Nick Clegg is facing a grassroots revolt by Liberal Democrat members who claim he has signed up to another three years of deep spending cuts after the 2015 general election.
The Social Liberal Forum, the main pressure group on the left of the Lib Dems, has warned that the party will stand for nothing if it commits to more “Tory cuts” at the election and said it must not be locked into such “economic illiteracy.” It accused Mr Clegg of tearing up an agreement between the leadership and membership on economic policy.
The forum is angry that the autumn statement delivered by George Osborne last week revealed that both coalition parties agreed that even after the annual budget deficit has been wiped out, any surplus in good years should be used to cut the remaining national debt.
The forum is close to Vince Cable, the Business Secretary, who is understood to share its concerns. He does not want the Lib Dems to commit to cuts beyond the 2015-16 financial year, which begins a month before the May 2015 general election.
In a warning shot aimed at the Treasury, Mr Cable said that the party would “not be locked into a Tory agenda.” He added: “Liberal Democrats have a different approach to tax and spend, in particular with an emphasis on fairness in the way the tax system operates, and our achievements in lifting low earners out of tax. Ultimately the electorate has got to decide what the outcome of the next election is, but we will go into it as a distinct party with a distinct agenda.”
Mr Clegg has backed the idea of MPs voting on a “charter for budget responsibility” covering the post-election period that the Chancellor will publish in a year's time. The move is widely seen as a trap for Labour but Lib Dem activists fear their party has been drawn into it.
Prateek Buch, the forum's director, said Lib Dem members should “have a say before being chained to this economic illiteracy.” He added: “Osborne plans to legislate to shrink the state, balancing the books without balancing the economy. As an independent party with our own economic vision, the Lib Dems simply cannot sign up. Lib Dems only recently agreed to prioritise investment in people, business and infrastructure over setting arbitrary targets for balanced budgets before a recovery in living standards takes hold.”
Writing on The Independent's website, he described the Osborne plan as “a political timebomb” that could have “utterly devastating consequences” for public spending. He warned that the Lib Dems would be left without “a distinctive vision on the economy” if they signed up to it.
The forum is worried that the Chancellor intends to reduce the five-year period of his “fiscal mandate”-possibly from five to three years. It fears that this could remove the Government's ability to “borrow to invest.”
Clegg allies insist that backing the charter does not mean the party is signing up to “Osbornomics.” For example, they say, the Lib Dems will fight the election promising a mansion tax on homes worth more than £2m to raise about £2bn a year.
A senior party source said: “The Lib Dems are signed up to the Coalition Government's fiscal consolidation programme, which finishes in 2017-18. Full spending plans have been agreed up to end of this Parliament (2015-16) but no specific plans have or will be agreed beyond that.”
He added: “It will be for both parties to set out at the 2015 election how they will complete the balancing of the books. The Lib Dems and the Conservatives will almost certainly have very different views on the mixture of tax rises and spending cuts required. Both parties will set out an independent fiscal policy at the next election. But the Lib Dems have also been clear that even when the books have been balanced, we must continue to get our national debt down. To not do so is unfair to our children and grandchildren and will not help us build a stronger economy in a fairer society.”