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Friday, March 27, 2009

Grasping the new reality

I have been waiting for some time for Nick Clegg to announce that Liberal Democrat plans to offer net tax cuts at the General Election are no longer realistic in the present economic climate.

According to the Financial Times Nick has now said that the drastic deterioration in the public finances since the policy was adopted means that overall tax cuts in the short term are "implausible". Effectively the state of the UK's finances leave any government little room for manoeurvre:

He told the Financial Times that the Lib Dems had to be honest about the need to cut the size of the state and should lead the debate over where cuts could come in the next parliament.

Mr Clegg said the government might have to axe the "wholly artificial target" of getting 50 per cent of children to university, arguing that other vocational courses might be better suited to the needs of some students.

He also called for a review of the pension entitlements of "upper earners in the public sector", although he shied away from a promise to scrap final salary pension schemes across the board.

Mr Clegg said there would also be a review of Britain's Trident nuclear deterrent, although he stressed the party favoured trading it in as part of a multilateral deal on nuclear disarmament.

He confirmed though that the party's long-term aim is still to cut taxes and to reduce the size of the state, although he said there was a case in the short term for some expansion of the state to pull the country out of recession. He is also still calling for a redistribution of the tax burden to help low- and middle-income earners, principally by cutting tax breaks and closing loopholes for high earners. All of that is welcome.
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