The Lib Dems should not sign up to Osborne's austerity straitjacket

The party must fight the election on its own terms - not the Tories'

Share

Amongst the undignified shouting and guffawing, George Osborne slipped a political timebomb into his autumn statement, whose significance may well shape the next general election. In setting what he sees as an elephant trap for Labour, he’s waving what ought to be an enormous red flag for his Liberal Democrat coalition colleagues – and may well have tied his own hands should he return to No. 11 Downing Street in May 2015.

The Liberal Democrats cannot, or rather should not, sign up to the Chancellor’s plan to lock in austerity – deeper than planned at any stage since 2010 – up to and beyond 2018. For one, it is economically illiterate. For another, the ink is barely dry on a hard-fought deal struck by the party to fight the next election on our “own distinctive economic policies,” including fiscal plans to aid investment in “people, business and infrastructure,” not on the same terms as Tory austerians. Any deal to balance the budget in the next Parliament no matter the state of the economy – and more importantly, peoples’ living standards – flies in the face of that independent economic position.

Far away from the autumn statement’s crowing about upwards revisions to growth – however unsustainable – and headline giveaways, the Chancellor's proposal to legislate for new fiscal rules would stretch fiscal consolidation far beyond those in his original – and long-since abandoned – Plan A.

Details are as yet sketchy but the plan for a new “charter for budget responsibility” probably means legislating for a balanced budget – eliminating not just the structural but absolute deficit – by 2018/19, and a shorter period on which to judge government spending plans than the rolling five years we have now.

This seemingly technical revision to how government finances work could have utterly devastating consequences on already-stretched public spending. Many serious commentators are already questioning the credibility of aiming for a balanced budget by a set date, not least if there are to be no tax rises beyond the unreliable “anti-avoidance measure” that seems to pay for everything these days. A charter that set a three-year fiscal mandate instead of a five-year rolling rule would effectively remove the government’s ability to borrow to invest – anathema to Osborne but crucial in light of the Office of Budget Responsibility’s gloomy assessment of private investment, which has fallen not risen by their original optimistic estimate. If business isn’t investing, and the Government is determined to balance its books by a set date no matter what, there’s only one outcome – years if not decades more of underinvestment in crucial infrastructure and services, and get more demand sucked out of a fragile economy.

Worse, it will mean yet more spending cuts for their own sake, distorting spending decisions for years to come. The talk of limiting “annually managed expenditure” – welfare to most of us – is an example, as it risks great damage to the most vulnerable in society for no good reason.

All this would be fine if it were just the Tories’ chief election strategist plotting in his elaborate garden shed. But this vein of thinking risks inflicting real damage between now and 2015, and makes it even less likely that millions who have missed out on the recovery will feel any gain.

As for the Liberal Democrats, there are reports that Osborne and Nick Clegg have agreed that a budget surplus will be a feature of this new charter. Balanced budgets don’t necessarily signify a balanced economy – something Help to Buy and lower household savings are moving us further and further away from. They are only of value if the real economy is providing people with the capability to live fulfilling lives. Should Clegg sign up to Osborne’s plans, especially as at the Lib Dems’ Glasgow conference in September he conceded the need to tax the wealthy more, he’ll have to answer not only for what the charter commits the nation to, but for what his party stands for if not a distinctive vision on the economy.

Prateek Buch is director of the Social Liberal Forum

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Commercial Litigation Associate

Highly Attractive Package: Austen Lloyd: CITY - COMMERCIAL LITIGATION - GLOBAL...

Systems Manager - Dynamics AX

£65000 - £75000 per annum + Benefits: Progressive Recruitment: The client is a...

Service Delivery Manager (Software Development, Testing)

£40000 - £45000 per annum: Ashdown Group: A well-established software house ba...

Day In a Page

Read Next
The economy expanded by 0.8 per cent in the second quarter of 2014  

British economy: Government hails the latest GDP figures, but there is still room for skepticism over this 'glorious recovery'

Ben Chu
Comedy queen: Miranda Hart has said that she is excited about working on the new film  

There is no such thing as a middle-class laugh

David Lister
Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little