Tag: Vince Cable

Below is the text of the speech made by Vince Cable to the Liberal Democrat Spring Conference on 13th March 2010.

I have a very simple message.

We, the Liberal Democrats, were right about the financial crisis.

We warned of the dangers and we led the debate when the crisis came.

And now we have a clear vision for the future of the British economy.

The Queen is said to have asked why no one warned about the crisis in the banking system. Actually, we did.

Ten years ago a group of us, Lib Dem activists, fought the demutualisation of building societies: a consequence of Conservative legislation which led to the disasters of Northern Rock, Bradford and Bingley and HBOS.

We told Gordon Brown to curb the excess profits of banks which were dependent on a taxpayer guarantee.

We warned him for years that he was in denial about the build up of household debt and the bubble in property prices. He took no notice; nor did the Conservatives.

But we were right.

And when financial disaster struck we insisted that there must be no nationalisation of losses and privatisation of profit: a point belatedly grasped by the government and even more belatedly, and reluctantly, by George Osborne and the Tories.

The government’s economic record speaks for itself: remember the phrases ‘no more boom and bust’, ‘prudence’, ‘Golden Rules’ – all abandoned.

And standing amid the wreckage of the economy Gordon Brown sounds more and more like Mr Ashley Cole saying – give me another chance.

What the public wants to know is who can guide the country out of the present morass: the broken, discredited, banking system; the deepest and longest post war recession, whose effects are far from over; and levels of government borrowing which are not sustainable.

We can.

We have deep, long term problems: an overdependence on banking; an obsession with property over productive investment; a yearning for high, Scandinavian levels, of public spending financed by low US levels of tax; and a financial aristocracy which regards tax paying as something for little people not themselves.

Let me make no bones about it – the challenges are enormous.

I start with the banks since they have been at the root of our recent problems.

Not all bankers were greedy or stupid, but plenty were and they have caused immense economic damage.

The damage continues because the banks have swung from the reckless over-lending which fuelled the boom to conservative under-lending deepening the slump.

Thousands of sound and solvent small and medium sized companies are being slowly throttled because they can’t get credit or it costs too much.

Banks do have a funding problem: all the more reason not to squander what they have on bonuses.

Banks, bailed out by us – the taxpayer – are also building up their balance sheets in readiness for an early re-privatisation instead of supporting British business.

RBS has fallen short of its legally binding lending target to British business.  Lloyd’s won’t even tell us.  That’s simply arrogant.

I challenge them to give us the figures and Alistair Darling to force them to if they refuse.  Many thousands of British jobs depend on it.

The need for radical reform doesn’t end there. Banks with global ambitions that are guaranteed by the British taxpayer cannot be allowed to run excessive risks again.

The Governor of the Bank of England has to be supported in his constant warning that banks that are too big to fail are simply too big. They have to be broken up, to increase competition and protect the taxpayer.

The banking collapse and recession have dug a deep hole in the government’s finances.

The next government will have to deal every single day with the consequences. The growing worry about sovereign debt means that there is no hiding place. Nor should there be.

It grates to have the economy held to ransom by currency speculators and the clowns in the rating agencies who missed the Icelandic crash and so badly misjudged the safety of banks. But any Government, of any hue, will have to depend on the markets to finance its deficit.

We must and will be fiscally responsible.

Unlike the Tories and their cronies who want to create a financial panic and run on sterling to frighten people into voting for them on May 6th.  Playing fast and loose with the financial stability of this country for political gain – destabilising the markets – is dangerous, irresponsible and wrong.

It is also irresponsible to engage in a phoney war over cuts weeks before an election that will affect the lives of millions of people.

The Government is trying to present itself as the party of spending and public investment but growing numbers of government scientists, FE college and university staff are currently being sacked.

The Tories were trying to project their economic team as ‘Slasher’ Osborne and the Hard Men – until David Cameron executed a giant slalom down the Swiss ski slopes and announced that cuts are off the agenda this year. For now.

Or at least that’s what I think they said.   I’d love to attempt a critique of the Tories budget plans but I have no idea what they are. I think the present line on the budget is: trust us and we’ll tell you after the election. Well I’m sorry but that simply isn’t good enough.

We have to be frank with people about the difficulties ahead.

Spending cuts must not be forced through too soon, making the recession worse. That is not just my view – Sir Alan Budd, the Conservatives’ designated head of fiscal policy thinks the same.

