The biggest question for all of the parties at the next election will be this: who can be trusted with people’s money and relied upon to free our children and grandchildren from the crippling burden of debt, while also investing in the things the country needs to succeed?
Everything else flows from this decision. The management of the public finances is the bedrock of Government, and in the next Parliament the country will need to decide whether we return to the mistakes of the past, or else take a new approach. The Liberal Democrats will do the latter – and this week we are the first of the parties to set out our stall based on our record in rescuing the British economy since 2010 and our distinct vision of the future. That’s a vision of a stronger economy and a fairer society that allows everyone, whatever their background, the best chance to get on in life.
In 2010, the country was on the brink of economic collapse. That’s why we put the national interest before any narrow party interest. Forming the coalition provided the stability that our country needed and the opportunity to ensure that our Liberal Democrat values and policies were an integral part of all aspects of the recovery plan that is now delivering growth and jobs.
We have delivered the largest tax cuts for working people in generations, 1.6m apprenticeship starts, record numbers of jobs, a pupil premium to help disadvantaged children catch up at school, the greatest liberalisation of pensions in a 100 years, equal marriage and a host of other measures. This record of delivery, of which every Liberal Democrat can be proud, is made all the more remarkable as we are the numerically smaller partner. This is not an identity lost. This is our liberalism affirmed.
We have confounded the critics who said that we wouldn’t be up to the task of governing in such testing circumstances and that coalition couldn’t and wouldn’t work. But more importantly, we have started to lay the foundations for the future. As a united and distinct party, it is right that we now set out to the British people the way that we would run the economy to build on those foundations.
We are currently on target to get the structural deficit down to zero, to balance the books, in 2017-18. The Conservative Party too has signed up to this timetable. However, though we share the timetable, we have a profoundly different approach to how we would get there during the next parliament. To meet this target, based on estimates from the Institute for Fiscal Studies of the total amount needed if you don’t raise taxes or cut departmental budgets at a faster rate – the Conservatives would have to take £12bn out of welfare. Once you look at the kinds of things they want to cut, that’s £12bn from the working age poor. We say that this is profoundly unfair. As Liberal Democrats, we would find the money needed with a mixture of cuts and by raising more money in tax from the very wealthy. Few things more powerfully illuminate the difference in values and philosophy between our two parties than these two approaches to closing the deficit by 2017-18.
Many people mistakenly believe that when we have eliminated the current deficit by 2017-18 that we will have paid off our national debt. Nothing could be further from the truth It will still stand at an eye-watering £1.5 trillion. A sum so enormous, that the interest alone will be the third-largest item of Government spending after welfare and the NHS.
For that reason our first fiscal rule going forward will be that national debt must fall as a proportion of our national income year on year so that it reaches sustainable levels by the middle of the next decade. To simply pass on our huge debt burden on to our children and grandchildren would be both immoral and illiberal. It would be asking future generations to fund our generation’s mistakes at the expense of their future.
Our second fiscal rule is that we will balance the overall budget but still allow us to invest in the things that will help our economy grow. Future governments will have to live within their means but we will make one significant exception, provided our debt rule above is met, that government will be able to borrow to invest in things that enhance economic growth or financial stability. In other words, our rule allows investment to fix our creaking national infrastructure. The Coalition Government has made good progress in putting infrastructure at the heart of our economic agenda but it’s going to take decades of sustained effort and investment to get the quality of infrastructure future generations need and deserve. Our railways are based on the 1970s; much of our utility networks are based on the last century; and we have an urgent need to build 300,000 houses per year to tackle our housing crisis.
Contrast this disciplined measured approach with a Conservative Party wedded to austerity for austerity’s sake and a Labour party with a record on borrowing so bad that they have given the very word a bad name.
This then is our rallying call to our Party and our offer to the British people. A record of delivery in the most difficult of economic circumstances. A clear way forward for the future, all underpinned by our vision of a country that has falling debt, a stronger economy and fairer society that enables every single person to get on in life.
Nick Clegg is the Deputy Prime Minister and Danny Alexander is the Chief Secretary to the Treasury.