.

I do not agree with that at all. Tax rises on the wealthy will be needed to ensure that the burden is shared fairly. Because of the Liberal Democrats, we are seeing the biggest income tax cuts for working people for a generation. We will need to continue to be willing to ask those who enjoy the fruits of the recovery the most, to make a greater contribution through the tax system.

As my party reaffirmed at our party conference this September, a state with the resources necessary to sustain good quality public services, improve the provision for the most vulnerable in society and long-term investment is central to a fairer society. Unlike the Conservatives our long term fiscal approach will be informed by the need to maintain good public services and further boost long term investment in infrastructure.

As Chief Secretary, I have presided over the most sustained period of fiscal consolidation in modern times. But those cuts are necessary as a means to an end, not an end in themselves.

The review set out at the autumn statement is about ensuring the job the Liberal Democrats started, cleaning up Labour’s economic mess, is finished in the next Parliament. It is emphatically not about an ideological commitment to a smaller state.

The Coalition’s economic plan is about delivering a stronger economy in a fairer society where everyone can get on in life. We are making good progress, but the work won't stop when our deficit goal is met. Endlessly shrinking the state would be a diversion from our plan, and we won't sign up to it. Getting our debt down and fairer taxes to deliver the investment and public services we need is the right mix to secure Britain's long term prosperity. It is the responsibility of Liberal Democrats to anchor British politics in the centre ground - economic responsibility matched with social fairness. That is why when the serious work of dealing with the deficit is done, we will not support a fiscal lurch to left or right.

Danny Alexander is the Liberal Democrat Chief Treasury Secretary

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