The timing and speed of cuts must reflect the state of the economy, not political dogma. But cuts there will be. We have spelled out some of them.

Serious public sector pay restraint for the next two years: no one with a pay rise over £8 a week and no bonuses at all.

Ending government contributions to the Child Trust Fund and cutting tax credits for high earners.

Axing unaffordable defence contracts such as Eurofighter, and the Trident replacement.   And others, subject to a rapid defence review.

Scaling back programs like HomeBuy, cutting back RDAs. Taking out tiers of burdensome regulation of local authorities, and scrapping undemocratic regional government.

Slashing a bloated central bureaucracy – kicking the consulting habit – and ending illiberal and costly government data bases: like ID cards and Contact Point. And we continue to look across all government departments for further savings. There can be no ring fencing if we are serious about getting the public finances back on track.

And there will be a levy on the profits of banks.

So far we have identified over £15bn per year of savings, most of which are to reduce the structural deficit and which we will be setting out in full at the time of our manifesto.

But again, we need to do more.

A Liberal Democrat Government would conduct an urgent public spending review. Not Tory butchering behind closed doors.

We will identify priorities and then debate them publicly.

It’s right and fair that the people who are going to be affected by these changes get to have their say.  That’s Democratic.  That’s open. That’s Liberal.

Cynics say to me: how can you possibly talk about making economies when the voters want to be promised lots of freebies?

But it is a massive mistake to underestimate the British people.

They don’t want to be insulted and patronised by politicians they don’t trust telling them that two plus two equals five, because five is a bigger number than four. Or that all of our problems will be solved by painless ‘cutting waste’.

Our programme is different not just because it is more transparent but because it offers two things our rivals can’t: hope and fairness.

The hope derives from a commitment to invest part of the savings more productively in sustainable forms of growth which creates jobs.

Without growth there is no new money to pay down government debt. But it must be sensible growth which doesn’t depend on consumer spending sprees, destroying the environment or the roller coaster of financial gambling.

We want a Green New Deal. Investing in jobs by improving our homes and building more social housing. And we will set up an infrastructure bank to invest in big projects like railways and renewable energy.

And fairness is crucial.

The public will accept austerity for a time if the burdens are fairly shared.

They will not accept it from a government that imposes hardship on the majority while rewarding rich cronies, grovelling to tax exiles and non-doms and ignoring the widening inequalities in income and wealth.

So we will change our unfair tax system.

3.6 million people who earn less than £10,000 will no longer pay any income tax at all.

Pensioners will be £100 better off and the average person’s income tax bill cut by £700.

We will pay for the tax cut by blocking tax loopholes that favour the wealthy and taxing their wealth in their mansions worth over £2 million: in other words the people who profited from the boom.

People are desperate to see the back of this Labour government. But they don’t want the same old Tories. And make no mistake they are exactly the same.

There is an alternative.

In just over 50 days there will be a general election.

We know that people want to vote for a party that will radically change our economy, for the better in a financially responsible way.

Our job is to show them we are that party.

Our job is to make sure that on May 6th they vote Liberal Democrat.

I know we can.  With Nick’s leadership, with your help and work – and your passion and your belief – we will.

Below is the text of the speech made by Vince Cable, the then Liberal Democrat Shadow Chancellor, to the Green Alliance on 1st March 2010.

Thank you for the kind invitation to speak to you.

The fact that you have invited me I take as a challenge to demonstrate that the Liberal Democrats see the environment in holistic terms: not as a separate set of concerns but connected to mainstream economic policy. I am also aware that I am following in the footsteps of Mr George Osborne. I see that, since that meeting, the Tories have deleted the environment from their list of 10 Reasons to Vote Conservative. I don’t know what you did to him but I can assure you that I won’t react in the same way. The environment – defined as part of a sustainable economy – will be a major plank of our election message.

When you mark your card after the beauty parade of political parties may I suggest that depth of commitment is not measured only, or even mainly, by the number of boxes which the parties tick in terms of policy statements. To explain the Liberal Democrat position on the environment, I go back a generation to the late 1970s. At that time, I wasn’t involved in Liberal politics; I worked for a Labour Minister, John Smith. I was however intrigued by an earnest group of people who came round my local streets in Twickenham collecting bundles of paper for recycling. In truth, I think I regarded them as rather loopy. But they weren’t a joke. A few years later they wiped out the local Labour Party, defeated the Conservatives and, having taken over the council, launched a pioneering drive in municipal recycling which we now regard as a basic function of local government. And twenty years ago when climate change was still a subject confined to the scientific journals Paddy Ashdown asked me – I had just become the candidate for Twickenham – to set up a group looking at the issue, out of which came the ideas for green taxes on which we have continued to build. The Green Fiscal Commission we regard as the best source of new thinking on the subject.

