Davey: The British people deserve better than fantasy economics

Today the Deputy Leader of the Liberal Democrats Ed Davey announced the party’s plan to invest £100bn in tackling the climate emergency. 

Ed Davey’s full speech below 

For too long, Britain has not had the economy it deserves.

Under this Conservative Government, too many people can’t live a secure, happy and fulfilling life. Too many businesses face crippling uncertainty over their future. And too many of us feel vulnerable in the face of technological change.

The fact is, the Conservatives have made our economy weaker – much weaker.
People might be in work, but more and more struggle to make ends meet.
Businesses have been hit, with investment down significantly since the 2016 referendum.

Productivity has been grimly weak – with no growth at all in the last 12 months.
The Office of National Statistics confirmed only this week, that Britain’s economic growth in the last year has been the lowest for a decade.

And this Government has ignored all our long-term economic problems. We have alarming skill shortages. A persistent trade deficit. And inequality that’s both socially and economically damaging.

Yet so far, the debate in this election on our economy – on our future – has been a debate between fantasies.

Fantasies born of nostalgia for a British Imperial past. Competing with fantasies from a failed 1970s ideology.

Fantasies competing to bankrupt Britain.

Boris Johnson has snuck into Jeremy Corbyn’s allotment and stolen his magic money tree.

The British people deserve better than fantasy economics.

So my job today – as the Liberal Democrat candidate for Chancellor of the Exchequer – is to offer you a better option: our optimistic, practical vision for the future. And to expose the other two fantasies for what they are.

And their economic fantasies begin with Brexit. Brexit is not the answer to any of Britain’s economic challenges.

In fact, Brexit is precisely the wrong answer to all of Britain’s economic problems – and will make them all worse. A calm, honest analysis of how best to tackle every single economic problem facing Britain today, would conclude remaining in the European Union will help, not hinder.

Take trade. The world has entered a period of dangerous protectionism. Led by Trump’s trade war with China. And with a US Presidential election less than a year away, expect this US-China trade war to escalate.

Yet in Javid’s and Johnson’s fantasy Brexit world – it somehow makes sense, in response to growing global trade protectionism, to ditch Britain’s best trade agreement ever, with our closest and nearest economic partners.

To pull out of the many trade deals the EU already has around the world. People should be deeply troubled by this madness. It’s not global Britain, it’s little Britain. And just think about the practicalities and the costs, and making trade with 27 European countries more difficult.

The Government’s own figures show that filling in the customs forms at newly erected border controls will alone cost importers and exporters a massive £15 billion a year in red tape.

This will strangle business and cost people their jobs. This is regulation gone made. This will put back the war on red tape several decades.

The conclusion can only be this: the Conservatives are no longer the party of business, they are the party of red tape regulation.

And then we come to the fantasy economics of Corbyn and McDonnell. Led by re-nationalisation, and state theft of private savings. They say this will somehow boost business investment. It would be laughable, if it wasn’t so deeply dangerous.

And Lexit, Corbyn’s Labour Brexit, is at least 4 decades out-of-date. Before the UK joined the Common Market, we were the sick man of Europe.

Bizarrely, Labour has forgotten that the best way to take back control from global multinationals, from the tech giants, is a European-wide response.

With strong competition powers for Europe, which New Labour used to champion.

Instead Labour now dreams of costly new capital controls to defend Fortress Corbyn.

Fantasy Island may have been a great TV show – but it’s going to be a horror film.

Our great country must not become a fantasy island – whether it’s the 1870s Imperial fantasy of Jacob and Johnson or the 1970s socialist fantasy of Jeremy and John.
In rejecting Brexit, in wanting to build a brighter future, not return to a less than rosy past, Liberal Democrats have a detailed plan for a successful, sustainable economy.

The first part of our economy plan is clear and unequivocal: Stop Brexit.

Any economic plan that involves Brexit is a weaker plan than ours.

According to the respected Institute for Fiscal Studies, Brexit has already cost our national economy over £1 billion a week in lost output.

How can the parties of Brexit claim they would have money for schools – when Brexit would be costing the Exchequer billions into the future?

How would they afford any rise in public spending, when the government’s own analysis shows that our economy would be 6.7% poorer in the coming years, if Brexit were to happen?

By contrast, the Liberal Democrat public finance plan is backed by our commitment to stay in the European Union.

We calculate that the extra growth from staying in the EU would yield a Remain Bonus – a £50 billion Remain Bonus. For our investments in schools and our policies to tackle inequality.

