Tomorrow it will have been five years since I became leader of the Liberal Democrats. Roughly half of that time has been spent in opposition, and half in government. I don’t suppose it’s exactly controversial to suggest that I and my party have changed over that period. Today I will argue that we’ve changed for the better. Because my purpose here today is to explain, clearly and simply, what the Liberal Democrats offer the people of Britain, and why it’s an offer which speaks to modern Britain.
Our offer is different from that of the Conservatives. It’s also different from Labour’s offer. That won’t surprise you. What will surprise you, perhaps, is that it’s different too from the offer of the Liberal Democrats in opposition.
What I want to set out is a case for why Britain should be governed from the centre ground. A case for both a stronger economy and a fairer society, because we can have both – they are not mutually exclusive. Serious parties know that that the centre ground is the only place from which Britain can be governed. And serious leaders try to keep their parties in the centre ground. But in times of economic distress, when people and parties are under pressure, when there are no easy answers, no silver bullets, only tough choices – at times like these, politics quickly becomes polarised as the homing instincts of ideologues to the right and the left kick in.
The Tory right dreams of a fantasy world where we can walk away from the EU, but magically keep our economy strong; where we can pretend the world hasn’t moved on, and stand opposed to equal marriage; where we can refuse to accept the verdict of the British people and pretend the Conservatives won a majority of their own.
The Labour left lives in a different, but no less destructive, fantasy world where their irresponsible borrowing in government can be remedied by borrowing more; where every budget reduction can be opposed without explaining where the money should come from; where games can be played with political reform and EU budget policy without long-term damage to their credibility.
It is at times like these that Britain needs a party rooted in the centre ground, which anchors the country there. The Liberal Democrats are that party. We’re not centre ground tourists. The centre ground is our home. While the tribalists in other parties desert the centre ground under pressure, the Liberal Democrats have done the reverse. Under pressure, we’ve moved towards the centre.
Governing from the centre ground means applying pragmatic liberalism to the policy challenges of our time. But pragmatic liberalism is not the same as dogmatic liberalism. And that is what distinguishes Liberal Democrats in opposition from Liberal Democrats in Government. The greatest strength of our party is our idealism. But in our strength lies our weakness – because sometimes idealism can turn into dogma, or at least an unwillingness to engage fully with the day-to-day experiences and perspectives of the British people we seek to serve. A party of government knows that workable solutions need to be grounded in values – but also that they must respond to the hopes and fears of reasonable people. This is the lesson we’ve learnt in government. The challenges of governing at a difficult time have given us a harder edge and a more practical outlook.
It’s worth pausing here for a moment and making a point about the immediate future of my party. There are two alternatives. If we are to become a more permanent fixture of government, then it will be, at least at first, as a partner in coalitions. That means embracing the realities of coalition government, and becoming better and better at negotiating successfully on behalf of those in Britain who expect us to stand up for them. It means accepting compromise. It means putting up with people who object that we haven’t got everything they wanted, and who can’t see the value in getting much, much more than we ever could in opposition. Because that is the alternative – a retreat to the comfort and relative irrelevance of opposition. But – and let me make this very clear – choosing opposition over government is not a values-free choice. It is a dereliction of duty. Because if our values and principles matter to us, we should want to see them deployed for the good of the British people. It’s not about us, after all. It’s about the people we serve.
Let me offer an example of how, in government, the Liberal Democrats have tacked towards the centre, not away from it. In opposition, it would have been easy to decry the less pleasant consequences of austerity. No matter how rational opposition parties try to be, it’s just too easy, too tempting, to go for the quick win. That’s why opposition parties are so good at spending ‘savings’ two, three or four times over. Play budgeting with play money. But in government, we’ve not been able to do that.
We know from experience now: if you protect the health and schools budgets, as we correctly did, you can’t oppose every reduction in the welfare budget. If you want to protect welfare as well, you’ve got to accept that you’ll end up gutting the crime budget, or the BIS budget, or local government. We get that now. We’ve learnt to live with a host of invidious choices.
