Does financial responsibility imply fiscal conservatism?

As policy-makers search for ways of sorting out western economies the term 'fiscal conservatism' has gained currency as a preferred synonym for financial responsibility; obviously by Conservatives themselves, but more surprisingly by many self-identifying progressives too.

While all sides agree that financial responsibility is a pre-requisite for good government there is less agreement about what this means in practise exactly and whether an economically right-wing approach is actually desirable for the economy.

Financial responsibility translates on the right as efficiency and plans to reduce state intervention and regulation, while on the left it means an effective policy on growth and stability with state welfare systems at it's heart.

For some, nostalgic for the boom years of the mid-1980s under Reagan and Thatcher, lower income taxes and axing wasteful policy totems are the incentive for investment and self-betterment. For others, nostalgic for the ka-boom years of the early and late-1980s under the same leaders, unemployment spikes, industrial strikes and the devastation done to state-dependent social infrastructure are the horrors they define themself in opposition to.

According to the IPPR's Adam Lent et al in their discussion paper, Labour faces a quandary, however, as uniform opposition to every spending cut allied to a determination to deficit reduction makes their aspiration for social justice through expansion of the welfare state incredible. The left's aim to 'protect living standards' therefore equates to their espousal of an ideological reversal.

Betrayal, you hear the cry!

But the battle passed its' boiling point when the public largely accepted the need for at least some austerity - whither the public, hence the politicians.

Co-author Hopi Sen picks up a selection of Labourite responses, most notably (and predictably) from Blue Labour's John Wilson - in which he self-conciously echoes Kinnockite mantra to specifically support the idea that "balanced budgets are a precondition for political radicalism."

Meanwhile, although several specific problems are quickly identified with the doctrinaire prescriptions these fresh converts deduced from their newly favoured ideological nostrums, the partisan spectacle of claims that "there is nothing right wing about fiscal conservatism" are almost too bizarre to be true!

So let's understand what we're talking about: fiscal conservatism means taxing less and spending less, or vice versa. Either way it means shrinking the state and shrinking state deficits, as one prong of conservative economic policy (which, we shouldn't forget, is designed to create a mutually-supportive relationship with conservative social policy).

Within that stricture variations between libertarians, supply-siders and deficit hawks can be found: libertarians profess a wish to 'starve the beast' of taxes as a form of crash diet for state spending; supply-siders argue for tax cuts as an economic stimulus which pays for itself; deficit hawks see spending cuts and tax rises as the best way to reduce deficits.

Yet this would hardly be of any interest if it weren't that the shift towards fiscal conservatism wasn't also a shift away from an opposing perspective.

The almost universal consensus which has existed since the depression of the 1930's that 'Keynesian' anti-cyclical deficit spending (ie on economic stabilisers and strategic infrastructure) is the way to boost growth is breaking down, while a similar consensus developed in the 1980s that stability could be ensured by gaining greater control over monetary policy has similarly been under attack.

Governments habitually integrate into their rhetoric some degree of supply-side reforms and Keynesian stimulus, offset by an undercurrent of raging war between the deficit hawks and doves according to conditions, while the economic libertarians tend to attach themselves to the supply-siders just as social democrats do to their Keynesian confreres in the hope of exerting a stronger influence. Their problem is that with huge monetary stimulus provided by recent tax-payer funded bailouts and quantative easing on top of already seemingly permanent deficits monetary policy tools have been largely exhausted thereby pushing the political focus back towards fiscal policy.

For LibDems traversing this policy challenge the shift has been painful. Not only did it mean forming a coalition with bitter rivals, but it meant trying to justify the change in approach. Though for me change provides the necessary counterpoint to the status quo of conservatism, the tenor of general opinion more accustomed to avoiding such paradoxes for the sake of maintaining perceptions of reassuring clarity was enough to create significant resistance at the polls.

Clegg and Cable have had their difficulties in defending the thrust of this new direction, but in one major factor they've proved their liberal credentials by rejecting outdated dogma irrelevant to the current needs.

Debts ballooned beyond the point of sustainability as conservative monetary policy allied to liberal fiscal policy under the delusion that unending growth had banished concern about stability, so as monetary policy was loosened by force in the face of the crisis fiscal policy required tightening to keep a handle on the deficit and prevent recession turning into depression: to be financially responsible did imply urgency for fiscal conservatism, but it certainly doesn't imply any necessity all other things being equal - it is merely one legitimate policy response useful under specific conditions.

All of which leads to the unavoidable conclusion that in their haste to remain electorally relevant Labour is now making the case for the LibDems. Remembering the overt tactic to demonise LibDem leaders, calling them a 'human shield' (among less glamorous epithets), this makes Ed Miliband's position increasing untenable - at least in moral terms!