On 3 September 1991, Liberal Democrat leader Paddy Ashdown visited the London School of Economics to launch a policy statement, Economics for the Future. The document proposed a new framework for “rule-based” economic management, built around an independent central bank, a move to the narrow band of the European Exchange Rate Mechanism (ERM), and targets for savings and nominal GDP (Gross Domestic Product), designed to raise public and private investment and end “boom and bust cycles.” At a microeconomic level, Economics for the Future set out plans to decentralize pay bargaining and strengthen competition policy (for instance, by tightening restrictions on corporate mergers and acquisitions). It also restated existing Liberal Democrat commitments to introduce a “Citizen’s Income,” to shift the tax burden from employment to energy use, and to invest in education and training.Footnote 1 Ashdown claimed that the package represented “the first comprehensive new piece of economic thinking in Britain since the advent of the term ‘monetarism’ into our political lexicon.”Footnote 2 More soberly, a press release issued by the party’s economics researcher, Ed Davey, noted that document marked a “distinct shift” away from positions that the Social Democratic Party (SDP) and Liberal Party had taken in the 1980s and toward “a far greater emphasis on the role of the market.”Footnote 3
Economics for the Future formed one of the final planks in the Liberal Democrats’ policymaking work in the run-up to the 1992 general election. As Peter Kellner noted in The Independent, the attempt to construct a distinctive liberal agenda for 1990s Britain had been Ashdown’s “personal project” since he became party leader in 1988, in the wake of Margaret Thatcher’s third successive election victory and the SDP-Liberal merger.Footnote 4 By building on the seven million votes the SDP-Liberal Alliance had won in 1983 and 1987, and challenging Labour and the Conservatives in the “battle of ideas,” Ashdown hoped that the Liberal Democrats could “assume the role of the post-Thatcher alternative and leave Labour straggling behind.”Footnote 5 In the event, of course, these hopes were dashed by the Labour Party’s resilience and “modernization,” especially after Tony Blair became Labour leader in 1994. As Ashdown’s published diaries show, his leadership became dominated by the pursuit of cooperation and coalition with New Labour.Footnote 6 Even after Labour won a landslide victory in the 1997 election, Ashdown persisted with an increasingly quixotic attempt to draw Blair into a coalition in order to secure electoral reform and help put “third way” policy thinking into practice.
In view of the 1997 election result, both academic and public narratives about political change in 1990s Britain have understandably been dominated by New Labour. For a wide range of social scientists, from Colin Hay to Stephanie Mudge, the Labour Party’s “modernization” has served as a textbook case of social-democratic accommodation with neoliberalism.Footnote 7 As the archives for the Blair years become available for research, historians such as Colm Murphy and Glen O’Hara have produced more nuanced and grounded studies.Footnote 8 Yet New Labour was not formed in a vacuum. Just as early twentieth-century debates about unemployment, inequality, and social welfare had spanned the liberal and socialist traditions, so the search for a progressive alternative to Thatcherism also cut across party boundaries.Footnote 9 The SDP had an unusually strong appeal for academics and policy specialists who had been repelled by Labour’s turn toward radical socialism and Euroscepticism in the early 1980s, and some of this support carried over to the Liberal Democrats. Indeed, it was in this context that David Marquand coined the notion of a “progressive dilemma,” arguing that the division of center-left forces had helped the Conservative Party to dominate British politics since the First World War.Footnote 10 Marquand’s own political journey—as a former Labour member of Parliament (MP) who became a leading SDP and Liberal Democrat intellectual before returning to Labour in 1996—nicely illustrates the fluidity of some thinkers’ identities.
