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The Day the Coalition Died

Tony McNulty thinks that Tuesday was the day the coalition will be seen to have ended.

By Tony McNulty

4 Dec 2011, 12:08

They might protest that they will fight the next election as a separate party. They might insist that they retain an identity of their own. But Tuesday – Autumn Statement day – was the day that the Coalition died. It was the day the Liberal Democrats gave up any pretence that they cared for anything other than power. This was the day when the clique at the top of the party decided that they would fight the next election as the supplicants of the Tories. This was the day when they made it impossible for the Labour Party to consider a post-election partnership whilst Clegg and his cronies are in charge. This was the day when, for most radical and progressive Liberal Democrats, the music finally died.

Following on from the Autumn Statement, the leadership of the Liberal Democrats has made it clear that they support the detail as well as the broad thrust of the fiscal, monetary and financial policies outlined. This is despite the fact that it is people from the lower income groups who will bear the brunt of the latest round of cuts. The Institute for Fiscal Studies says that the Autumn Statement represents a shift of resources away from low-income families with children to the much more affluent. The IFS report reveals that the poorest 30% of households will lose more than three times as much as the richest 30% and that number of children in poverty will go up by over 100,000.

Clegg’s much vaunted and heavily trailed plan to help the young unemployed – eighteen months after his Government scrapped the Future Jobs Fund and Job Guarantee – appears to be financed by a squeeze on tax credits aimed at the poor. As if this wasn’t enough, the Liberal Democrats have agreed with their Conservative colleagues that the country’s current economic position means that it is necessary to set out expenditure plans for the next five years – through until 2017, rather than the 2015 target set out in the Coalition agreement.

This means that the Liberal Democrats have committed to over £15 billion worth of spending cuts for 2016 and 2017 – that is to say, for the first two years beyond the next election. Jeremy Paxman couldn’t believe his luck when Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury, told him on Newsnight that “...we have decided what the path of spending is in the following two years [after the election] and in due course will set out what that means in detail.” Alexander was very clear that both parties would work together to set out these post-election spending plans – before the election.

So, by the end of this week, the Liberal Democrats have committed to an economic strategy that attacks the very poorest and makes them pay more than the most affluent, to a youth employment scheme that is financed by squeezing the poor, to 100,000 more children in poverty and to two further years of £15 billion of public spending cuts, beyond the 2015 election. No significant measures for growth or to stimulate spending and demand were presented at all. The Coalition partners, it appears, are joined at the hip supporting one government programme until 2017.  So how can the Liberal Democrats fight the next election as a separate party? And how can they seriously offer themselves as a distinct alternative to the Coalition government? Perhaps they will campaign against themselves just to cover all the bases.

Under Clegg, and as a result of the events of this week, the Coalition is dead and the Liberal Democrats have been subsumed into the Conservatives as a ‘wholly-owned subsidiary.’ What this means for the radicals and progressives in their ranks is, at the moment, unclear. There are many in the Liberal Democrats for whom this entire approach is an anathema and who will want to reconfirm their own identity – but how can they disengage before the next election if the stage is set for a united economic policy until 2017? How can they disengage without destroying the Coalition?

Just as interesting will be how Labour deals with the new reality. How can Ed Miliband persuade the progressive and radical rump of the Liberal Democrats that Labour is willing to work with them, but cannot entertain working with Clegg’s Coalition Liberal Democrats? This must be what Ed Balls had in mind with his tentative noises to the Liberal Democrats recently. Have the events of this week radically challenged Labour’s narrative on the economy? Has Labour done enough thinking to present an economic alternative that will satisfy the bond markets as well as its core and lost votes?

Some think that the two further years of Coalition cuts presents Labour with insurmountable challenges – challenges that it will be unable to address. It is clear that the new political terrain gives Labour the chance to set out a very real alternative to the Coalition – something that it needs to do with some urgency. Labour tentative steps around an economic critique that talked of cuts coming ‘too fast and too deep’, of a five point plan for growth and jobs and telling the Coalition ‘told you so’ – was fine as far as it went, but a new situation needs a new tune. Now is the time to establish not only a much more developed critique of the ‘slash and burn’ austerity of the Coalition, but also, and more importantly, a coherent and substantive economic policy.

The first part of this equation is easier – much of Labour’s critique of the Coalition’s economic policy has been robust – especially as developed by Ed Balls. It the second half of this equation that Labour must address with greater urgency to avoid becoming as redundant as many of the Social Democrat and Socialist voices in Europe and beyond. The second part is more difficult, but is linked to the first and is just as urgent. We don’t need the shadow budgets from the past, but we do need relevant and cogent economic analysis and policies – and we need them now.

The death of the Coalition provides Labour with the opportunity to develop the solutions that the country needs to survive a very shaky future. As a result of Osborne’s incompetence and failure, we are heading for a much more severe re-run of the seventies. If we are to avoid getting sucked in to a lost decade of stagnation, and a generation of young people growing up without hope, then we need Labour to articulate that critique, analysis and alternative – for the sake of the economy and for the sake of democratic party politics.