Birmingham Liberal Democrats

Kennedy sets out agenda for a Liberal Britain

Charles Kennedy, Leader of the Liberal Democrats, yesterday set out an agenda for a liberal society for the 21st century, in a keynote speech at the Commonwealth Club in central London. Mr. Kennedy said "Given his latest salvo against the sixties' liberal consensus, the Prime Minister is beginning to sound alarmingly like Norman Tebbit on a bad day. He would not have dared deliver those remarks if Roy Jenkins had still been alive today. I know what Roy's response would have been to Blair's words. He would have replied in the same way he replied to similar sentiments from Norman Tebbit back in the eighties. He would have challenged Blair to specify just what socially progressive reforms he was hinting at wanting to reverse. Remember, the Tories under Mrs. Thatcher didn't dare try to reverse any of them - despite the rhetoric. Why doesn't the Prime Minister turn his attack on aspects of the eighties? The lack of compassion, the excessive greed, the loadsamoney mentality, the warped view encapsulated in the infamous comment that "there is no such thing as society." Why is he happier to dump on Harold Wilson than Margaret Thatcher?"

THE SPEECH IN FULL:

Last September - at the start of the Parliamentary session - the Liberal Democrats won a great by-election in a Labour heartland in Brent. We had no activist base in Brent - nothing to build on. We pounded the streets and we made our case. We leapfrogged from third place to first: in the most diverse, inner city seat in Britain. By common consent it was a sensational result.

Our opponents were ready with their excuses. Labour said it was too long a campaign. The Conservatives said they hadn't tried hard enough and this was 'not natural Tory territory'. The commentators looked puzzled; decided it was 'what Liberal Democrats do'; and returned to their interminable dissections of the Blair/Brown relationship.

A LIBERAL DEMOCRAT YEAR

It was an interesting parliamentary year. Despite much pressure, we avoided pre-judging Hutton; declaring the real issue was the Prime Minister's failure of judgement rather than his integrity. We stayed out of Butler; arguing that it wouldn't address the key questions about judgement. We did well in the June 10th elections, pushing Labour into third place in the local elections and gaining two more MEPs. And we saved the best for last.

At the end of the Parliamentary session, we did it again. We won Leicester South and we almost won Birmingham Hodge Hill. One-time safe Labour seats. Not anymore.

This time, our opponents had nowhere to hide. The by-elections were called with indecent haste. Labour and the Conservatives both fought us tooth and nail. The voters rejected them both.

If - to coin a media cliché - this was another flash in the pan, the kitchen is about to catch fire.

What matters is that it's time to start listening to the voters of Brent, Leicester and Birmingham. They are fed up with this Government - which ignores them. They don't like the Conservatives - who neither sound like them nor understand them. They are comfortable with the Liberal Democrats - who reach out to them.

British politics is more volatile than it's been for two decades. It is now clear that - as this Labour government becomes unpopular - increasingly the challengers are not the Conservatives. The challengers are the Liberal Democrats.

Why? Because we are now the other truly national party. We are the party which is challenging Labour in its heartlands. We are the party which wiped out Labour in Newcastle. We are the party which runs Liverpool. We are challenging in Manchester, Leeds, Cardiff. The Tories are nowhere in these places - they have scarcely any councillors.

But we are also the party which is challenging the Conservatives in many southern and rural seats. When Liam Fox admitted that they lost these by-elections because 'they are not natural Conservative territory' - he was acknowledging what I have just said. The Conservatives are now a party of the South and the English shires.

When politicians and pundits speak lazily of the 'two main parties' - meaning Labour and Conservative - what does that mean if you live in Newcastle or Liverpool or Manchester or anywhere in Scotland? Nothing.

The message of the June 10th elections and of the by-elections is that this is an era of three party politics.

Our opponents will disagree. They will tell you that these by-election victories are just the fall out from Iraq.

They are wrong.

Iraq has become a totemic issue. Iraq is - for Tony Blair - what sleaze was - for John Major. The electorate is angry about it; but doesn't want to keep talking about it. They know what they think and won't change their minds.

