Thursday, 16 August 2012

Autumn challenges for Clegg and Miliband

As he contemplates the next parliamentary year from the comfort of his Spanish holiday, the Deputy Prime Minister will have plenty of time to consider the perils of coalition. With a stand-off between Nick Clegg and David Cameron over constitutional reform, it is becoming increasingly clear how little the Liberal Democrats have gained from being in power with the Conservatives.

There are two reasons why this is so. First, Clegg failed to secure unconditional support for key policies from Cameron. He won a referendum on the alternative vote, but had no guarantees that his position would not be trashed by his coalition colleagues. Instead of just having a referendum, he should have made boundary changes conditional on AV being passed, and put both on the ballot. Now, rather belatedly, he has chosen to link the constituency carve-up to the failure to get Lords reform through. It looks petulant done this way, and does Clegg few favours in the eyes of voters.

But the second failing was not to insist that the Conservative Parliamentary Party be asked to endorse the coalition agreement in the same way that Clegg gained the support of his Liberal Democrat colleagues. This has allowed many Tories to take a pick-and-mix approach to its measures. This was, of course, as much Cameron's failure rather than Clegg's, but it was a weakness of the whole arrangement.

Of course, a bigger problem for Clegg is that on measures where his party gained seats, notably tuition fees, he has accepted a position the exact opposite to that which he argued for during the election. The concessions on repayment thresholds may make the loans more attractive to some, but have made the finances of higher education less sustainable. Clegg would have been better insisting on a lower cap on fees which might have appeared less daunting to potential students in the future.

Where the Lib Dems claim some credit for policies delivered - the pupil premium and a higher tax threshold - it can plausibly be argued that they are delivering policies that most Tories willingly embrace. The pupil premium also featured in the Conservative manifesto. But. so far, its failure to link with a national funding formula and to recalibrate the much higher premium inherited from Labour, means that it is often being used to mitigate cuts elsewhere in the budget rather than for proven measures that could tackle achievement and aspirations among target students.

If he is to regain some of the credibility he enjoyed before the last election, Clegg needs to be ready to revisit the coalition agreement in the autumn, and establish some key priorities for the second phase of the government, some of which should reflect the reality that George Osborne's economic policies are not working as intended. Top of the list should be a serious investment package in national infrastructure, one that starts to have a real impact on the economy, and a stimulus to service industries that pump money directly into the UK economy, perhaps through targeted VAT reductions for tourism-related industries or a strong incentive package to boost UK education. He should also try to put a halt in both cases to the Home Office's unstinting efforts to deter tourists and students from spending their money in Britain.

Meanwhile, Ed Miliband has benefited from the coalition's woes, but still lacks a strong enough policy on the economy and taxation. His challenge for the autumn is to put flesh on a policy that goes further than heckling 'I told you so' at the Chancellor. Ed Balls has argued for VAT cuts, but they need to be targeted on services and industries that are largely home-grown if they are to improve growth, not add to the trade deficit. Stella Creasy has rightly argued for a wholesale bottom up review of all public spending, with value for money at the heart of it. And the focus on any extra investment must be on infrastructure - both small-scale, such as restoring individual school capital budgets, and large-scale, including sorting out London's airports. Miliband has gained stature in the last year: this autumn is the time he needs to translate that into economic credibility.

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