Lib Dems sought to treble 2010s austerity spending cuts

Lily Hail -

The Liberal Democrats sought to institute a 10 per cent reduction in public spending in coalition negotiations with the Labour Party, sources familiar with those negotiations have told the Independent.

Lib Dem negotiators proposed cutting the primary rate of land value tax to 4.5 per cent, down from its current rate of 7.5 per cent – a move which would have cost the exchequer more than £150 billion annually, and necessitated spending cuts of up to 20% of the UK's annual budget across all departments.

After being told of the financial impact of the proposed LVT rate cuts, Lib Dem negotiators attempted to set a target of 10% spending cuts – more than treble the 2.7% reduction in spending instituted by the coalition government's austerity policies in the aftermath of the 2008 financial crisis.

Lib Dem budget proposals in negotiations

  • Lower the primary rate of LVT to 4.5%, or failing that, 5% – to the tune of £150 billion annually
  • Cut all government expenditure by 10% – about £150 billion per year, roughly the size of the Department for Education's budget
  • Lower corporation tax to 18%
  • Cut earnings tax
  • Seek to cut income tax for lower and middle earners

Government formation woes

Labour negotiators largely rejected these demands wholesale, and insisted on a maximum of 3% spending cuts in any deal they would put before their party. The Lib Dems ultimately acquiesced, but the coalition deal was still overwhelmingly rejected by Labour, who instead opted to enter unofficial opposition.

The situation is complicated by reports that the incumbent Solidarity government are considering resignation (16th June). If this were to occur, Waffel-lol would be tasked with forming a coalition or securing a confidence and supply agreement from other parties in Parliament. To build a majority, the Liberal Democrats would need to secure the backing of either Solidarity or both Labour and the Conservatives – meaning they would not be able to rely on right-wing votes alone to pass such severe spending cuts. Additionally, with left-wing party members unhappy (14th June), the prospect of a backbench revolt cannot be ruled out.