Another example: in these distressed economic times, the ideologues to left and right find comfort in the shibboleths of their preferred economic doctrines and turn their backs on evidence and reason. So the prescription of the right is all supply-side – deregulate, cut, get out of the way. The prescription of the left is all demand-driven – tax, borrow, spend, intervene. In government, we’ve rejected these Manichean alternatives and stuck with a more flexible approach.
Yes, we have to cut expenditure to bring down the deficit. Otherwise we put ourselves in hock to the bond markets, drive up interest rates and impoverish future generation. And yes, we have deregulated: We’ve stripped back accountancy rules for the smallest businesses. We’re cutting back health and safety inspections for low risk companies. We’ve extended the qualifying period for unfair dismissal so businesses can be confident about hiring new staff.
But we have also taken steps to drive demand: We’ve put money back in the pockets of the low and middle income families we know are most likely to spend it with our income tax cut. We’ve taken every opportunity to increase investment in capital – infrastructure, roads, rail, schools. We’ve established the Regional Growth Fund, the Growing Places Fund and multi-billion pound Treasury guarantees for investment to unlock private sector growth. We have resisted the false choice between a state that steps in and assumes control, and a state that backs off and washes its hands.
We have embraced the challenge of building an enabling state that acts where necessary and backs off where not. Promoting, inspiring and facilitating growth and opportunity.
But recognising that the strong economy we want can only be built on the back of hard work and responsibility by citizens themselves.
So we’ve been on a journey. But our journey has been towards the centre ground, not away from it. Because the centre ground is where liberals are best able to fulfil our purpose in politics.
For Liberal Democrats, our purpose is to enable every person to be who they want to be and to get on in life. Freedom and opportunity combined. Or what the philosophers might call ‘substantive freedom’.
To deliver on our purpose, we need to build a stronger economy in a fairer society. We need a stronger economy because without resilience and sustainable growth, our economy will never be able to deliver the jobs and the opportunity people need.
We need a fairer society because unless we ensure everyone has the means to get on, some will be left behind while others race ahead, and our society will become increasingly unfair and unequal. And so every policy we promote has to make our economy stronger and our society fairer.
What underpins our ‘stronger economy, fairer society’ agenda, and gives it a distinctly liberal flavour, is a very clear conception of the appropriate balance between the role of the state and the role of the citizen. For us, that relationship is clear: it is the government's responsibility to ensure every person has the opportunity to get on, but every person must take personal responsibility for using those opportunities by working hard.
We cannot absolve people of their responsibility for improving their own lives, because to do so would be to turn them into dependants – and so deny their capacity to do things for themselves and compromise their dignity. You can’t build a stronger economy with people lost to dependency. At the same time, we cannot wash our hands of those without the means and advantages to get on in life alone. To do so would compromise their potential and diminish their dignity – a tragedy for them and a waste for society. You can’t build a fair society when you deny some the chance to fulfil their potential.
Our commitment to opportunity has deep roots. Liberals have an unshakeable belief in human potential. We know that children born in the most difficult circumstances can rise above them and live the fullest of lives – but only if they’re given the help to do so. Parents know what I mean. You look at your children and yearn with hope for their future. You do whatever you can to give them every advantage. You worry about the obstacles they will face, and you plan to help them overcome them all. But equally, parents know that kids need to learn to look after themselves. Slowly but surely, we guide them into independence and adulthood. Because we know that to be happy, they will need the means and capacity to run their own lives – and pass their love and skills on to the grandchildren they might give you one day. Parents know instinctively that a balance of opportunity and responsibility are what human beings need to thrive. Why would the state treat people otherwise?
And so we need both – a stronger economy and a fairer society; more opportunity and more responsibility. Every one of our policies needs to meet this test.
I want to use as an example our approach to welfare. Labour left us with a welfare system with two fundamental problems: Design and affordability.