To date, historical interest in the Liberal Democrats during the 1990s has largely focused on Paddy Ashdown’s personal relationship with Tony Blair and on the quintessentially liberal issue of constitutional reform, where a pre-election agreement (the “Cook-Maclennan pact”) served as a blueprint for much of New Labour’s reform program.Footnote 11 However, there are several reasons to think that the Liberal Democrats’ broader contribution to policy debate deserves fuller attention. First, more than any other Liberal leader since Jo Grimond in the 1960s, Ashdown was determined to establish the Liberal Democrats as a party of ideas, “at the leading edge of current political thinking.”Footnote 12 What Patrick Wintour of The Guardian called “Ashdown’s hyperactive, almost vanguardist” style of leadership, “in which policies … sprayed out like a catherine wheel,” had a formative impact on the new party.Footnote 13 Secondly, the media landscape of 1990s Britain—dominated by television, radio, and the print press—allowed Ashdown to play a prominent role in public debate as the leader of the third main party. Thirdly, the Liberal Democrat leadership’s embrace of market economics and depoliticized economic management in the early 1990s marked an important step in the diffusion and entrenchment of neoliberal ideas across the UK political spectrum. Finally, Ashdown’s vision of post-Thatcherite politics—built around citizens’ rights, European integration, a flexible labor market, decarbonization, and social investment—anticipated both some of the main themes of Blair’s “third way” and some of its policy details. Although accounts of “third way” politics in Britain naturally focus on Blair and Gordon Brown, they should also recognize the role that the Liberal Democrats played in the development of post-Thatcherite policy orthodoxies.
The “narrative of a transition from social democracy to neoliberalism” between the 1970s and the 1990s is perhaps the closest thing that modern British historians have to a meta-narrative, as Florence Sutcliffe-Braithwaite, Aled Davies, and Ben Jackson have recently noted.Footnote 14 The development of market-liberal ideas in think-tanks such as the Institute of Economic Affairs (IEA) and their influence on the Thatcher and Major governments have been carefully analyzed by Jackson and others, though the notion that this marked the beginning of a “neoliberal age” has rightly been viewed with more skepticism, at least by historians.Footnote 15 As Brent Toye and Dillon Wamsley have argued, however, the 1990s did see the formation of an “elite consensus” around some core neoliberal tenets.Footnote 16 Center-left politicians who had resisted “Thatcherism” in the 1980s not only accepted many of the Conservatives’ reforms, but also embraced market mechanisms as a way of achieving “progressive” goals, and sought to institutionalize and “depoliticize” anti-inflationary economic policies. Seen through this lens, the Liberal Democrats represent an important case study of changing ideological assumptions in late twentieth-century Britain, not least because the party’s neoliberal turn in the early 1990s prefigured some of the policy shifts that Labour would make after 1994. The concept of an elite consensus is appropriate, insofar as support for these ideas was stronger among Liberal Democrat and Labour leaders (and their economic advisors) than among backbench MPs or activists. (As we shall see, there was always some unease about Ashdown’s market turn in the wider party.) On the other hand, any notion of consensus must be circumscribed and qualified, as modern British historians have long recognized.Footnote 17 Even Blair and Ashdown had major differences with the Conservatives—and some differences between themselves—over the details of economic management, the shape of welfare and public service provision, constitutional reform, and the UK’s relationship with the European Union (EU).
The challenge for the historian is to take Paddy Ashdown seriously—perhaps not as an original thinker, but as a political entrepreneur and a second-hand dealer in ideas—while recognizing that small parties’ claims to influence often contain an element of myth-making. This article uses recently released archival sources to examine the remaking of British Liberalism during the late 1980s and 1990s and to unpack its nature and limits. It shows how Ashdown sought to position the Liberal Democrats in progressive neoliberal space, setting the party’s social, environmental, and political goals in the context of an economic policy based on competition and depoliticization.Footnote 18 The dividing lines that Ashdown had drawn with Neil Kinnock’s Labour Party proved much harder to sustain after the rise of Tony Blair, and—partly as a result—the Liberal Democrats’ policy work was increasingly overshadowed by New Labour. Ashdown’s leadership nevertheless formed an important moment of transition for the UK’s third party, in which British Liberals retreated from mid-twentieth-century visions of economic reconstruction and accommodated themselves (with varying degrees of enthusiasm) to an era of market liberalism and globalization.
