THE Liberal Democrats need to show this week why they should be taken seriously: as a party of power as well as of protest. That was the main message of yesterday’s Populus poll for The Times. But credibility means first showing that the party’s sums add up. After last week’s messy pre-manifesto, the Lib Dems yesterday published a detailed paper on costings. This is a serious piece of work. Comparable Figures are set out year by year.
The package has two main features: first, a £5 billion-a-year transfer within existing spending totals and, secondly, raising an average £6 billion a year from a 50p top tax rate on incomes of more than £100,000. But will savings on the projected scale be achieved from scrapping the Department of Trade and Industry, cutting industrial subsidies and from what is called “better government”, such as reducing benefit fraud?
Free personal care for the elderly and no tuition fees for students may stimulate demand and push up spending (although expenditure on care is forecast to rise). A 50 per cent top marginal rate may also produce less revenue than projected if wealthy taxpayers alter their behaviour.
The Lib Dems point to a margin of error, of £3.5 billion of “savings” over spending commitments, and of £1.8 billion on the 50p tax policy. Some of this is, however, likely to disappear in further spending commitments before the election.
As David Laws, the Shadow Chief Secretary responsible for costings, argued at the Times fringe meeting, credibility is more than just an arithmetic exercise, it is about whether the party is willing to make tough choices.
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Mr Laws and Vince Cable, the Lib Dem Shadow Chancellor, certainly talk tough. Mr Cable’s conference speech set a standard for candour and rigour unlikely to be matched at the Tory and Labour conferences. He is against corporatism and for free trade.
Yet Mr Cable’s reassuring economic liberalism and Mr Laws’s iconoclasm about public services go only so far and their instincts and attitudes are not shared by many of their colleagues.
Even if the sums do more or less add up, they still imply an increase in the tax burden and the public spending share in the economy. The Lib Dems may no longer be the party of unlimited and uncosted pledges of Tory and Labour caricature, but they are not the party of limited government. Lots of other, notably green, tax changes have been promised, and replacing council tax with local income tax may be less popular, and more burdensome, in practice than in theory, hence the assumption of large Treasury support The Lib Dems remain wedded to universal, taxpayer-funded provision of many services as well as higher state pensions for the over-75s.
The party rejects the Blairite view that limiting the growth of taxes and spending to politically acceptable levels over the long term requires better-off consumers to pay in part for some services, such as higher education and care in old age; the notion of “co-payment”. But student numbers and demand for elderly care are likely to grow fast over the next few years.
So the Lib Dem approach implies continuing upward pressure on the levels of spending and taxation. “Tough choices” may still mean a larger, and active, State.