BBC On The Record - Broadcast: 28.04.02

Film: Terry Dignan describes the dilemma confronting the Liberal Democrats' economic policy after Gordon Brown's latest budget.

TERRY DIGNAN: Gordon Brown's Budget has given the Liberal Democrats a problem. Do they stick to their promise to tax and spend more than Labour? I've been checking out the On the Record tape library to find out why Matthew Taylor now faces a dilemma over his economic policy. Until Gordon Brown's budget the Lib Dems had a distinctive appeal. Unlike Labour they unashamedly espoused the virtues of higher taxation to spend more on health, education and other services. "We told you so." That was the Liberal Democrat response to the Chancellor's declaration that more money for the NHS made higher taxes unavoidable. But, said party leader Charles Kennedy, at least Labour, unlike the Conservatives, had seen the light. CHARLES KENNEDY: That is a clear ideological divide which now opens up in British politics between the Government and the Liberal Democrats on one side, and the incoherence of the Conservatives on the other. DIGNAN: Of course, the danger for the Liberal Democrats is that now they lose their distinctiveness. It's hardly an election winning slogan - 'Vote for us. We're just like Labour.' Yet a closer examination of the party's policies shows they still do have something different to say. They want to make all personal care for elderly people free. They want an extra two-thousand police officers. And look at their plans for education. They'd cut primary school classes to twenty-five and recruit an extra five-thousand secondary school teachers. They'd scrap university tuition fees and restore maintenance grants. The trouble is all this has got to be paid for and in the Commons Tony Blair has been mocking the Liberal Democrats' tendency to make new spending commitments at the drop of a hat. TONY BLAIR: "In the last week, they have called for over a billion pounds more on social services; more money for affordable housing; to fund research into a bovine tuberculosis vaccine; cuts in fuel duty; more money for transport; more NHS facilities in rural areas; seven hundred and fifty million pounds more for small businesses; more money for amateur sports clubs. I am sorry, but in the end, even for the Liberal Democrats, they have to realise cost can sometimes be an issue." DIGNAN: The Liberal Democrats will pay for their extra spending by raising income tax by one-p in the pound. According to their alternative budget, this will bring in an extra three-point-three billion pounds. There'd be a fifty per cent tax rate on those earning more than a hundred-thousand a year, bringing in four-point-four billion pounds. So Liberal Democrats will have to keep their fingers crossed that voters will happily go on paying higher taxes. Otherwise they're in danger of losing support - to the Conservatives. IAIN DUNCAN SMITH: "Because to listen to the Chancellor, one would think that this week, this is the first time he had ever raised taxes at all. But he spent the past five years and six Budgets raising taxes, and all the time public services are getting worse." DIGNAN: Yes, but suppose voters feel services have got a lot better by the time of the next election? In recent months On The Record has filmed at hospitals like Birmingham Heartlands where have improved already. If this becomes the norm, it means higher taxes have achieved their aim, perhaps making further rises unnecessary. So, that's the Lib Dem dilemma. By the time of the next election the case for higher taxes may have gone. Yet if the Liberal Democrats drop the idea, they lose the one thing that has made them distinctive.
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.