Certainly for us - Iraq has been a turning point. We took a principled stand. It's easy today to suggest it was the obvious thing to do; but I can assure you that it wasn't so easy then - when I was being dismissed as 'not serious' for opposing the war. For months, while the Conservatives were the principal cheerleaders, we asked the critical questions. We stood up for the millions who were deeply worried about the war. They watched us perform as the effective opposition and they won't forget.

Iraq is totemic - but it isn't the whole story.

People don't trust Tony Blair; but they don't trust Michael Howard either. (It's hard not to sympathise - when in one and the same breath the Conservative leader suggests he wouldn't have voted for this war, yet he supported it.)

People see the Labour and Conservative agendas are converging. Both are arguing about choice; they're outbidding each other over the number of civil servants they will fire; scrapping over who can sound toughest on law and order.

We opposed the war, but we also have a different vision of Britain.

LIBERAL BRITAIN

For much of the 20th Century, people in this country were characterised as being 'small c conservative'. But in this 21st century, it's the characteristics of the 'small l liberal' that are beginning to dominate.

Look around you.

We are less deferential; more inclined to think for ourselves; more open about sexuality and equality. For example, how many people care these days whether their local MP is gay or straight? What they ask is whether this person is effective.

Our national institutions are changing too. We are no longer a nation of one church; we are a nation of many faiths. We are no longer a nation with one family structure. We are no longer a nation of one colour and, increasingly, we welcome diversity. Although, given his latest salvo against the sixties' liberal consensus, the Prime Minister is beginning to sound alarmingly like Norman Tebbit on a bad day.

I tell you one thing. The Prime Minister simply would not have dared deliver those remarks about departing from the sixties' liberal consensus if Roy Jenkins had still been alive today. As the BBC's Andrew Marr observed at the time of Roy's passing, he was in a quite unique position in British politics in exerting significant influence on not one but two of the three main party leaders. And I know for a fact exactly what Roy's response would have been to Blair's words on Monday of this week. He would have replied in exactly the same way as he replied to similar sentiments from Norman Tebbit back in the eighties. He would have challenged Blair to specify just what socially progressive reforms he was hinting at wanting to reverse. Remember, the Tories under Mrs. Thatcher didn't dare try to reverse any of them - despite the rhetoric.

Why doesn't the Prime Minister turn his attack on aspects of the eighties? The lack of compassion, the excessive greed, the loadsamoney mentality, the warped view encapsulated in the infamous comment that "there is no such thing as society." Why is he happier to dump on Harold Wilson than Margaret Thatcher?

And would he contrast and compare the efforts in the sixties towards a more tolerant society with the record of his government today. In the sixties neither Wilson nor Jenkins were attempting to remove state benefits from the children of asylum seekers; withdraw the right to trial by jury; hold people without charge in jail.

As the fabric of our society changes, our political parties must reflect what's happening. Yet for a decade, the Conservative party has been in open warfare as it attempts to come to terms with the new liberalism; while the Labour Party, rooted in the state control of socialism, makes appropriate noises, but can't shrug off old habits.

The commentators and pundits have been slow to see it. They are wary of stepping outside the safe environs of the House of Commons - or worse still travelling beyond the M25.

It's not really surprising. Labour vs. Tories, left vs. right, Blair v. Brown - these are scripts that they know, stories that they have written. It's human nature to resist change. But contemporary politics requires a new language as well as a new way of thinking. If you take, say, the council tax, the war on Iraq, the Euro - these are issues which people are passionate about. But they don't fit neatly into the rigid delineations of the old left-right spectrum.

But phrase the question differently - is a party 'liberal or illiberal?' Immediately, the old issues take on a new aspect. You might then ask - does a party believe in a big or a small state? Does it truly believe in the benefits of diversity? Does it trust the people, or seek to dictate to them?

Through this prism of 'liberal' or 'illiberal', you can start to grasp the reality of the new politics. That, in turn, leads to a clearer understanding of the challenge for those of us seeking to reinvigorate the debate. And for the Liberal Democrats, this also provides an opportunity: to persuade this 'small l liberal' society, to become 'large L Liberal Democrat' voters.

What, then, are the Liberal Democrats offering? What do you stand for?