Now I am today prepared to accept the criticism by the independent Institute for Fiscal Studies of our Remain Bonus. The IFS are probably right when they say that our £50 billion figure is “cautious” and “reasonable”.

That’s yet more evidence that the Liberal Democrats are now the only party of sound finance. 

Just look at the contrast with the other two parties. The spending competition between the Brexit parties, the Labour and Conservative fantasists, has made Santa Claus seem like Scrooge.

So while the Conservatives may attack Labour on spending – the truth is both the old parties are now fiscally incontinent.

The hard economic fact is this: Brexit will hit growth – short term, medium term and long term. And that means a Tory or Labour Brexit will hit our public finances, our schools, police and NHS, now and in the future.

The second part of the Liberal Democrat economic plan focuses on climate change, and our environment.

For Brexit is far from the only big challenge of our time. The climate emergency has to be the urgent priority.

And our radical climate message is clear – we will decarbonise capitalism.

A Liberal Democrat Government will jump-start an economy-wide programme
to tackle the climate emergency.

And I can announce today that across a 5 year Parliament, Liberal Democrats would spend and invest an extra £100 billion of public finance on climate action and environmental preservation. 

Now I must confess – I get excited about these climate economy plans.
Partly because I led stage 1 of Britain’s decarbonisation – when, thanks to Liberal Democrat Ministers, Britain’s renewable power more than trebled.

I’ve seen what we did in Government. And I know what we can do in Government again.

Liberal Democrats made Britain the world leader in offshore wind power.

Liberal Democrats encouraged Siemens to invest in Hull, to regenerate that city and bring new, well-paid green jobs.

And Liberal Democrat climate policies have seen coastal community after coastal community benefit from renewable electricity investments – from Grimsby to Lowestoft.

I want to build on that world-beating climate industry record.  

A Liberal Democrat Government would intervene again to create the new industries and the new markets we need to tackle the climate emergency.

Our climate investment plan includes a new £10 billion Renewable Power Fund.

It alone would leverage in over £100 billion of extra private climate investment.

Not a new subsidy, but state climate finance, to fast-track clean power deployment and give a healthy profit to the taxpayer. Payback as we clean up.

This fund will confirm Britain as the world leader in offshore wind, and make
Britain the global number one in tidal power too.

From Swansea Bay Tidal Lagoon to a whole suite of tidal power stations round our coast. Creating another new climate industry.

And we will invest £15 billion more to make every building in the country greener, with an emergency ten-year programme to save energy, end fuel poverty and cut heating bills. Cutting the average household’s energy bill by a whopping £550 a year.

In Government before, the Liberal Democrats showed that an activist, well-designed climate policy could kick-start a new industry. With subsidies that then got competed away, in the green power auctions I Iegislated for as Secretary of State.

And in Government again, we will build on our great climate record. With floating offshore wind. With tidal power. With carbon capture and storage. And hydrogen technologies.

And we will regulate the City for climate.

From pension funds to banks, from the debt markets to the Stock Exchange.
Mandatory disclosure on fossil fuel investments, to expose investors to their
climate risks.

New laws to require a financial institution or large corporate to publish their multi-year strategy to move to net zero.

New accounting standards and laws, to write down climate damaging assets to a zero value by 2045.

Under Liberal Democrats, the UK can become the gold standard of climate capitalism for the world.

And our responsible reformed capitalism can be the key to the fastest possible decarbonisation.

Contrast Lib Dem climate economics, with Boris Johnson’s backfiring clean taxi boast. Made on the day that Elon Musk – thanks to Brexit – chose Germany over Britain for massive investment in clean transport.

Contrast Lib Dem climate capitalism, with Labour’s renationalisation of energy – set to cost billions, set to hit private investment and set to delay action. It’s hard to think of a more climate-damaging distraction.

So the third part of our Liberal Democrat economic plan: people. And opportunity.

The most important capital a country has, is its human capital. Yet we don’t even measure it. And when you don’t measure something, guess what happens? You undervalue it.

So we need economic metrics and economic policies that nurture and develop our country’s most precious capital.

That’s why Jo Swinson has been so right to lead the debate for a different approach to budgeting and planning our financial priorities – where Well-being economics matters for budget choices.

What does Well-Being budgeting mean? Well, go check out the early experiments in New Zealand – where investment in mental health services has gone up.

And then think what a Well-Being approach to human capital would mean for investment in education and training.

I can confirm today, that investment in infants, children, young people and adults – their education, their training, their wellbeing – this would be the top day-to-day spending priority for the Liberal Democrats.