First: design – Labour left us with a benefit system in which work didn’t always pay, but sometimes playing the system did. A benefit system that trapped millions on out of work benefits with no hope or aspiration for a better life. A benefit system that took money off people in tax and then gave them some of it back if they filled out a series of government forms – instead of letting them keep the money in the first place. And a benefit system which meant in some parts of the country families who didn’t work were able to live in far better homes than families on low or average wages. The benefit system was so badly designed we had a social duty to reform it.
But the second problem with Labour’s benefits system was affordability. Since the 1970s our economy has tripled in size but the welfare budget has increased seven fold.
So the unaffordability of Labour’s welfare system gave us a financial imperative for reform too. It is that fiscal imperative which has, rightly, forced us to go back to first principles with Universal Credit, a new benefit model for the 21st century.
Universal Credit is a centre ground welfare reform. Its central purpose is to ensure that you are better off in work. That shouldn’t be a radical change – but it is. Of course, it isn’t enough to just make sure work pays and then let the state get out of the way. Because many people need support, encouragement and training to get out and find a job. And – let’s be honest – some people do need tough sanctions to get them active. That’s why we’ve introduced the Claimant Commitment for those who apply for benefits – a written contract between taxpayers and the claimant setting out how all those who can will work to get off benefits in the future. That’s why we’ve introduced the rule that anyone who refuses a reasonable job offer will have their benefits docked, and anyone who refuses three will get no JSA at all for three years. It’s why we’ve made it clear that you can’t limit your job search to a specific sector or place for more than three months. It’s why we’re introducing proper assessments for disability benefits – so the money goes to those who need it most. It’s why we’ve introduced the Work Programme to support people who need help finding a job. It’s why we are introducing a new Single Tier Pension to make sure everyone who saves sees the benefit. And it’s why we’re pushing ahead with the roll-out of Employment Support Allowance, with strict rules so that people who are unwell but could work with the right support get that support and are expected to plot a course back to work. Of course it is harder to find a job and keep it if you are unwell. But some conditions are so common that we simply cannot write sufferers off and pay them to stay at home.
Never mind that the state can’t afford it. We should not delude ourselves that it is an act of compassion to tell someone that because of ill health they should spend the rest of their lives dependent on benefits. It belittles their potential and ends up being a self-fulfilling prophecy. It is time for politicians and the benefits system to recognise that people with health conditions have just as much potential as everyone else if only they are given the help they need to get on.
Universal credit means families will be better off in work than out of it. That is essential to keep people’s faith in the system. When two thirds of people think the benefits system is too generous and discourages work then it has to be changed or we risk a total collapse in public support for welfare existing at all. Politicians of the centre ground, who believe in a benefit safety net, have an absolute duty to be tough on those few who abuse, or try to abuse, the generosity of tax payers and exploit our benefits system. And an absolute duty to make sure the system as a whole is – and appears to be – fair.
We need welfare protection for people who fall on hard times. Of course. But you cannot ask low income working people to pay through their taxes for people who aren’t in work to live more comfortably than they do. That’s why we have introduced a cap on the amount of housing benefit you can claim of £20,000 a year – a rent many working families would stretch to afford. It’s why we have introduced an overall cap on the benefits people can claim, so you can’t get more in benefit than the average family brings in from work. This is controversial.
And in government we have anchored the reform in the centre ground by insisting on vital protections – like support for the 50,000 families affected to ensure they get the help they need to find a job. Like a grace period so if you lose your job, you don’t suddenly find yourself unable to make the rent – you have nine months to find work and get back on your feet. And exemptions for those families where the parents simply can’t work – those in the ESA support category for example. With these protections I believe the overall cap on benefits will make a significant difference in encouraging families to work and take responsibility for their lives.
So this is the welfare system we have designed: one that promotes opportunity and requires responsibility. Some of our critics believe either that the Liberal Democrats in government did not want to reform welfare or were powerless to stop the Conservatives from doing so. The truth is this: yes, welfare reform has been painful and controversial at times but it was in our manifesto and on our agenda right from the start.
