Home > Policies > The Economic Crisis
A Liberal Party Policy Paper
Adopted at the 2009 Liberal Party Assembly
The Economic Crisis
The Liberal Party recognises that, as a result of poorly regulated financial
institutions at all levels taking ever greater risks, the world financial system
has suffered a massive collapse of confidence, plunging the world into
recession and forcing governments to support the banks with huge injections
of taxpayer’s money.
The western world was, and to some extent still is, living beyond its means.
The Liberal Party believes that the crisis is the result of a systemic failure of
the banking and financial system as a result of its deregulation of the financial
system. Both institutions and the individuals employed by them have been
encouraged to take higher risks in search of higher reward. In the end the
banks could not be allowed to fail and the taxpayer had to provide the safety
net. In the end the bankers gambled without risk as they were risks were
ultimately underwritten by the taxpayers.
The problem for government is twofold: ensuring that a crisis of this sort
never happens again; and paying for the bail-out without crippling the nation’s
finances for generations to come.
The Liberal Party believes:
- that it essential that confidence in the financial system be restored but that it is undesirable to simply throw cash at the problem;
- that therefore any cash injected into banks or other financial institution be granted only on the basis of the government taking equity shares in the company at the then current market price;
- that having no confidence in the existing regulatory authorities, and that these authorities should be strengthened with a single controlling body;
- in the international nature of capital but believes that internationally agreed banking standards are required to prevent a repetition of this crisis;
- that Mutual societies appear to have been largely unaffected by these events, and thus that the UK should encourage the formation of new and regionally based mutual organisations.
Liberals believe in freedom and free trade, but do not believe that bankers
should be free to gamble with our collective wealth without supervision,
regulation or restraint.
The Economic Challenges
The growth of the internet, e-commerce and other advances in technology are
already changing working practices and employment patterns. At the same
time the rapid growth of economies in the developing world is challenging the
previous dominance of the West and rendering whole industries
uncompetitive.
These are global challenges, beyond the power of individual nation states, or
even of regional groupings such as the EU, to control. The need for a
democratically accountable world authority has never been greater. Unless the
new technology can be made to serve the interests of people there is a real
danger that changes will be determined by what is technologically possible,
rather than by what is desirable.
“Information is power” and the changes now taking place in the world are
capable of being used for authoritarian purposes of for the liberation of
individuals and communities. As Liberals we believe that the economy should
serve the interests of the people.
Economic Management
The UK government, whichever party is in power, now has only marginal
influence over interest rates and exchange rates which are chiefly determined
by global market forces. This puts pressure on the remaining areas of the UK
economy over which the government can still exercise control. Liberals
deplore the influence of electoral considerations on the management of the
economy with successive governments building up reserves so that they can
attempt to bribe the electorate with tax cuts or increasing public spending just
before an election. We believe that the introduction of proportional
representation would bring greater stability.
We remain committed to a genuine free enterprise economy with stricter
controls over monopoly power, similar to the US anti-trust laws, and greater
employee participation, including co-ownership.
We believe that the devolution of power to the nations and regions of the UK
will help to redress the imbalance of economic activity between South-East
England and the rest of the UK.
We also believe that high standards of education and health should be
available without charge and are concerned at the continuing erosion of this
principle.
Objectives
Liberal economic policy has the following objectives:
- to convert to sources of energy and industrial processes which are sustainable and non-polluting;
- to support world development and oppose protectionism, accepting that the privileged position of the Western World cannot long continue;
- to distribute wealth fairly, waging war on poverty and ensuring a minimum standard of living for all, but also rewarding innovation,
- initiative, commitment and good work;
- to encourage cooperative ventures and organization on a human scale;
- to foster the development of local economies.
With regard to these objectives we would identify significant exemplars with
target achievement dates. These would include such matters as the restoration
of the ozone layer and the elimination of TB (both nationally and globally).
Only in this way can appropriate strategies be identified and costed in view of
their probable short term costs against long term savings.
For Liberals, economic policy will always have to serve the achievement of
the freedom of the individual to enjoy a healthy environment.
Pensions
We believe that all pensioners should receive a basic pension sufficient to
provide an adequate standard of living.
Liberals believe that the private sector can enhance, but can never replace, a
basic state pension which we have resolved must be set to at least what the
Family Budget Unit describes as “Low Cost but Acceptable (LCA)” standard
of living. We also believe that additional non-means tested benefits will need
to be paid to take account of housing costs, disability and additional needs of
older pensioners.
We also believe that individuals should be able to save for additional benefits
in a national scheme where the individual pension is related to the
contributions and investment returns. Because these benefits would be
financed directly and genuinely from contributions, those who have saved for
their retirement would no longer be penalised because of those savings.
To ensure that these monies are no longer “raided” by government a separate
National Pension and Investment Trust should be established. Such a trust
would allow the expectation of flexible retirement ages and would cater for the
substantial number of employees who regularly change employment or
are in self-employed or part-time work.
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