The Chancellor must avoid spin and ensure the public trusts the Government's figures

Speech by Rt. Hon. Charles Kennedy MP, Leader of the Liberal Democrats delivered to Commonwealth Club on Wed 1st Dec 2004

Speaking at the Commonwealth Club ahead of the Chancellor's pre-budget report, Charles Kennedy, Leader of the Liberal Democrats, set out the party's approach to issues of taxation and government spending. Mr. Kennedy made specific proposals to strengthen the role of the National Audit Office so that it could formally report on the economic performance of the Government.

On the Liberal Democrat approach to the economy, Mr. Kennedy said:

"The Liberal Democrats have been consistently open with the British people about tax and in the coming General Election we are making it clear our commitment is to fairer and simpler tax - not higher levels of general taxation.

"We are a party of economic liberalism. We want people to keep as much of the money they earn as possible. But we are also a party of social justice, opportunity and fairness. Without wealth creation, there is no wealth to spread. That is why our liberal tradition emphasises free trade and the opening up of both private and state monopolies to competition; allowing markets to work and freeing enterprise from the shackles of unnecessary regulation.

"But we cannot escape the fact that sustained, and sustainable, investment in our public services is central to providing quality local public services - accessible to all on the basis of need - not on the basis of how much people can afford. The British people instinctively understand this.

"Taxation has often been described as a necessary evil. I would argue differently. Moderate taxation in a liberal and democratic society can be a force for good - providing it is well spent. In a liberal society, the battle against poverty can be taken forward by ensuring that through the law and through proper sustainable investment in services for all, no one is disadvantaged by accident of birth in making the best of their talents.

"But that contract with the people - that the Government will only tax fairly and will spend their money wisely - can only be sustained if the political parties are straightforward about their plans. With the stealth tax strategy of Gordon Brown, the obvious unfairness of our current tax system - especially the Council Tax, and the empty promises of the Conservative party on this issue - it is no wonder that trust in taxation is breaking down."

On Labour's record, he said:

"This government has invested huge sums in the public services and taxes have had to go up to pay for them - just as the Liberal Democrats forecast at the last election would happen. I welcome that investment. I have long argued for it. It's just a shame that the Chancellor is frightened to be upfront about it.

"He has raised that money by putting up taxes. He just won't say so. Many of his tax rises have been stealth taxes. And even when he planned to raise national insurance, he couldn't bring him self to admit it at the 2001 General Election.

"And the truth about his stewardship of the economy is that he remains wedded to a dated, statist, target-obsessed, Whitehall-controlled model for our public services. What that has meant is that the public is not seeing the benefits in improvements to their schools and hospitals as a result of the huge sums of money which are being spent - as quickly as might have been expected."

On Conservative economic policy, he said:

"One minute we are being promised the possibility of tax cuts; the next we are told that cuts might not be possible; then we are told that Michael Howard would like to grant tax cuts; but he can't exactly specify how. It's a mess. The truth is that Conservative economic thinking is all over the place.

"Last week, the Prime Minister attacked the Conservatives for 'fantasy politics' - I would put it another way, I would call it the politics of desperation. That is because the Conservatives are not aiming to win the next general election, they are campaigning only to survive - and they are willing to perpetrate any fraud to succeed in that.

"By ducking the tough choices about where and what to cut, the Conservative party has a huge credibility gap when it comes to delivery. The Liberal Democrats will take no lessons from a Conservative party which, perhaps 5 months before a General Election, is spinning lower taxation and higher spending on schools and hospitals but cannot say how it will balance the books."

On regaining public trust in the Government's figures:

"Gordon Brown has genuine achievements to his credit. But they must not be undermined by yet another example of this Government's tendency to exaggerate and mislead. In order to avoid breaching his own 'golden rule', the Chancellor stands accused of trying to 'redefine' the economic cycle in order to accommodate the deficit that is slowly building up.

"This Government has sought to undermine our civil liberties with the mantra, 'if you have nothing to hide, you have nothing to fear' - and yet it refuses to open up its own books. Double standards, just like the double counting the Chancellor is prone to, undermine public trust. That must not be allowed to go unchecked.

"We should widen and strengthen the role of the National Audit Office so that it can report formally on the Government's fiscal performance. Such a body could review whichever budget assumptions it sees fit with the object of keeping Parliament informed enabling it effectively to hold the Government to account.

"If such independent monitoring is to be truly credible, the statistics underpinning its reports would also need to be fully credible. We are also therefore proposing that the Office of National Statistics should be independent of Government as well."