Lib Dems show their true colours: yellow, yellow, yellow

Both Jeremy Browne and Nick Clegg, with recent comments, have risked squandering their influence and credibility for short-term political gain

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Has Clegg been taking tips from Cable?
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James Dowling
On 30 January 2012 11:57

Two days, two different issues. On both the suggestion that the government goes further and faster in increasing the personal allowance to £10,000 and Stephen Hester’s bonus, a Liberal Democrat Minister has taken a strong stance that is not necessarily quite in keeping with what the Government is actually doing or planning to do.

In these days of coalition, we have become used to a rather elastic interpretation of collective responsibility – but, even so, what the devil is going on?

I was interested by Peter Hoskins and Rachel Sylvester’s recent pieces suggesting that the Liberal Democrats have consciously embarked on a strategy of differentiating themselves from the Conservatives. I don’t doubt that this is true. But in my mind, this begs the question of to what extent something odd or new is happening in the coalition dynamic.

Jeremy Browne’s widely covered outburst on last week’s Question Time intensifies the questions around whether the Government should have done more to ‘rein in’ Stephen Hester’s bonus; Nick Clegg’s rhetoric on the personal allowance encourages an expectation that might be rather harder not therefore to fulfil.

It is likely that Jeremy Browne’s comments were opportunistic and designed purely for public consumption – they bought off an otherwise difficult question at the time, and helped encourage the view that the Liberal Democrats were somehow different, ‘fairer’, than their hard-hearted Conservative bedfellows.

The fact that Stephen Hester arguably deserves his bonus (Hester is well-regarded in the Treasury and No10 – as the front of the FT today reflects – and could earn much more money elsewhere, without the public odium that his current position attracts) is beside the point; the public strategy is clearly to ride a more populist bandwagon – seemingly regardless of long-term credibility or sense.

Nick Clegg’s remarks are in the same mould, but they are also cast into an ongoing policy debate. In that respect, they bear more than a passing resemblance to some of Vince Cable’s tactics in the past – public outbursts to bolster a faltering internal argument. If this is really where the Deputy Prime Minister is going, it’s a curious development – not least because his policy suggestions were quite so half-baked.

One of the most genuinely progressive contributions to the coalition programme for Government was the ambition to raise the personal allowance to £10,000. As an incentive to work, it is far more effective than any tinkering with the welfare system. It deserves support.

However, the Deputy Prime Minister suggested that this could be paid for by (for example) cutting pension relief (which the Government has already done – and has ruled out going further on this Parliament); closing avoidance loopholes (something politicians have historically viewed as seemingly a source of free money; in reality, most such anti-avoidance action simply goes to plug holes in budgets that have already been allocated and baked into the Treasury forecast – which is why the Treasury do not count it as new money in); and, the mansion tax (which is great if you live in Sunderland, less good if you reside in the South East – and is therefore electoral suicide for the Conservatives and, probably, the Liberal Democrats).

Worst of all, some reports suggested that it could be paid for by reducing the higher rate threshold – thereby dragging more people into 40 percent tax. Given that there are nearly eight times as many basic rate taxpayers as higher rate, the threshold would need to be reduced way further than £2500 to make up the shortfall. In reality, you’d end up dragging anyone who earned over the mid-thirties into 40 percent tax.

None of these options make sense as serious policy proposals – and, in proposing them for nakedly populist reasons, the Deputy Prime Minister risks seriously undermining his stance within Government. No wonder the Treasury are so infuriated with him.

Both Jeremy Browne and Nick Clegg are serious Ministers who have much to offer this Government and the country. Their recent comments, however, risk squandering their influence and credibility for short-term political gain.

Down the line, this tendency, if continued, risks marginalising the Liberal Democrat voice within Government. Come election day, if their rhetoric was unrepentantly yellow, but the Government’s record rather more blue, they might yet have cause to rue this.   

James Dowling is a former HMT official and now a public affairs consultant, specialising in financial services

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