“New Directions for a New Age”: British Liberalism in the 1980s
In many ways, the 1980s was a high point for third-party politics in Britain. In the two 1974 elections, the Liberal Party had taken almost 20 per cent of the vote by promising to end “adversary politics,” using electoral reform, industrial co-partnership, and an incomes policy (designed to control wage and price growth) to place the post-war settlement on stronger institutional foundations.Footnote 19 The creation of the SDP in 1981 threw further support behind this “middle way,” and the SDP-Liberal Alliance took 25.4 per cent of the vote in the 1983 general election and 22.6 per cent in 1987. Yet the electoral system was unkind to a geographically diffuse third force, and many Liberals and Social Democrats became frustrated by time-consuming negotiations over seats and policy. The disappointing 1987 result prompted both parties to vote for merger, though the process was acrimonious and protracted, largely as a result of David Owen’s determination to keep a continuing SDP in existence.Footnote 20
Many of those drawn to the Alliance hoped that it would fulfil Jo Grimond’s vision of a “realignment of the left,” supplanting the Labour Party as the main challenger to Conservative governments in Britain. Although the Alliance made some inroads into Labour’s working-class support in 1983, however, the vast majority of its twenty-three seats came in areas of traditional Liberal strength, such as rural Scotland and Wales and the West Country. Like the Liberals in 1974, the Alliance performed strongly in much of rural and suburban Britain—coming second in 262 out of 397 Conservative seats in 1983—but, with the Thatcher government riding high, Liberal and SDP candidates struggled to unseat Tory MPs. Sociologically, the Alliance had a strong appeal to middle-class university graduates, especially those with public-sector jobs, and Anthony Heath’s British Election Study team claimed to discern an ideological “heartland” among voters who were center-right on economic issues and progressive on social ones.Footnote 21 Much of this support was relatively shallow, however, as voters’ response to the merger process revealed. By the time Paddy Ashdown was elected leader of the Social and Liberal Democrats (SLD) in August 1988, the new party had fallen to about 10 per cent in the opinion polls. The nadir was reached a year later, in the aftermath of the June 1989 European elections, when the SLD took just 5.9 per cent of the vote and was beaten into fourth place by the Green Party. It was only in autumn 1989, after a serious financial crisis and a membership ballot, that the merged party became known as the Liberal Democrats.Footnote 22
The Alliance’s basic policy prospectus—Keynesian economic management, European Economic Community (EEC) membership, the defense of the mixed economy, and constitutional reform—was largely a product of social-democratic assumptions about the role of the state, as refracted through the “governability” debates of the 1970s.Footnote 23 Roy Jenkins gave this argument its canonical form in his November 1979 Dimbleby Lecture: relative economic decline could only be reversed through political reform and European-style social partnership. Within the Liberal Party, similar ideas could be traced back to the centrist-liberalism of David Lloyd George’s 1928 Yellow Book on Britain’s Industrial Future, which (as one activist later put it) had “confirmed the British Liberal Party as the most social democratic in Europe.”Footnote 24 During the early 1980s recession, leading SDP-supporting economists such as Richard Layard worked up detailed plans for reducing unemployment through targeted economic stimulus and job-creation schemes, while using an incomes policy to manage inflationary pressures.Footnote 25 The SDP’s economic credentials formed an important part of its appeal: indeed, research commissioned by the Conservatives found that unemployment was “the single issue which most potential Alliance voters think the Alliance would handle better” than the other parties.Footnote 26