We prize freedom of the individual underscored by a safety net for the vulnerable in our society. We are stout defenders of the public services, free at the point of use. We are internationalist in outlook - pro UN, pro Commonwealth and pro Europe. Our Liberal background makes us wary of an overmighty state and dedicated to civil liberties. We are dedicated enthusiasts for the green agenda.

How do these principles apply in practice?

While Labour and the Conservatives continue their phoney war over choice, we make it clear that our number one priority is quality local public services: a good school and hospital near you. We say the Government has mixed up its priorities. Too much is wasted on micromanagement from the centre, middle men and bureaucracy. We say resources and power are more effective if focussed on the front line. While Labour and the Conservatives continue to scrap over tax and spend, we say 'get public spending right.'

So now I'd like to turn to our public spending plans in more detail.

ECONOMIC STABILITY

Gordon Brown has established a reputation for economic stability and competence, which, at least in comparison with the last Conservative government, is justified. The key innovation has been the independence of the Bank of England to set interest rates which has helped to deliver steady growth, low unemployment and low inflation. (It is often forgotten that Liberal Democrats first advocated this; not least by Gordon Brown.)

But the Government's endless self-congratulation too easily feeds hubris and complacency. There is still much damaging economic instability. The lurch from the severe squeeze in public spending between 1997 and 1999 to the rapid growth of spending since, has led to considerable, unnecessary cost. We waste, for example, £1 billion a year on excess charges for agency nurses because key decisions to train and retain nurses were not made until too late. There is chronic instability, too, for manufactures and farmers, who have traded at an exchange rate which on some measures has been 20% or even 30% over valued against a bracket of other currencies. That is one reason why Lib Dems keep returning to the unresolved issue of our economic relationship with the Euro area.

There is chronic and dangerous instability in the housing market: for most British families the main store of their personal wealth. The Government has washed its hands of responsibility for the problem; just as it has for the trillion pounds of personal debt which is largely secured against inflated house prices. My colleague Vincent Cable has set out a ten-point plan for creating greater stability in this key area of our economy.

But the biggest questions are over the budget.

The public sector finances are in reasonable shape. Government debt is moderate. The fiscal deficit is just within the 'golden rule'. But there is no room for error and a downturn - a sharp fall in the housing market or a new oil shock - would create an alarming amount of red ink. In these circumstances I would urge caution.

The Government's promise to make major savings by sacking the civil servants is not wholly plausible. Certainly there is scope for serious improvement in public sector efficiency through better procurement and better use of IT, as identified by Sir Peter Gershon. Such efficiency savings should be used to reduce the Government deficit.

TOUGH CHOICES

I put much emphasis on sound finance and I am determined that my party's spending commitments should be fully accounted for and financed by cuts in lower priority spending. We can now demonstrate how £25 billion could be switched over a parliament - not just by cutting waste, which is additional, but by making clear policy choices.

These are areas we have identified where major savings could be made:

Closing the DTI not just symbolically but by cutting severely its industrial support programmes.

Cutting many of the 'Local Area Initiatives' operated by DEFRA and ODPM - which have become a vast 'slush fund', usurping the role of local government

Scrapping the government's 'baby bond' scheme

Scrapping the proposed ID card

A more open market and competitive procurement process in areas such as defence, scrapping the residual, protectionist rules.

We would go further than the government in relocating the civil service and agencies to the provinces: at least twice as many jobs as part of our commitment to decentralisation.

We would transfer bodies best run to the private sector: agencies like Royal Mint, ECGD and British Trade International.

Out of that we can make a really serious commitment to priority areas:

We shall radically improve state pensions, lifting many pensioners out of means testing but recognising also the need for later retirement. My colleague Steve Webb will shortly develop this approach in detail.

We shall demonstrate a commitment to 'law and order', what I call 'tough liberalism', through a big increase in police numbers and making prison education and drug rehabilitation a priority.

We shall fill some important gaps in the Government's education programme - more specialist maths and science teachers in secondary schools; and a stronger commitment to further education.

We shall match Gordon Brown's extra commitment to overseas aid and aim to meet the 0.7% of GDP target well within two parliaments.