Perhaps I could indulge in a few more personal recollections: not to personalise the arguments but so that you are clear where I am coming from. My starting point is that of a fairly hard-nosed economist whose formative years were spent working in or with developing country governments in Africa, South Asia and Latin America. I had a pretty negative view of conservationists who seemed obsessed by preserving animals and views for rich, white, people to look at while keeping the local population in a romanticised traditional lifestyle. I saw my job as identifying ways of helping an expanding population of poor people to improve their living standards. And I regarded as economically illiterate the Club of Rome, anti growth, theorists whose obsession with raw materials running out took no account of prices. I confess that I continue to trail various environmental heresies with mixed results. Some years ago I was ranting about the fallacy of the concept of ‘food miles’ at a public meeting and seriously annoyed a farmer in the audience, a lady with strong, green, views. The argument continued after the meeting but it was resolved; we are now very happily married.

But my first encounter with serious environmental thinking was as part of the small team which worked with Mrs Brundtland to produce Our Common Future in the mid-1980s and which first launched the concept of ‘sustainable development’. ‘Sustainable development’ has become a mantra we all now use. But it emerged from fierce debate between those, mainly from developed countries, who wanted economic growth slowed down to take account of environmental damage and limits, and those with a developing countries standpoint, including me, who wanted economic growth speeded up to reduce poverty. ‘Sustainable development’ was an ideological compromise – a plea for growth which respects the environment. The underlying tension remains and is reflected in the way different views of the EU on the one hand and China and India on the other at Copenhagen. ‘Converge and contract’ – the compromise formula for climate change – is designed to resolve that tension but agreement is a long way off. And both sides are right. The continued growth of greenhouse gas emissions threatens serious consequences for the next generation. But the rapid growth achieved in China , especially, and India in the last three decades has lifted hundreds of millions out of poverty and there is an enormous, understandable, appetite to continue.

I moved from Brundtland to work on the first of the major intergovernmental reports on climate change to Commonwealth Prime Ministers and worked with the East Anglia scientists and others who were trying to raise awareness of the issue over two decades ago. I was persuaded of the need to take climate change seriously – as was Mrs Thatcher, one of the Heads of Government to whom the report was presented – by the rigour of the climate scientists: stating that there was a problem but always acknowledging uncertainty and the range of error; never overstating the case.

No one could now complain about lack of awareness of the climate change issue. But I worry about the damage done by failure at Copenhagen and the process of rapid political retreat now taking place, particularly in the USA. The underlying problem is that climate change is an elite project with a narrow and thin political base. It depends critically on public trust in science and scientists. That trust has now been dented. I know that the sceptics are employing every dirty trick in the book and are wildly overstating the significance of a few pieces of slipshod work and exaggerated claims. But much damage has been done to trust in climate science. I don’t agree with a lot of George Monbiot’s work but he was absolutely spot on in his tough response to the slippage of scientific standards. Scientists complaining about emails being stolen and the burden of FOI requests are behaving like the more obtuse MPs during the expenses crisis.

What is now required to restore trust is to reassert the importance and values of science: making it clear that man made global warming is not a fact but a scientific hypothesis with strong evidential support; that there is a lot of uncertainty about magnitudes and impacts; but that the costs of preventive action are likely to be much less than the cost of climate change if it materialises. Climate science must be open to challenge, like all good science. It is not a religion. And critics, however tiresome, have to be treated with courtesy not abused (I can’t be the only person who takes deep offence at the term ‘climate change deniers’, equating sceptics with neo-Nazi holocaust deniers). Those of us who are still convinced that climate change is a major challenge have to reflect that humility if the arguments are not to be lost, irretrievably. What I can assure you is that the Liberal Democrats will continue to give prominence to climate change as a crucial issue we must address.

But let me turn to our approach to policy. Where economics and environment come together is in recognising that the costs of environmental pollution should be captured in the price. A proper marriage of economics and environment would sweep away the array of subsidies, protectionist trade policies and tax breaks which disguise the costs of farming, water extraction, fishing, timber production, waste disposal, energy production, mining and manufacturing. Pollution costs would be taxed as the rather dry pre-Keynesian economist Pigou argued almost a century ago. There has been some progress at least in the developed world to tackle that agenda. The Liberal Democrats bring together environmentalism and liberal market economics and are comfortable promoting sustainable economics; while our sister parties, in Canada and Germany for example, have a track record of delivering on the ground.