As Thatcherism moved into a more confident phase after 1983, however, Jenkins’s Keynesian approach became increasingly vulnerable to caricature as the politics of a “better yesterday.”Footnote 27 Many Liberal activists were influenced by the environmental economics that E. F. Schumacher and Herman Daly had popularized in the 1970s, and were wary of the SDP’s industrial focus: indeed, the 1979 Liberal Assembly at Margate had passed a resolution declaring that “sustained economic growth as conventionally measured is neither achievable nor desirable.”Footnote 28 By contrast, David Owen embraced the rationalism of market economics, seeking to identify the SDP with the West German “social market” and with elements of John Rawls’s political philosophy.Footnote 29 All of these currents flowed in to the merged party. Although Owen and his closest allies opposed merger, the SDP MP Robert Maclennan attempted to win them over through a hard-edged “initial policy statement,” Voices and Choices for All, which (inter alia) proposed to extend Value Added Tax (VAT) to food, children’s clothing, and domestic fuel in order to help pay for an attack on poverty. The document had to be withdrawn after it sparked a revolt among Liberal MPs, and quickly became known as the “dead parrot” after the Monty Python sketch.Footnote 30
David Steel’s failure to foresee the problems with Voices and Choices for All helped to end any hopes he might have had of leading the SLD, and reinforced the desire for a leader with a stronger interest in policy. As Ashdown put it during the 1988 leadership election, it was “the leader’s job to introduce new ideas to the party” and to “push debates along” in the way that Grimond had done in the 1960s. Jeremy Thorpe and David Steel’s failure to do this meant that the Liberals were “still living off the intellectual capital of the Grimond years.”Footnote 31 Some observers doubted Ashdown’s ability to lead this kind of renewal. Andreas Gledhill of the Conservative Research Department (CRD), for instance, thought he had not “revealed much capacity to grasp the intricacies of practical policy issues” or “demonstrated any coherent political philosophy” since becoming MP for Yeovil in 1983. On this reading, the “only distinctive aspect of Mr Ashdown’s brand of liberalism” was “a determination to be seen at all costs as dynamic, radical, iconoclastic, and—in a general manner—opposed to the Establishment.”Footnote 32
Yet a study of Ashdown’s record does reveal some distinctive views, as both Gledhill’s CRD profile and Ashdown’s later autobiography show. As a former public schoolboy from a military family, Ashdown attributed his “left-of-centre political opinions” to a “deep dislike of the class system in Britain”: in particular, he contrasted the class divisions he saw in the Royal Navy with the more meritocratic and comradely culture he experienced in the Royal Marines’ Special Boat Section (SBS) during the 1960s.Footnote 33 Though he had once been a Labour supporter, Ashdown saw the party’s “dependency on the unions” as a barrier to social and economic modernization, and claimed to have felt “utterly betrayed” when Harold Wilson’s government dropped the In Place of Strife reforms in 1969.Footnote 34
After joining the Liberal Party in the 1970s, Ashdown built his political career on the party’s radical wing, opposing nuclear power and campaigning for the removal of Cruise missiles from the UK. He seems to have been impressed by green economics, since he backed the 1979 zero-growth resolution, and welcomed the prospect of moving away from a resource-intensive economic model “which destroyed our environment, diminished our people and consigned those in the Third World to permanent inferiority.”Footnote 35 Ashdown was also one of the first MPs to use a computer, and (as Gledhill put it) had “a Wellsian fascination with the liberating power of technology.”Footnote 36 This combination of environmentalism with techno-optimism made him an enthusiast for the idea of a “social wage” or universal basic income (UBI), and his own experience of unemployment in the early 1980s may have reinforced this. As he argued in the left-Liberal journal Liberator in 1984, the growth of mass unemployment was “not a temporary phenomenon,” and something like UBI was likely to be needed to redistribute wealth and maintain social cohesion in “the new low employment/high technology society.”Footnote 37
