Lib Dem leadership candidates: Austerity was right and Labour would have done it too

Ed Davey and Jo Swinson said Labour would have cut like they did.

The Liberal Democrat leadership candidates have claimed in an online hustings that Labour would have pursued austerity if it had won the 2010 election.

When asked “do you accept that austerity was the wrong economic policy in 2010”, Jo Swinson and Ed Davey – who were both ministers in the Coalition government – said they did not accept that.

Davey said that in 2010, following the banking bail-out, the government was borrowing £400m a day and so spending had to be “reined-in”.

In comments that were echoed by Swinson, Davey said that the budget proposed by Labour’s chancellor Alistair Darling was “actually rather similar” to the one the Coalition government implemented.

In March 2010, Darling said that cuts to public spending would be “deeper and tougher” than those pursued by Margaret Thatcher in the 1980s and the Institute of Fiscal Studies said that tax rises and spending cuts were likely until 2017.

However, in its May 2010 election manifesto, Labour said: “The Tories argue that public spending should be cut immediately, but this position is out of step with every other G20 government, right or left.

“If governments do not provide support when families and businesses most need help, growth is set back, jobs are lost, and the country builds up more debts – paying a higher price in the future. To cut now would push the economy back into recession, not reducing the deficit but increasing it.”

After the election, Labour’s now shadow chancellor John McDonnell ran for leader of the Labour Party, opposing cuts to public spending. He said:

“The budget deficit can be sorted if we set up a fair tax system which tackles the tax avoidance by the big companies and the very rich that costs us £100billion a year. We need a Robin Hood tax on speculators’ deals in the City.”

In the hustings, Davey said that the Liberal Democrats had failed to communicate that Labour would have cut too and that the Lib Dems had stopped Tory chancellor George Osborne cutting as hard and fast as he would have like to. “It would have been far, far worse,” he said.

Davey said that austerity stopped being the right policy a few years ago though and the Tories should have stopped it.

Swinson said that, in 2010 “there needed to be some spending constraints” and “I wouldn’t take lessons from the Labour Party on this”.

However, she added that measures like the bedroom tax had been a mistake. “We have to be a bit humble and recognise where we didn’t win some of the battles that we absolutely should have won,” she said.

Joe Lo is a freelance journalist and a reporter for Left Foot Forward

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8 Responses to “Lib Dem leadership candidates: Austerity was right and Labour would have done it too”

  1. nshgp

    220 bn a year going on the debts not on services.
    Hence you get austerity, …

  2. Tom Sacold

    It is the legacy of Blair & Brown’s neoliberal New Labour ‘light touch’ financial policies.

    All the banks should have been nationalised and the Banksters given long prison sentences.

  3. Boffy

    Even days prior to the 2010 General Election, the Liberals were arguing that the austerity measures being proposed by Cameron’s Tories were economic suicide. Of course, only a few months prior to the 2010 General Election, Cameron too had been promising to match all of Labour’s spending plans, as, in the words of Samuel Brittain following the 2008 global financial crash “We are all Keynesians now.”

    What changed Cameron’s mind was not any matter of economic principle. Cameron still though the Tories would lose, and seeing the success of the Tea Party in the US, in shoring up the conservative base of the Republican Party, by reverting to the ideas of Hayeckian austerity, and sound money, he saw a political means of shoring up the Tory vote for 2010. As with his decision to promise the EU referendum, it was pure political calculation designed for conservative party interests, and nothing more.

    Even whilst the Liberal-Tory negotiations to form the coalition were taking place, the Liberal representatives at those talks were saying that introducing austerity measures at that time, when the economic recover that Labour had put in place (economic growth in the last quarter that Labour was responsible for was 1%, or about 4% annualised, and interest rates/Gilt yields were falling) still needed to consolidate. They abandoned that correct position only to get a sniff of Ministerial leather. Joey Jones of Sky News, at the time, gave the low down on what the Liberals were actually saying, as I showed in a video on my blog at the time.

    A look at the performance of the US, which after 2008 continued to use Keynesian fiscal stimulus under Obama, and whose economy continued to recover, as well as to be able to generate the growth to pay down some of the debt, compared to the stagnation of the UK, and EU, which after 2010, introduced measures of austerity that amount to measures of economic self-harm, demonstrates the point.

  4. Boffy

    My 2010 blog post with Joey Jones video can be found here – https://boffyblog.blogspot.com/2010/11/liberal-economy-with-truth.html

  5. Patrick Newman

    Right on Boffy call the crooked LD’s out. They did not need to coalition with the Tories. It could have been a supply and confidence deal like with the DUP. They could have demanded a more socially just balance between tax and spending/benefits cuts but they were happy to shit on the poor and vulnerable. They could have been all radical and said let’s go for rapid recovery and why run the economy like household accounts. Print money when you are a sovereign currency (which they ended up doing with QE). They with the Tories designed the slowest recovery from a recession in history. They must be continually reminded of their key role in austerity. They not only supped with the Osborne devil – they soon took to wearing his clothes and sleeping at the foot of his bed!

  6. steve

    The Blairites gave the private sector the ‘light-touch’ regulation they wanted.

    And consequently the private sector drowned in their own greed.

    Tax payers came to the rescue and were subsequently punished with austerity.

    Hand-outs for the elite, hard times for the rest of us.

  7. Ralph Musgrave

    The above is just one more article by someone who doesn’t get the distinction between two quite different forms of austerity: 1, lack of aggregate demand, and 2, lack of public spending.

    But never mind: as long as you can repeat fashionable words like “austerity”, “progressive”, “hate”, “inclusive”, etc etc, you’re guaranteed fame and fortune.

  8. George

    I remember Ed Balls arguing that similar cuts to those made by the Coalition would be necessary but ought to be spread over a slightly longer period. Blairites in the Labour Party were, and probably remain, neo-liberals to a considerable degree.

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