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Danny Alexander: 'Voters can only conclude ... that a currency union is not going to happen'
Danny Alexander: the Tories' doctrinaire economic policy would inflict unnecessary pain on the  Britain Photo: EDDIE MULHOLLAND

Last Wednesday, the Coalition delivered another Autumn Statement that stuck to the strategy we’ve had since 2010: clearing up Labour’s mess in the public finances and doing so fairly; reforms to reward work and improve the UK’s long-term growth prospects. This was a very Liberal Democrat Autumn Statement – income tax cuts, infrastructure investment and a big, liberal tax reform. 
Our plan has widespread public support. But there is still work to be done to finish the job after the election. With Labour having long since departed the battle for economic credibility, the big question now is which of the Coalition parties is actually promising to stay the course, and which is lurching away from it? 
When we started in 2010, there were two important elements to our approach. First, we focused on the structural deficit – that part of Labour’s record borrowing that wouldn’t be removed when growth returned. It wasn’t cuts for cuts’ sake. Second, we aimed to finish the job fairly, with the best-off making the biggest contribution. Though all of the decisions I have made have been difficult, that has been achieved so far. 
Economic circumstances have been tougher than forecast back in 2010. It was right to be flexible and to accept that it would take an extra two years to “finish the job” on the structural deficit. If we reduce the deficit at the same rate as in this parliament, that goal will be met in 2017-18. 
The Liberal Democrats are committed to seeing that task through. But we and the Tories differ sharply on how to complete that task. And there is an even more profound difference over what happens afterwards. They see 2017-18 as a staging post to a smaller state, with many more cuts to come. We see that year as a turning point, with the opportunity for a different, more balanced approach thereafter, offering light at the end of the tunnel.
By the end of 2015-16, we will have taken £120 billion of difficult decisions on spending and tax to reduce the deficit. The best-off in society have contributed the biggest share – indeed the top 20 per cent have contributed more than the other four fifths combined. Over the two years that follow, around £30 billion of further deficit reduction will be needed. It is essential that this includes some tax rises to make sure the wealthy make a contribution. To focus solely on spending cuts is wrong, unfair, and would put unnecessary pressure on public services and people on low incomes. 

Post 2017-18, the difference is even starker. The Tories want to keep on making cuts, running growing surpluses year after year, way beyond what is required to balance the books. 

Yes, we have to reduce the burden of debt as a share of our economy to more sustainable levels – it would be immoral to pass on crippling debt levels to our children. But that simply does not require shrinking the state ever further. That is an ideological demand, not an economic necessity. The recent dire warnings from the Institute for Fiscal Studies and others over the drastic shrinkage of the state refer to a plan that keeps cutting spending until 2020 – something the Liberal Democrats are emphatically not signed up to. 

Instead, we would run a balanced budget and, provided the debt was falling, allow borrowing to invest in the most productive economic infrastructure. We could then do even more to improve our roads, railways, broadband and so on. This would allow general public spending to grow as the economy grows. No spending bonanza, but a change from where we have had to be in this parliament, enabling the pressures on public services to be dealt with. 

Labour, of course, are simply not part of this debate. They want to drag out deficit reduction across the next parliament, building up more debt and prolonging the squeeze. Ed Miliband and Ed Balls have no economic credibility precisely because they refuse to face up to their role in creating these problems, and to the need for more hard decisions to finally release us from the grip of their past failures. 

The Liberal Democrat approach is to stay the course we have set in this parliament, until the job is complete in 2017-18. It is sad to see the Conservatives move away from the sensible, balanced approach of the Coalition, to a more doctrinaire policy that would inflict unnecessary pain on the people of Britain. 

Who would have thought that of the two parties that formed the Coalition, it would be the Tories who would be blown off course? A mix of unfunded tax promises, harsh spending plans, and pandering to Ukip may be born of pre-election panic, but it is not economically credible. The Liberal Democrats would borrow less than Labour, and cut less than the Tories. We’d get the national debt down over time, while allowing more productive investment in infrastructure and public services. 

In coalition, we have helped save Britain from economic chaos and ushered in a strong recovery. The real danger of such chaos in future comes from a Labour Party that would repeat its disastrous mistakes, and a Conservative Party that wants to give Britain austerity for ever and destroy our place in our largest market. British people want neither of these. The only way to avoid economic chaos and keep Britain on the right path is to have Liberal Democrats shaping our economic destiny, as we have over the past four and a half years. 

Danny Alexander is Chief Secretary to the Treasury  
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