THE LIBERAL Democrats should fight to reduce the size of the state and cut taxes, according to some of its most prominent members.
The party must keep the faith with capitalism in the wake of the global financial crisis, David Laws MP has written in an update to the Liberal Democrats’ “Orange Book”, which pushed the party further towards liberal economic policies when it was published in 2004.
He said future governments should consider “a further substantial real rise” in the personal tax allowance, following the coalition’s move to hike this to £10,000 in the last Budget.
Laws also backed efforts to reduce public spending as a share of GDP to below 35 per cent, noting that there is too much scope for waste under the current spending forecasts, even after the cuts to 40 per cent of GDP planned by the coalition.
“The Orange Book was not written in order to make a Lib Dem-Conservative coalition possible, but without the policy changes which the book and its authors anticipated, it is much more difficult to imagine the present coalition being formed and sustained,” said Laws.
However, Danny Alexander, the Lib Dem chief secretary to the Treasury, yesterday insisted that the 40 per cent target would remain, and the new Orange Book contributors are thought to represent a small part of Lib Dem opinion.
Others contributors cheered the efforts to liberalise services such as the Royal Mail and the energy market. “It is to be hoped, and I think expected, that the changes in the Liberal Democrat government team make supply-side reform more, rather than less, likely,” wrote CentreForum economist Tim Leunig.
Meanwhile, Orange Book co-author and CentreForum chair Paul Marshall said “the next frontier in structural school reform revolves around the role and potential of profit-making schools”, although he conceded that the party remains split on the issue.
“The Orange Book marked the first step towards the Liberal Democrats rediscovering something of their classical liberal roots,” said Mark Littlewood of the Institute of Economic Affairs, a free-market think-tank whose journal has published the update to the book.