Within departmental budgets we shall make similar tough choices. Unlike the Conservatives, we won't cut defence spending; however expensive relics of the Cold War like Euro fighter have to be axed if funds are to be found for equipping, paying and housing our frontline troops. Our health budget will emphasise prevention over cure: going further than at present to screen out disease early, by providing targeted health MOT tests of the kind available in the private sector.

'Tough Choices' are real. If you see some of our Lib Dem councils in action - you will find that that is what they are about. In Leicester we faced a sustained barrage from Labour for making choices; but the electorate respected us the more.

What I absolutely reject is the notion - being promoted by Tories and Labour alike - that choices don't have to be made because there is so much 'waste' to be saved. Of course Government waste must be cut. But the idea that billions can be magically saved through in this way flies in the face of long experience.

And let us not forget that waste is not just about bureaucracy. Unemployment is waste (as it was under the Conservatives). The war in Iraq 'wasted' over £3.5 billion. Had it been conducted under UN auspices (as in the first Gulf War), our allies would also have contributed. It would not have been left to the British taxpayer.

FAIR TAXES

Neither our spending commitments nor the condition of the economy require higher taxes. But what is required is fairer taxation. It is a disgrace - and inexplicable for a government promoting an agenda of social justice - that the poorest 20% of the population pay a higher percentage of their income in tax than the richest 20%. This we intend to correct.

Our main proposal is to scrap the council tax and replace it with a local income tax. LIT operates on the principle of the 'ability to pay' and has been used successfully in countries as diverse as Denmark, Switzerland, the US and Japan. We have a distinct policy. Yesterday the Government offered another 18 months of procrastination. And the Tories are no better.

We also propose a new top rate of tax of 50p on every pound earned over £100,000. This would be used to remove unfair charges: student tuition fees and top-up fees and NHS charges for personal care, which are, in effect, a tax on victims of diseases like Alzheimer's and Parkinson's. Those who complain that a 50p tax rate on the rich is a disincentive to work and save should remember that poor pensioners already face a 50p marginal rate under Pensioner Credit and middle income families repaying loans for student tuition fees will also face a 50p marginal rate.

We would go further. I would like to see low-income pensioners lifted out of tax altogether - up to an income of £10,000 - we are exploring a range of options for removing tax loopholes created by Gordon Brown to pay for it. I would also like us to set a long-term target of lifting low-paid workers out of income tax up to the £10,000 level.

One source of funding could be environmental taxation. My colleague Norman Baker has already described how we want to shift taxation from people to pollutants. The aviation sector in particular has largely escaped from fairer taxation. We would change the tax regime so it falls on the aircraft rather than the passengers. That is taxing the environmental impact more precisely.

ENTERPRISE

Fair taxation means a redistribution of wealth. I don't shrink from setting that out as an objective. But we also believe in wealth creation.

Liberalism has always been about enterprise, competition and markets. At our last party conference our motion on business was entitled: "setting business free". Our proposal to abolish the DTI was not just about saving money but because we understand the frustration business has with a meddling, centralising, over regulating government. The entrepreneur Ghulam Noon told the government recently: "please stop trying to help us!'

The Government's task is not to pick winners and prop up losers but to ensure that there is a literate - and mathematically literate - population; transport infrastructure which works; moderate, and simple, taxation; and freedom to trade and invest, not least in the Single Market of Europe. My Treasury and DTI colleagues will shortly be putting forward proposals for simplifying tax, lifting some of the burden on small business and speeding up the removal of the red tape which suffocates the growth of many companies.

If, as I said earlier, the Liberal Democrats will be the challengers when Labour falls, then Britain will need an alternative to Labour, which is economically liberal but is also committed - as we are - to social justice and quality public services.

CONCLUSION

So, ladies and gentleman - this is the Liberal Democrat Britain of tomorrow.

Our economic programme can be summarised as follows: economic stability and financial responsibility; tough choices in public spending; fair taxation; and pro-enterprise. Our keywords are trust and fairness. Our byword is tell it straight.

To the doubters I say - remember Leicester South, Hodge Hill and Brent.