The Liberal Democrat Leader, Nick Clegg, has called for a cross-party Council of Financial Stability to agree the timetable and scale of deficit reduction. He made the call at the London Stock Exchange on Tuesday 23rd March. Nick said that the sheer size of the UK budget deficit will require politicians to take a different approach to public spending to avoid social unrest.
Nick criticised 'government-as-usual', which he said could not command the legitimacy to make many of the big decisions necessary in coming years. The scale of the changes required is so great that it will require a different way of taking decisions. He said that the standard model of Governments elected with a minority of popular support imposing cuts from Westminster would be a recipe for Greek-style social and industrial strife so he called for new ways to ensure that the long term national interest would be put above short-term interests.
The Liberal Democrats would establish a cross party Council for Financial Stability, with the economic spokespeople of all the major parties invited to join, along with the Governor of the Bank of England and the Head of the Financial Services Authority. The purpose would be to agree the basic timetable and scale of deficit reduction in the years ahead.
The cross-party Council could agree the timetable according to sound economic tests, like those Vince Cable has already set out as a means of judging when to begin the process of fiscal contraction, which are the rate of growth; the level of unemployment; credit conditions; the extent of spare capacity in the economy; and the cost of Government borrowing.
This plan would not prevent political parties from arguing about which changes should be made to taxes and public spending, or which areas of taxation and spending should be immune from any change but it would force politicians to be honest about the scale of the changes required, with a structural deficit estimated at £80bn.
Including the monetary and banking authorities would allow for a more coherent debate about the interaction between monetary and fiscal policy, as well as the role of the financial services sector in underpinning growth.
The full elimination of the structural deficit will almost certainly take more than one parliament so an agreed approach on the overall scale and timetable of fiscal consolidation will provide both the British public and the markets with the assurance that a consistent and responsible approach will not be hijacked by politics in the future.
Regrettably, the Conservatives and Labour continue to hide from the true scale of the problem and both parties instead continue to pretend that 'efficiencies' are the answer to everything.
If you want real change, vote for it.