A Liberal Democrat government will invest in our country’s human capital, by an extra £120 billion, in capital and revenue, over a 5 year Parliament.

From childcare to colleges, from primary schools to lifelong education – this will represent a step change in life chances for all people, everywhere in our country.

This is a huge investment – but it is fully costed. And paid for.

Using the Liberal Democrat Remain Bonus. And using receipts from our corporation and capital gains tax policies.

And when we publish our manifesto costings, this will all be fully set out.

For unlike the proponents of fantasy economics, we will publish our manifesto costings.

That’s what voters deserve. And what the business community should expect.

Which brings me to the fourth part of the Liberal Democrats’ economic plan.

Business.

Our country is blessed by tens of thousands of brilliant businesses. It’s time we celebrated the contribution business makes to our economy and society – jobs, incomes, prosperity.

Yes we want business to be responsible – and when it comes to looking after employees and the environment, we need laws to ensure responsible businesses aren’t undercut.

But most businesses today are responsible.

 And that’s why my message to British business today is this: Liberal Democrats are now the party of business. And we will be the Government of Business.

Not just because we would stop Brexit – the central demand of so many business people up and down the country.

But in our economic plan, we want to back business – with tax reform. With digital networks. With strong competition policy.

So we will replace the analogue tax of business rates that is hitting our high streets, with a Commercial Landowner’s Levy that will revitalise communities spur on development, and cut tax for so many struggling high street retailers.

And we won’t just invest significant new capital into broadband but we will also intervene to change the regulatory approach.

Under us, unlike the Tories, UK PLC won’t waste so much money in duplication and triplication of digital infrastructure in our richer, urban areas – whilst leaving untouched poorer communities and rural areas.

And unlike Labour, we won’t put Big Brother in charge of your digital broadband. Lib Dems won’t waste your taxes and scare of private investment with a nonsense return back to state-owned telecoms – where long delays and low quality were the order of the day.

Our approach to 5G and beyond isn’t just as ambitious as the other parties. It’s also far more practical and cost-effective than our political competitors.

And our competition policy will be tougher and stronger too.

As the Minister for Competition for 2 years, I established the policy which saw the last major reform of Britain’s competition law and authorities.

But in Government, I didn’t get my way on everything.

David Cameron stopped me reforming anti-trust law. I wanted to change our system so it became more akin to that in the US and that in Germany – where businesses and executives who conspire, who form cartels, end up in court.

It’s called the Prosecutorial model.

And the main beneficiaries from this approach? Smaller firms. Entrepreneurs. Innovators. Businesses who currently lose out so much because the big corporates exploit their market power.

And for business, beyond tax, digital and competition, we will renew and embolden a new industrial strategy linked to our regional prosperity strategy.

Lib Dems will say to business, loud and clear:

if you invest in the UK’s nations, regions and communities that have been left behind. If you create the jobs we need and treat your employees and the environment responsibly, we will get behind you.

So we will regionalise the British Business Bank – so it backs enterprise in the places where it’s needed the most in the regions.

We will re-boot the Regional Growth Fund that Vince Cable developed so successfully as Business Minister.

And we will rebalance our economy – not least with a low carbon energy and transport revolution focused in the Midlands and the North.

So to part 5 of our economy plan. Infrastructure.

Liberal Democrats will invest big in infrastructure. Later in this campaign, we will publish full details of our infrastructure plans – for transport, for energy, for digital, for housing, for the regions.

But here in Leeds today I can announce we will invest in plans for a public transport revolution across this great northern city. Leeds is the largest city in Western Europe without a mass transit network. Under Liberal Democrats, we will build one. 

And I can also tell you today that on top of our climate change, environment and transport capital spending, we will invest £45 billion of capital in community development, taking our total infrastructure portfolio to £130 billion over a five year parliament.

This includes an extra £7 billion for school and college buildings – both to repair them from the terrible neglect of the Conservatives and to build new ones.

Plus we have allocated an extra £10 billion for investment in hospitals, to ensure our NHS can provide the best care possible.

And let me put that investment in context. This would be a level of infrastructure investment not seen in many, many years.

And compared to Conservative plans, it would be an additional annual average of £6 billion.

But here’s the challenge – for any party’s infrastructure investment plans: can they be delivered?

Because to deliver them you need the people. You need the skills. You need the plans, the permissions and the projects.

We believe only our infrastructure plans are truly deliverable. For two reasons.

Firstly, our plan is “back-loaded” – so we would ramp up over 5 years.