That is also the rationale for carbon taxes which are clearly the best way of setting a carbon price for consumers and producers. Liberal Democrats support the concept. But in practice we are starting from somewhere else: a complicated system of national taxes bearing quite heavily on motor vehicles but hardly at all on domestic heating or aviation, with a modest industrial – climate change – levy and an EU carbon trading regime (which has so far had minimal impact on the carbon price because permits have been issued too liberally and grandfathered rather than auctioned).

We suggest that one useful step forward is to introduce realistic pricing for aviation in ways that circumvent the treaty restrictions on taxing aviation fuel. Aviation is a rapidly growing source of emissions and the last redoubt of the old idea that polluters don’t and won’t pay. Aviation has unfair, distorting tax advantages over competing modes of transport, notably long distance rail, because there is no tax on fuel, no charge for landing rights which, in a sensible world, would be auctioned (and in contrast to the track charges imposed on rail operators) and with subsidised landing charges (cross-subsidised by shopping in the bizarre, Alice in Wonderland world of aviation regulation). As a result aviation does not pay for carbon, or localised – nitrogen dioxide – pollution or the disamenity of noise, especially at night. We suggest as one – modest – first step: changing the tax base, and increasing tax, by applying it to flight take-offs in a way which captures the emissions generated by the engines and flight distance and scrapping the current ticket tax which penalises the efficient use of aircraft and doesn’t tax air freight. We would aim to raise £2.6bn from this green tax which would contribute towards cuts in direct taxation on the low paid. We are also opposed to the current ‘predict and provide’ approach to airport expansion in the South East. We hope that the Conservatives will be as good as their word in working with us to stop Heathrow expansion in particular.

Road transport is already taxed relatively heavily in the UK by international comparison – a fact which encourages road hauliers to dodge British tax by filling up with diesel on the continent. But despite unpopular tax indexation, the cost of motoring has risen less rapidly than the cost of bus or train travel. Moreover, petrol duty and VED make no distinction between travel on congested roads where there are alternatives and remote rural areas where there is no congestion and no alternative. We should be moving towards a proper road user pricing system for which the technology is now available. Tax is however only one way of changing behaviour. A more direct route is a tightening of energy efficiency standards – miles per gallon – for new vehicles along the lines advocated by my former boss at Shell, Mark Moody-Stuart.

Tougher standards – for insulation in new building are likely to work better for domestic heating than the price mechanism – higher taxes – which would cause fuel poverty with only a very blunt incentive to invest in energy efficiency. And in parallel there has to be a concerted drive to improve the existing housing stock, street by street, rather than the current fragmented, shambolic, set of programmes.

There are big strategic choices to be made in power generation. At present, progress on new renewables in the UK is pitifully slow and the opportunities for changing the basic model of energy delivery to local, distributed, power systems is being missed, though feed in tariffs will help in future. The government has effectively shelved the 2003 White Paper which set out a strategic framework based on energy conservation, new renewables and – transitional – gas. Intensive lobbying has led to agreement for a new generation of coal-fired power stations as at Kingsnorth and more importantly support for a new generation of nuclear power stations. I appreciate that nuclear power has attractions to many in the green movement because it is an – almost – zero carbon fuel. Its proponents have also cunningly exploited public anxieties about energy security with wildly exaggerated stories about disruption to gas supplies which, in the case of the UK, are very diverse and safe. The hidden costs of nuclear waste storage and decommissioning are vast. When I spoke in Parliament against the bailout of British energy in 2003, some of the best analysis I encountered came from Greenpeace.  The Liberal Democrats oppose new nuclear power not from some theological opposition to the principle – it would be ludicrous to declare war on physics – but because of the potential hidden cost – the blank cheque needed from the taxpayer – and the potential which nuclear power has to ‘crowd out’ new renewables. A traditional, grid based, system gets in the way of more innovative, distributed, localised systems.

But the whole environmental agenda is in danger of being derailed by the current economic crisis. Economic necessity concentrates the mind. The environment has plummeted down the list of the electorate’s priorities.

