Lib Dems hope to harvest fruits of political candour

I remember in 2001 writing a mammoth 4,000 word election Q&A for The Observer on who you should vote for, based on fiscal policy. My conclusion was vote Conservative if you think tax rises to fund the NHS are a waste of money, vote Labour if you want an improved NHS but would like to pretend that taxes won’t go up to fund it, and vote Lib Dem if you want more NHS spending and are happy to admit taxes will go up.

In the end, of course, national insurance did go up to fund that extra NHS spending.

And so in 2010, we have a new iteration of this trinity.

If the election was a prize rewarded for fiscal candour, the Lib Dems might actually win. That much is evident from the four-page annexe at the back of their manifesto showing multi-year costings for all their manifesto commitments.

Their £16.8bn tax cut from raising tax allowances to £10,000 came under immediate fire from Labour, who said it really cost £23bn, but had not realised that the plan involved freezing the higher rate threshold (rather than also hiking it by £3,500).

The Tories issued a long rebuttal, mainly concerned with the toppish estimates on the gains from tax avoidance. Both main parties are on even shakier ground until they decide to hand us a similar table.

The IFS believe that the costing of the tax cut is credible. The savings that pay for that tax cut they are less sure about. Does that make it bad policy? Well, if you were only allowed to make fiscal decisions based on policies whose impacts were 100 per cent certain, then there would be very few avenues for innovation in tax and spend.

In relative terms at least there has been a list of government actions that the Lib Dems will stop or shrink that is more extensive than, for example the list of five tactics on four sheets of A4 which apparently save £12bn for the Tories without reducing the quality of public services.

I think there can’t be much doubt that the Lib Dems have the most radical tax policy change, with their allowance change. But it’s by no means targeted on the poor. And if, as the manifesto says, the Lib Dems might need to raise taxes, well, why are they enacting such a massive tax cut now? Why not make the allowance change a bit smaller? Why not pay down the deficit a bit more?

So, I hear you say that this is all rather worthy and academic, but barring a yellow miracle, there is no chance of this agenda being enacted. Perhaps the most interesting thing here is to imagine how this manifesto interacts with the argy-bargy of 18 days of hung parliament negotiations.

The most definitive article of policy here is not to start cutting spending in the current year. If the Conservatives win the popular vote, and Labour get more seats (the likely outcome if today’s Times poll is correct. Lab: 34% but 300 seats, Con 37% but 264 seats), then in theory there will be a majority of the country that don’t want deficit reduction to start now, even if the nation has delivered a negative verdict on Gordon Brown.

So what happens then? Does George Osborne drop his 2010 cuts to woo Clegg and Cable? Or does Clegg go for the party with the strongest mandate? “On what basis?” one FT journo asked Clegg today. “Both,” said Clegg. “Yes, but what if parliamentary seats and percentage of votes say different things?” “Both,” replied Mr Clegg, ending the manifesto launch. This could get messy.