Danny 0, Vince 3?

Posted On: 
5th February 2015

Nick Clegg and Danny Alexander are unveiling possibly the biggest shift in Lib Dem policy of the entire Parliament.

But it looks like a real reverse for the Chief Secretary and his long record of binding himself close to George Osborne.

The top line in many papers is that the party would raise £8bn in taxes and sign up to £4bn in spending cuts. But the real story is a change in the proportion of spending cuts to tax rises that the Lib Dems previously supported. Instead of 80: 20 it will now be 60:40.

What’s really interesting is just how the party tried to avoid telling us the true extent of that shift yesterday. In its briefing note to hacks, it actually said:

“We will take a balanced approach to finding this £30billion through a mixture of both spending cuts and tax rises, so that across the whole period of fiscal consolidation (2010/11 to 2017/18), the ratio of spending cuts to tax rises will be between 80:20 and 75:25.”

But using that period of 2010 onwards looks very much like an attempt to save face for the Chief Secretary. When you count the numbers from 2015/16 to 2017/18, as is obviously the more relevant period, the ratio is indeed 60:40.

More importantly, it could be an even bigger ratio for tax, maybe even 50:50. The small print of the briefing states that the party proposes ‘at least’ £8bn of tax rises and £6bn in reduced tax avoidance, and ‘up to’ £16bn in spending cuts.  CCHQ may pounce on that as a tax bombshell. Clegg and Alexander appear at the Shangri-La hotel in the Shard today to unveil their plan and Tory critics may well say the LibDems’ ‘lefty shangri-la politics’ are back. 

But Lib Dem activists may be delighted to have some clear yellow water between them and the Tories, a defining difference that can help on the doorstep.

And this looks like a major victory for Vince Cable. I wrote last year that Cable’s Newsnight interview was the most significant, and least-noticed, political moment of the LibDem conference. 

He told Laura Kuenssberg at the time that he wanted a bigger tax take than the 80:20 planned by the party. I later put this to Danny Alexander in The House magazine. He told me:

"My priority is to use tax as the instrument to make sure that the overall balance is fair. I think 80-20 broadly achieves that, 78-22 or 79-21, that doesn't bother me...All the evidence is that that sort of balance that I'm suggesting is best".

Well, Vince has won the day, it seems, after making his case to Clegg and convincing him a different approach was needed. Few can deny that Alexander retains the DPM's confidence and loyalty. But when you factor in the Ashcroft poll suggesting Alexander will be toppled by the SNP, it's not been a great week for the Chief Secretary.

Why does this matter so much? Well, you can see how it would smooth the way for a Lib-Lab coalition, with Cable and Balls seeing more eye to eye than Alexander and Balls.

Cable was also responsible for the Lib Dem shift last summer towards backing more borrowing for productive capital investment (another difference with the Tories), against Alexander’s own preference.

Committing the party to a rolling target on clearing the deficit by 2017/18 (to allow flexibility) was another Cable victory.

So when Alexander says he’s the ‘economic spokesman’ for the party, it’s worth remembering just who really seems to have driven the big policy changes in the last few months.