Much of the established green approach, resting as it does on environmental taxes and a more general approach to frugality, assumes that there is a large appetite for self flagellation. For those people who clamoured for a zero growth world – well, here it is and it isn’t very nice.

Fortunately there is a growing recognition that the current economic crisis presents opportunities as well as threats to environmental thinking. The key issue is jobs and where they come from. Britain has a major short term problem of cyclical unemployment or underemployment arising from the banking collapse and recession and a longer term structural problem of generating jobs and growth out of an economy which can no longer rely on consumption driven by household debt, inflated property prices and the high octane economy of the sharks and young bloods in the City.

The short term problem cries out for classic Keynesian public works based on ‘shovel ready’ projects. The construction sector has been the worst hit by the recession and arguably has the richest potential for job creation directly and through supplier industries from timber frames to ceramic fitting. There is massive pent up demand for social housing, and supply is seriously constrained by lack of funding. Improvement of empty and substandard property for rent is one – relatively cheap – way forward. The Liberal Democrats have also been arguing for a concerted programme of home insulation.  Since we acknowledge that there is a major fiscal contraction ahead and no scope for enlarging deficit financing we identify savings from government spending which can be redeployed in this way. Environmental goals can be neatly reconciled with job creation. I shy away from the term ‘green jobs’ since it implies that non-green jobs like being a car mechanic or a gas fitter are somehow less worthwhile which is not right or sensible. Indeed I note with some amusement that the centrepiece of President Obama’s ‘green’ public works programme is road building.

Liberal Democrats are anxious to ensure that the baby of environmentalism is not thrown out with the bath water of unsustainable public spending. We are, for example, seeking to use some of your ideas on carbon spending for saving money.

The term Green New Deal also captures the convergence of economic and environmental aims. The term suggests a short term, recession, programme but it has been better described to me by Colin Hines, one of the authors of the idea, as creating a ‘green spine’ for the economy from which many diverse activities will branch. It is already possible to see some of the activities around which future employment and growth will occur – creative industries; pharmaceutical and biological science; specialist IT based services; health and education services; and financial services disarmed of their destructive potential.

Environmental services and industries are another and could be a leading sector with encouragement. Much will happen spontaneously led by market demand. But this new economy will require infrastructure, preferably a green one. There is a potentially vast demand for digital infrastructure, new and improved public transport, renewable power production and transmission systems plus the education and training of a new generation of scientists, engineers and skilled workers to operate this new economy. The Government is not going to be able to finance much of the infrastructure because the public sector balance sheet is so weak. The funding will have to come from the private sector and I have been promoting the idea of an Infrastructure Bank tapping into the hundreds of billions in annuity funds of pension and insurance companies looking for a home in the UK or retail investment in what could be ‘green bonds’. Part of its remit would be environmental but it would clearly have a broader infrastructure role. It could also mobilise private, retail, investors looking for an attractive, long term productive use of their savings. Colin Hines has coined the term ‘savers and saviours’ – what is needed is the imagination and leadership to link employment growth, environmental imperatives and the self interest of entrepreneurs and investors.

The Liberal Democrats want to work with like-minded people to develop that vision. We must take these ideas forward on all fronts: national, international and local.  Birmingham City Council which we run in joint administration with the Conservatives has advanced plans for a municipal green new deal.  Given our traditions of localism, we have more confidence in bottom up than top down initiatives. A sustainable future will require both.

Below is the text of the speech made by Vince Cable to the 2009 Liberal Democrat Spring Conference on 7th March 2009.

Good afternoon Conference.

I will ignore the usual plesantries and jokes because we have a national economic emergency.

The economic position of the country is dire.

It is deteriorating fast.

It dominates every political conversation.

In the coming months we face unremitting bad news about factory closures, job losses and home repossessions.

There has never been a time in our lifetime when there was a greater need for politicians to give clear, honest, economic, analysis combined with a realistic message of hope.

Yet the current political debate across the Tory-Labour divide is as depressingly predictable as the Christmas pantomime,

‘It’s all your fault, Gordon’.

‘No it isn’t’.

‘Oh, yes it is!’

‘Oh, no it isn’t!’

Sterile, Puerile and Childish.

The Government claims that this is an international crisis.

And of course it is.

We are living with the consequences of the collapse of a giant international pyramid selling scheme.

But it isn’t only an international crisis.

Liberal Democrats have long warned that the British economy was unbalanced and over reliant on a consumer borrowing spree and fantasy house prices.

That the mountain of personal debt would come crashing down and that the housing bubble would burst.