Second, under a Liberal Democrat government we will be in the European Union. Able to enjoy the benefits of freedom of movement, ensuring we have access to skills, that are in short supply in the UK. Able to enjoy the benefits of cost effective frictionless trade. Able to access cash from the European Investment Bank.

But let’s focus on the people you need for infrastructure projects.

Everyone knows our economy benefits from free movement of labour. But that’s doubly so when it comes to the construction industry. Across the UK, big infrastructure projects have depended on skilled European workers, working side-by-side with skilled British workers.

Take free movement of labour away. Depreciate the pound even more with Brexit. So you make the UK a less attractive place to work. And our construction industry gets hit.

And that’s one reason why both the Conservative and Labour infrastructure plans just don’t add up.

Unless there are significant numbers of European workers involved, it is once again pure fantasy to believe the Conservatives could spend the £100 billion they promise – let alone Labour’s £400 billion illusion.

Which brings me to the final point in the Lib Dem economic plan – our fiscal rules.

To be the party of fiscal responsibility – whilst making significant investment in the climate, in schools and in our NHS – it’s not enough to produce the costed manifesto which we will.

You have to restore credibility to the United Kingdom’s fiscal rules. Over the last 3 decades, the one common feature of the fiscal rules set by Chancellors is – they’ve all been broken.

We’ve desperately needed a deeper, more intelligent review of fiscal rules – and this has just been done – brilliantly – by the Resolution Foundation.

They have put forward new analysis and new ideas for a fresh set of rules. And Liberal Democrats have embraced their thinking.

And arguably their most relevant fiscal rule for this election’s economy debate is the rule about current spending.

How you ensure that your day-to-day spending on things like salaries and benefits, is covered by your revenue, primarily tax receipts.

The Resolution Foundation have proposed a new fiscal rule for day-to-day spending – that a Government should target a structural surplus in current spending equal to 1% of national income over a Parliament.
 
And their rule retains sensible flexibility, allowing spending up to minus 1% of national income – if there’s a downturn and forecasts turn out wide of the mark.
 
Liberal Democrats will adopt that fiscal rule – and our spending plans meet it, with current account surpluses in every year of our five year costings.
 
We embrace fiscal responsibility. 

The others opt for fiscal risk. 
 
The Conservatives are targeting only to balance the current account – and then in three years.

Plus, their target has no flexibility at all. Given Brexit will blow this new Tory fiscal rule away in months, that’s even more reckless.

So if Boris Johnson so much as promises a tax cut, you know you can’t trust him.
And Labour? Well, they are promising to get to current account balance in 5 years’ time. Or, in plain language, Labour’s on the never, never.

You may not be aware, but there was supposed to be a debate this Sunday – a Chancellors’ debate.

When the 2 fantasists could have competed with a realist.

But it looks like Sajid Javid is running scared of debating the economy with me.

As he refused to take part in that Chancellors’ debate.

So today I have two challenges for Sajid Javid.

First, stop running from reality and let the voters decide what is more credible: the fantasy economics of Brexit, or the brighter future on offer by the Liberal Democrats.

Come and debate me.

Second, agree to have all our election spending pledges, indeed our whole manifestos, independently costed by the Office for Budget Responsibility.

It’s clear the Conservatives aren’t keen. By pulling the Budget on 6th November, the Conservatives acted to prevent the nation’s fiscal watchdog, the Office for Budget Responsibility, from providing the voters with up-to-date and independent economic and fiscal facts.

So this is the new political economy.

Liberal Democrats as the party of fiscal rectitude.

Versus the Tories and Labour as the parties of fiscal incontinence.

Fact versus fantasy.

So we will continue to set out the Liberal Democrat fact-based priorities for our vision for Britain’s economy.

Priority one, stop Brexit. Ensure access to the single market and within the customs union – and stay cushioned from the American-Chinese trade wars. Invest the £50 billion Remain Bonus in schools and tackling inequality.

Priority two, the planet. Decarbonising capitalism and investing £100 billion in low carbon infrastructure and the environment.

Priority three, people. Transforming our skills, well-being and life chances, as never before.

Priority four, business. Responsible businesses that are supported with tax reform and superfast broadband, as well as an industrial and regional strategy that reaches country-wide.

And priority five: investment in infrastructure, not seen in far too long.
So the bottom line is this: if you really want credible, sensible, sustainable public spending plans, vote for a party that won’t damage our economy with Brexit.

Vote for a party that won’t hike up borrowing just to pay for ideology and Brexit.

Vote for a party that won’t waste billions preparing for leaving the EU, and £33 billion just on divorce costs.

If you want a greener, fairer, brighter future, vote for the Liberal Democrats.