Libdems start to back away from austerity too


9:00 am - August 16th 2012

by Sunny Hundal    


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The Financial Times has published a significant article today.

Put aside the economists who have changed their mind on the advice they gave Osborne: this time the Libdems are wavering.

John Pugh, an MP who helped write the Lib Dems’ economic policy before the 2010 election, has called for ministers to return to the plans set out by Vince Cable, the business secretary, when he was the party’s Treasury spokesman.

Mr Pugh said: “We need to look again very carefully at the implications of the sharp reduction we have seen in capital expenditure.

“There are a fair number of people who think that if we returned to the plans as conceived by Vince Cable . . . we would be in a slightly healthier position than we are.”

Mr Pugh admitted this would be difficult for the chancellor, given it would be widely interpreted as a U-turn on his central policy of not breaking the spending pledges made in 2010 and effectively adopting a plan B. But the Lib Dem MP added: “The situation is serious enough now for people not to be bothered about what you call the plan.”

Annette Brooke, another Lib Dem MP and former economist, agreed with Mr Pugh. She said: “It is really important that we should be focusing on boosting growth. Even though a lot of really good ideas have come out of the government, they all tend to have involved small sums of money.”

John Leech, MP for Manchester Withington, said: “An easy way to take the construction industry out of recession would be to spend a significant amount of money building some housing very quickly. Even if we borrowed to do so in the short term, it would pay for itself in the long term.”

A senior economic adviser to the party said: “We may have to resort to emergency measures to stimulate demand. We have already let the timetable on eliminating the deficit slip: we may have to do that again.”

If the Libdems lose faith in the deficit reduction strategy too, the Coalition really is doomed.

But it is rather startling that it has taken over two years for the Libdems to realise that austerity isn’t working, and to demand a change a change in strategy.

Better late than never I suppose. But unless the stimulus is large and powerful enough – it won’t have much impact.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


I don’t think it’s a case of being blind before hand… The two Johns have been critical before this point.

It’s severe and they’ve broken ranks. About time, but I don’t buy that they went into govt. believing in Osborne’s strategy!

2. margin4error

Looks like a degree of license has been given to the minions to be critical about government policy ahead of party conference season.

Can’t see it ammounting to anything though. Sadly.

Sunny, surely you know by now that the LDs will say all this but STILL vote with Dave & co.

Until they start speaking with their feet & have a wander through the ‘no’ lobby, all this is just hot air.

I know that, you know that but more importantly, Dave knows that so the tories will carry on doing exactly as they please & the LDs will step into line behind them every step of the way.

With margin4error on this one, pre conference bluster for the demoralised troops.
I suspect that the concept of electoral demise might (rather like hanging) concentrate the mind but what do they do about it?

I don’t know the details of the Lib Dem economic policy in 2010, but their public statements were much closer to Labour than Tories (i.e. be careful about cutting too much). The ‘startling’ thing was how quickly they changed their position after the election. Unlike other policies this wasn’t a pragmatic coalition trade off – austerity is what keeps them together. So keen to show they are a serious party of government, they’ve ended up screwing up the economy trying to prove it. And now they are considering going back to what they originally said they’d do – perhaps they’ll start discussing tuition fees next.

Also agreeing with margin4error and kb32904

6. David Moynagh

Austerity for the ordinary people only and outright cruelty to the sick and disabled. This rainbow coalition led by Zippy and Bungle are an outright disgrace. They should be tossed out on their necks and told to go and find work that they might manage. Litter picking……. They are responsible for the mess. Thank heavens that tories and lib dems are considered vermin up here in Scotland. Both parasites by nature.

Capital expenditure has nothing to do with deficit reduction.

The government can simultaneously cut the structural deficit and boost capital expenditure. I think they are daft not to given that the government can currently borrow at negative real interest rates.

Duncan – does this ring a bell?

http://news.bbc.co.uk/1/hi/uk_politics/8565722.stm


Reactions: Twitter, blogs
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  20. Liberal Demolition

    Some LibDem MPs seem to have finally realised Plan A isn't working. It only took two years. http://t.co/u98YNf6A

  21. Colin-Roy Hunter

    Some LibDem MPs seem to have finally realised Plan A isn't working. It only took two years. http://t.co/u98YNf6A

  22. Compass

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  23. Colin-Roy Hunter

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  24. Peter Durant

    Some LibDem MPs seem to have finally realised Plan A isn't working. It only took two years. http://t.co/u98YNf6A

  25. Robert Beard

    Some LibDem MPs seem to have finally realised Plan A isn't working. It only took two years. http://t.co/u98YNf6A

  26. Andy Birss

    Some LibDem MPs seem to have finally realised Plan A isn't working. It only took two years. http://t.co/u98YNf6A

  27. Dean Reeves

    Some LibDem MPs seem to have finally realised Plan A isn't working. It only took two years. http://t.co/u98YNf6A

  28. Colin-Roy Hunter

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  29. ManchesterLabourLeft

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  30. Brian Tomkinson

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  31. Bonnie Greer

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  36. Matthew Shakespeare

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    Good, but unlikely to happen eh?





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