That a heavy price would be paid for the Thatcherite destruction of mutual building societies and the weakness of bank regulation.

I don’t claim that we got everything right; but, unlike the Tories, the Liberal Democrats consistently identified the structural weaknesses of the house that Gordon built.

For their part, the Tories give the impression that they are absolutely loving every minute of this crisis.

They calculate that the worse it is, the easier it will be to obliterate the memory of the two Tory recessions and the easier it will be, once in office, to make savage cuts in public services.

Britain does have deep problems, for sure, and the Government has messed up big time.

But the Tory narrative is feeding the downward spiral of fear and lack of confidence.

And they offer no convincing alternative.

What the public wants, instead, is a balanced assessment of where we are, and practical, positive, serious proposals to get our country out of the mire.

This is a crisis for us all.

None of us knows all the answers.

The immediate problem is that demand has dried up; people are hoarding cash, because they are afraid.

The Liberal Democrats were the first party to call for deep cuts in interest rates to stop us getting into a deflationary downward spiral.

That said, we need to acknowledge the anger of millions of savers who resent paying for other people’s profligacy and now receive nothing on their bank deposits.

And the savers are needed since Britain needs a strong personal savings culture for retirement, personal care and higher education and to prevent a reversion to the debt fuelled boom and bust cycles.

The Conservatives are offering standard rate tax relief on savings interest which is superficially attractive to the better off savers.

But, in the present context, 20% of nothing is nothing.

It would be much better to concentrate on removing the outrageous confiscation of savings under means tested benefits like pension credit.

The heart of the crisis is in banking.

The Government had no alternative to save the leading banks from collapse.

That is not the same as saving Woolworths or steel or car makers.

If the banks collapse – and in October they almost did – almost every other business goes down with them and we go back to barter.

But we argued from the outset that we cannot have the taxpayer taking all the risks and losses and the banks continuing to be run by bankers in their own interests or hoarding capital.

Lloyds/HBOS has now joined the list of effectively nationalised banks.

But only after prolonged damaging dithering.

Rather, those banks which have failed and been rescued should be taken over and run in the public interest.

The purpose of control is clear:

– to stop jobs haemorrhaging as sound companies run out of cash;

– to identify and manage the ‘bad debt’; to deal with abuses like large scale tax avoidance;

– to deal with remuneration scandals;

– and to split off low risk high street banking from the global, casino-type operations – in other words, run the banks on safe, traditional lines.

British taxpayers must never again guarantee gambling by our banks.

Once this is sorted, the Government’s stake can be sold, hopefully at a profit to the taxpayer.

The Government is clearly terrified of being accused of nationalising the banks.

We have an extraordinary situation where John McCain, the right wing Republican candidate for the US Presidency recognises the need for bank nationalisation and our own supposedly Socialist government won’t face up to its responsibilities.

I am proud that the Liberal Democrats have been clear and consistent on this issue from the outset.

This is a moral as well as a financial crisis.

The shocking stories coming out of banks reveal a deep corruption of values which has now spread into government and society.

A decade ago Brown and Blair made a pact with the Devil.

In order to bolster New Labour’s reputation for economic competence they got into bed with the financial aristocracy.

They turned a blind eye to massive salaries and bumper bonuses, the large scale use of tax havens and tax dodging and dangerous high risk activities of some investment banks – ultimately underwritten by the British taxpayer.

In return they were showered with compliments and party donations and enough tax revenue to spend more on public services.

The pact is now breaking down and we can see in all their ugliness the characters to whom Labour bartered its soul.

We all now know about Fred Goodwin and Adam Applegarth.

Less well known is Roger Jenkins whom Barclays pay £40 million a year – £40 million! – to find ways of dodging taxes and Peter Cummings whose bad deals destroyed the 313 year old Bank of Scotland and is in line for a £6 million pension pot.

It isn’t just the extreme greed of the super-rich who gloried in success but still expect to be massively rewarded for failure.

The bonus culture has become all pervasive.

I understand the annoyance of bank employees who do not get the pay they were expecting.

But without the taxpayer, they would not have a job, let alone a bonus.

Many in other industries have not been so lucky.

And it isn’t just the private sector.

Civil servants now expect big bonuses if they meet their targets, and if they don’t bonuses to encourage them to try harder.

Although the scale of greed is smaller the self-serving instincts of the public sector aristocracy are fundamentally no different from the bankers.

