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The Neo-Liberal Democrats

by Simon Kovar


There are two constants in the history of British Liberalism. The first is that Liberals have defined their primary enemy, almost without exception, to be the forces of privilege as represented by the Conservative Party. The second is that the party has always regarded these differing creeds to be
philosophically and politically irreconcilable, in contrast to its complex relationship with the trade unionism and social democracy of the Labour Party. This view is born out by polls of the party’s members and voters, and in the approach taken by successive leaders. So when Nick Clegg spoke during the general election of “a future fair for all” it was understandable to assume that he advocated a more just society, in which the wealthy pay their fair share and public support is on hand to ensure equal opportunities. After all, this is what the Liberal Democrats and, before them, the Liberal Party have always stood for.

The schism between ‘economic’ and ‘social’ liberals has no basis in the party’s ideological tradition. True, you will often hear of the transition from a ‘classical’ liberalism of small government and laissez-faire, characteristic of the early C17th liberals and their C19th successors, and the ‘modern’ liberalism of the C20th, committed to active government, the mixed economy and the welfare state. In this reading, it makes sense to see the market reformers within the party as representative of a return to an earlier, perhaps purer, liberalism sometimes associated with Gladstone and the C19th Liberal Party. But this is far from the truth. The party has never interpreted liberty in purely ‘negative’ terms; that is, as the absence of public interference in the private spheres of conscience, family life, culture and economy. It has always regarded liberty as the ‘positive’ presence of equal opportunities to lead the good life. On issues such as education, public health, the provision of public amenities such as libraries and parks, the regulation of workplace conditions, the guarantee of trade union rights and the outlawing of discrimination, the party tended to view public intervention as the friend of liberty. 

What is now termed ‘social liberalism’ is properly called Liberalism, the creed of the Liberal Party from its inception. This party regarded free trade and competition as (limited) means of guarding against economic monopoly while the provision of public services and the promotion of civic morals were the proper province of public concern and public action. Markets were not regarded, by Liberals from the C17th onwards, as tools of unrestricted wealth accumulation divorced from any concept of the public interest. When earlier Liberals spoke the language of ‘negative’ liberty – the absence of constraints on the individual – they were explicitly not talking about the market. They were addressing the ability of the church, monarch and aristocracy to deny religious freedom and individual conscience, and to interfere in an arbitrary way with the livelihoods and property of individuals. Liberals surveying the behaviour of today’s major corporations and financial institutions might well see them as every bit the threat to individual liberty, choice and conscience as once were monarchs and the church. The issue then, and now, was not minimum government but minimum oppression (to borrow the late Conrad Russell’s useful formulation). When later Liberals made their primary focus poverty and inequality, they were not denying their predecessors: their position on issues of religious freedom and conscience remained the same, as was their assault on unearned aristocratic privilege. They were, however, responding to new priorities and challenges, applying the same principles and reaching conclusions that would have been entirely recognisable to C17th Whigs and to Gladstone or Mill.

What today is called ‘economic liberalism’ is not Liberalism at all. It is neo-liberalism: a C20th phenomenon of the New Right. It is the creed of market fundamentalism rather than market pragmatism, a rejection of the old liberal idea of the mixed economy in favour of privatisation and radical public sector contraction. It confuses market freedoms and deregulation with individual freedom and choice, and mistakes corporate interests for the private sphere. None of these choices are liberal choices, as would have been understood by Adam Smith, William Gladstone or Jo Grimond. It is worth pausing to consider Grimond, often regarded as a forerunner for neo-liberalism; here he is writing in 1959 about the market:

The Free Market permits a man to extort from his fellows as much as he can get, for his skill or his good fortune. It smiles on acquisition. Its working means that from time to time men are thrown out of employment or go bankrupt. In theory, at least, it keeps everyone in a state of struggle and uncertainty. Struggle and uncertainty cause unhappiness. As I believe that happiness is something which politicians should promote, I am not prepared to take the system on trust as obviously excellent. As to its moral basis, I hesitate to pose as a theologian, but I doubt if the free enterprise system in all its forms is always entirely in accord with Christian teaching. Have we not reached a stage in world history when co-operation is more useful than competition? Instead of running our economy on self-interest, enlightened or otherwise, should we not try un-selfishness? Could such
an outlook be encouraged without concentrating power in the hands of the State or reducing the position of the individual? I am sympathetic to this point of view.

                                                                                                      (‘The Liberal Future’, p.55)

For Grimond, economics is a means only: there is nothing inherently moral about the market. Indeed, a concern to guard against the over-concentration of power by the State or to safeguard the position of the individual does not necessarily imply free market solutions in, say, health or education. There are alternatives.

This is the thread that runs, unbroken, from the ‘classical’ liberals of the C17th and C18th century – with their warnings of the looming dangers of corporate, industrial capitalism – through to Mill and Gladstone in the C19th, Beveridge and Keynes in the 1930s and 1940s, Grimond in the 1950s and 1960s, Thorpe in the 1970s and eventually Ashdown. It is a thread that has been severed by Nick Clegg and the ‘Orange Bookers’ who have joined, with enthusiasm, a coalition of the neo-liberal New Right. The public sector is now under a sustained assault. Much of the media focus on the coalition’s proposed NHS reforms has been on the expansion of GP responsibilities at the expense of Primary Care Trusts: but more significant is the prospect of much of the £80 billion health budget being handed to private contractors commissioned to provide services. Likewise in education, private companies are lining up to take advantage of new ‘free’ and academy schools ‘freed’ from local democratic accountability and curriculum controls and turned, essentially, into private enterprises. These policies are not the product of fiscal necessity – David Laws et al were advocating them in the Liberal Democrat policy reviews of the late 1990s and early 2000s – but ideological conviction; and far from regarding “economics as a means only”, in Grimond’s phrase, the ‘Orange Bookers’ regard free market economics as synonymous with freedom and individual choice: Thatcher’s view, but not Adam Smith’s.