The Liberal Democrats are now the party of welfare reform – sensible, centre ground welfare reform. Recognising that most people on out of work benefits want to find a job but often need help to improve their skills before they can. Recognising that there are some people who want to play the system and therefore shouldn’t get benefits at all but that they are in the minority. Recognising that being unwell can make it much harder to work but not accepting that we should therefore give up on people.
So as we develop Liberal Democrat plans for the next wave of welfare reform – and further reforms will be necessary – I want us to keep at the front of our minds the idea that a liberal state is an enabling state. The enabling state gets help to those who need it but doesn’t hand out money to those who don’t. The enabling state pays for education and training so you can get a better job; it doesn’t let you drift on for years, unemployable. The enabling state pays for and directs you to medical treatment if you’re unwell so that you can get back to work and not have to live on sickness benefits. The enabling state pays for childcare so you can get out to work; it doesn’t pay you to stay at home for twenty years. The enabling state offers a benefit back stop for those who need it but ensures that work is always the better option.
So we will be developing proposals that:
· Continue to hold down costs in a way that is fair to welfare claimants and to the other taxpayers who support them.
· Incentivise work by supporting childcare more effectively, extending conditionality for claimants and increasing access to education and training.
· Encourage those with health conditions to undergo treatment that will help them to get better.
· Support fairness by making clear that money should not be paid to those who do not need it – looking again at universal benefits paid to the wealthiest pensioners.
Centre ground reforms from a centre ground party.
The alternatives put forward by the other parties are clearly misguided. There are some on the left who argue that benefits are a right – and the state has no business expecting anything from claimants in return. That any system which assumes people with health problems or a difficult background nonetheless have the capacity to make something of their lives is oppressive and discriminatory. That increasing benefit payments is more important than increasing the pay of nurses and teachers.
Labour have tied themselves in knots over our plan to increase benefits by one per cent a year – saying they would make an artificial divide between the deserving and undeserving poor – those in work and those who are out of work through no fault of their own – and uprate some benefits by inflation instead. Never mind that they haven’t identified what other spending they would cut to fund this promise. Never mind that Labour have actively supported a 0% rise – a freeze – in public sector pay. It doesn’t make rational sense.
My view is simple: there is absolute moral equivalence between working hard in a job and working hard to find a job. Out of work benefits should rise at the same rate as in work benefits because they should only go to people who genuinely can’t find work or are too sick to work. Of course, there are some on the right who believe that no-one could possibly be out of work unless they’re a scrounger. If you can’t find a job you must be lazy. If you say you’re too sick to work you’re probably pretending. The siren voices of the Tory right who peddle this myth could have pulled a majority Conservative government in the direction of draconian welfare cuts.
Just look at what happened this autumn. The Conservatives suggested we cut an extra £10bn from welfare. And ideas were put forward to penalise families with more than two children by taking away child benefit and to penalise young people who want to move away from home in search of a job by denying them housing benefit. But when the political hothouse of the conference season was over and our two parties sat down to agree a plan, the Coalition stuck to the centre ground. We agreed £3.8bn of benefit cuts – uprating all benefits in line with the pay rises we can afford from next April in the public sector of one per cent. And we rejected the more extreme reforms that had been put on the table.
This is the job of the Liberal Democrats: to anchor reform in the sensible centre ground.
Turning the ideas we promoted in opposition – of benefits as a route out of, not into poverty – into practical, deliverable policy.
Both the Conservatives and Labour try to occupy the centre ground. Both get pushed off it by their tribal politics. But the Liberal Democrats are not for shifting. We know that the centre ground is what the people of Britain want their government to occupy. We know that the centre ground is the place to build consensus, the place where co-operation and collaboration can deliver the good government people want. The only place where government can build a stronger economy and a fairer society, ensuring opportunity for all, responsibility from all, and a better future for the country as a whole.