We can wave our arms about Sir Fred’s pension but the practical question is what we do about the extreme, obscene, inequalities of reward which bear so little relation to performance.

One modest step is full public disclosure.

So the Fat Cats have nowhere to hide.

Public companies should publish the full pay package for all highly paid employees as well as directors.

The starting point for disclosure could be the Prime Minister’s pay: £194,000 a year.

Of course, those entrepreneurs who want to risk their own money should still be free in a liberal society to make their fortune.

Alas, this country does little to encourage any British Bill Gates; and too much to featherbed top dogs in big organisations.

We must also remember that while most of us have reasonably secure jobs or entitlements well over a million British families will be plunged into hardship this year as workers lose their jobs.

Job Seekers Allowance – for those entitled to it – is the grand sum of £60.50 a week, not much more than a tenth of average income.

Families who are not rich are seeing their incomes slashed.

And they have to keep their mortgages going or they will become one of the 75,000 who will be repossessed.

There are many little cruelties and indignities which will befall many of these families.

Let me just mention one: the vicious action of a Labour government giving powers to bailiffs to force entry to debtors homes using sledgehammers and to use force to hold down people who resist.

Labour is taking us back to the pre-Victorian morality of the debtors’ prison.

To restore a sense of fairness to such a divided and distorted society will be a massive project.

Our proposed tax reforms make a start.

They would establish the principle, revolutionary in itself, that companies and high net worth individuals are not free to decide that paying UK taxes is discretionary, like tipping the waiter.

We have to crack down hard on corporate tax avoidance and tax havens, made easier by the fact that the US and the EU are determined to do the same.

Nor can we continue to offer Sir Fred Goodwin and his ilk top rate tax relief on their pension contributions or, to private equity investors, CGT rates which are less than the tax rate paid by their cleaners.

These loopholes should be closed.

And the revenue should be redistributed in a progressive way to cut taxes on the low paid and those on average incomes putting cash into the pockets of people who need it and will spend it.

A tax cut financed by taxes on the very wealthy and a clampdown on tax dodging will be at the heart of our election offering.

The spirit of our alternative budget will be the same which inspired the People’s Budget 100 years ago – when liberal radicals led by Lloyd George laid the foundations for progressive politics in Britain.

I make that renewed commitment in the full knowledge that the public sector finances are getting rapidly worse and will need to be sharply corrected once the recession is abating.

Our tax cutting plans will be fully costed and fully affordable.

It is also right, in the short run, for the government to sustain the economy; to borrow to keep people in work rather than borrowing to pay them to be unemployed.

But instead of the VAT cut we would have carefully targeted public investment aimed at providing more social housing, environmental improvements to the housing stock and better public transport.

At a time when there are massive unemployed resources in the construction industry there has never been a better time to fight worklessness and homelessness simultaneously.

There will be economic recovery.

But the Government cannot continue for long to borrow a staggering 10% of GDP.

There is no imminent threat of bond markets drying up and a sterling crisis but there will be one unless there is a clear route back to public sector spending discipline.

As a credible political force we accept these realities.

We cannot and should not make unrealistic spending commitments.

There are two ways of approaching this looming challenge.

One is the traditional way: salami slicing key services; using councillors as butchers for central government; abandoning necessary public investment.

There is a better way.

Setting priorities.

To govern is to choose: knowing when to say no.

We have argued already that an axe has to be taken to wasteful IT programmes and ID cards must go; that tax credits must be chopped back; that new motorways should not be built; that we cannot take on the liabilities of new nuclear power.

There are bigger questions looming.

Do we seriously believe a Britain in dire financial straits can afford a new  world-wide military role?

How long can we continue the pretence that we can sustain generous pensions for public sector ‘fat cats’?

This year hundreds of thousands of university students will join the dole queue.

Perhaps half of all new graduates.

They will have to be helped.

But how much longer can we pretend that it is sensible or affordable to chase the government’s target of half our population studying full time at university?

These are enormous issues.

We must be bold and under Nick Clegg’s leadership we are being bold.

People are crying out for a believable explanation of the mess we are in and a credible message of leadership on how to get out of it.

Labour has dominated the progressive side of British politics for 80 years.

But no more.

Labour has lost its moral authority.

And Economic failure has killed the New Labour brand.

We, the Liberal Democrats not Labour, are the future of progressive politics.

In these difficult and uncertain times the Liberal Democrats under Nick Clegg’s leadership have the ideals, the policies and the competence to meet the national need.