How did this happen? How did a party of the liberal left, proud of its heritage as the progenitor of the great civic amenities of the C19th and the jewels in the crown of the C20th social welfare settlement, including the NHS, fall in thrall to a neo-liberal fringe regarded, until relatively recently, with derision across the broad Liberal Democrat mainstream? 1999 was, in many ways, the crucial year. The party occupied a position of moral credibility and political opportunity, as a critic of New Labour’s authoritarianism and timidity in the fields of social and political reform. The Ashdown-Blair project had all but collapsed. The party had a choice to make. It was already clear what New Labour was – a party intensely relaxed with the excesses of the filthy rich – and was not – the champion of the public realm. The party also knew an enemy when it saw it: William Hague’s Conservatives warning of Britain becoming a “foreign land”. The Liberal Democrats could, at that moment, have chosen to become the conscience of the democratic left, determined to secure proportional representation and to champion the cause of social justice. In some ways, it was clear that this was the choice the party wanted to make. Charles Kennedy won the leadership on a broadly leftist prospectus, speaking of social justice and reducing the gap between rich and poor. Like previous leaders, and in tandem with much of the membership, he displayed a visceral anti-Conservatism.

Kennedy’s problem was a lack of philosophical definition and an approach that was so laid back that his leadership was prone to appropriation by others of greater conviction. The tragedy for the Liberal Democrats is that that sense of conviction and (it must be said, ruthless) ambition did not emanate from Simon Hughes, who had fatally delayed his leadership bid in 1999, or from the party’s left wing. It came instead from the Orange Book tendency, the ‘modernisers’ who were given a considerable helping hand by Kennedy in the form of patronage. Mark Oaten, an entirely marginal figure within the party, gained early promotion as Kennedy’s Parliamentary Private Secretary and went on to found Liberal Future, a peculiar ‘party within a party’ that toyed with privatisation of the NHS and sought ties with ‘liberal’ Conservatives. Laws, the party’s policy director before becoming an MP, had long sought a similar philosophical shift. He was appointed Shadow Chief Secretary to the Treasury under Kennedy: the position he held until recently in the Cameron-Clegg coalition. Out went the flagship policy of a penny on income tax to boost education funding, and in 2003, Kennedy called for £5 billion worth of Whitehall economies, including the abolition of the department now presided over by Vince Cable. The party’s 2001 policy review was chaired by Chris Huhne and took the party on its first steps towards the erosion of public monopoly in public service provision. For a politician professedly of the party’s centre left, it is striking the extent to which Kennedy turned for succour and policy not just to the party’s centre right (Ashdown’s leadership base) but to the fringe right.   

The Orange Book was published in 2004, featuring contributions from three current members of the coalition cabinet plus David Laws, all of whom later held senior shadow positions under the leadership of Menzies Campbell. Notoriously, this volume called for a social insurance scheme with private providers to replace the NHS: a direction of travel now emulated by the Coalition’s recent reforms. Kennedy’s forward to the book declared of its ideas that “all are compatible with our Liberal heritage”. He later went further, suggesting that there was no incompatibility between the party’s traditional social liberalism and the Orange Book, an exercise in triangulation that (together with the manner of his departure) both obscured and denied the fundamental debate the party needed to have regarding its future philosophical definition and direction. The absence of that debate meant that the eventual rise to dominance of the Orange Book tendency represented not a decisive exercise in collective party position-taking but something more akin to a coup, built in part on the complete disarray, muddle and indecisiveness of the party’s left. The current coalition government is the direct result of that state of affairs and represents a comprehensive rout of the Liberal Democrat left. With the exception of Steve Webb at sub-cabinet level, the left has been frozen out of all senior appointments. Meanwhile the party is facing acceleration in the long-term decline of its membership base (another product of the Kennedy era), the virtual closure of its central campaigns and policy capacity, and its disappearance as an independent parliamentary force.

Successive generations of Liberal Democrat leaders and politicians, whether of the party’s left or right, have held the following in common. They have fought privilege and corruption; they have argued for a redistribution of wealth and opportunity from the rich to the poor; they have regarded the market as a (limited) means and not an (un-checked) end; and they have recognised the moral limits of markets. They have argued in support of public services and, when they have spoken of public service reform, they have meant alternative means of public provision, not privatisation. They have regarded proportional representation as the absolute precondition of a more pluralist and cooperative politics. And they have argued for a realignment of the left. Every one of these commitments has been abandoned by Nick Clegg.

One other inheritance has suffered peculiar neglect: the role of Liberalism as a potent electoral force. 1906 was the most comprehensive election victory ever secured by a British political party, with Liberal support cutting across class and geography in a manner that Conservatives and Labour have never been able to match. It is no accident that Labour’s 1945 general election victory, the second most comprehensive, was secured on the back of radical Liberal ideas courtesy of Beveridge and Keynes. The last 13 years have seen a deep-seated erosion of public faith in the political establishment and the comprehensive discrediting of the neo-liberal consensus that has dominated British politics for over 30 years. Yet during that period the Liberal Democrats made a net gain of just 11 seats. Despite the unprecedented boon of the leader’s debates, in 2010 the party gained a mere 1 percentage point more of the vote and lost a net 5 seats. Can it be a coincidence that this period coincides precisely with the rise of the party’s neo-liberal wing?

Simon Kovar is a Contributing Editor of The Liberal.

The Politics of Coalition (Kovar, 2007).

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