Although Ashdown had retreated from some of these positions—particularly on nuclear weapons—by the time of the 1988 leadership election, his thought retained a strong post-Fordist streak.Footnote 38 Where his rival Alan Beith presented liberalism largely in terms of a philosophical case for the primacy of freedom, Ashdown’s vision for the SLD was more sociologically grounded, in a way that mirrored much of Marxism Today’s analysis of “New Times.”Footnote 39 Drawing on the management theorist Charles Handy’s work, he believed the UK economy was undergoing “a fundamental shift … from a labour intensive manufacturing economy to an economy of high capital input, high skill and high added value,” which was likely to bring “massive growth in flexible and part-time employment and informal work” and to accelerate “a deep-seated shift in values.”Footnote 40 Ashdown repeatedly referenced survey research by the Taylor Nelson Monitor, which showed that “sustenance-driven” and “outer-directed” material goals were giving way to an “inner-directed” concern about “personal development” and quality of life issues, such as the environment.Footnote 41 Though Margaret Thatcher had “spotted” the growing desire for agency and “choice,” Ashdown argued, her government had satisfied it only in the economic sphere, and there mainly for a privileged “few.”Footnote 42 With both Labour and the Conservatives still largely materialist in outlook, this gave the new party a “crucial opportunity to ‘own’ the politics of the future.”Footnote 43
In setting out an agenda for the SLD (which he sought, at this stage, to call “the Democrats”) Ashdown combined this post-Fordist analysis with other ideas circulating within the party. In particular, he was aided by a working group chaired by David Marquand, which produced the January 1989 “themes and values” document Our Different Vision.Footnote 44 One central theme was investment, which set up a critique of the Thatcher government’s policy choices: instead of cutting income tax, as Nigel Lawson had done in his 1988 budget, the government should have invested in education, training, and research and development in order to help UK businesses and workers compete in the new economy.Footnote 45 A second theme was internationalism, as the thawing of the Cold War, the forthcoming European single market, and the need for collective responses to global problems pointed to “the end of the era of the nation state.”Footnote 46 Margaret Thatcher’s September 1988 Bruges speech, which signaled her growing Euroscepticism, made this particularly salient. Ashdown warned that opting out of European integration on the basis of “a nineteenth century illusion of national sovereignty” would be “a gross betrayal of Britain’s best interests.”Footnote 47
A third theme was the environment, where conversations with Jonathan Porritt of Friends of the Earth reinforced Ashdown’s belief that the Democrats could “capture the agenda as the Party serious about ‘Green Issues’.”Footnote 48 Finally, he took up the call for a new focus on citizenship that Richard Holme and David Marquand had developed in The People’s Kingdom (1987) and The Unprincipled Society (1988), and that would underpin the Charter 88 pressure group’s campaign for constitutional reform.Footnote 49 Taking his cue from the German sociologist Ralf Dahrendorf, however, Ashdown framed citizenship largely in terms of individual rights and “entitlements,” rather than duties and obligations.Footnote 50 Though he shared Marquand’s desire to strengthen the public realm after a decade of Thatcherism, he remained sensitive to Dahrendorf’s critique of the social-democratic state, and was keen to curtail bureaucratic power and “producer interests.”Footnote 51
Ashdown pulled these ideas together in his book Citizen’s Britain, which he began in early 1989 with the working title “New Directions for a New Age,” and which was published in the run-up to the September party conference.Footnote 52 After the European election debacle in June, the book became “part of a strategy for survival,” as Ashdown sought to prevent the SLD being “squeezed out by the Labour Party moving into the centre ground and by the Greens capturing the radical agenda from us.”Footnote 53 Colleagues and friends such as the sociologist and UBI campaigner Bill Jordan helped out with the drafting. In the final version, Ashdown contrasted two visions of Britain in 1999: “Citadel Britain,” where power and wealth were concentrated tightly in a few hands, and “Citizen’s Britain,” in which constitutional reform, legally entrenched rights, high-quality training, strong consumer protections, and a basic income ensured that power and wealth were widely dispersed.Footnote 54 The book was briefed to the press as containing “controversial proposals for competition in public services” that would “anger ex-Liberals,” but the gesture toward voucher systems was so carefully worded that it aroused little controversy.Footnote 55 As the Cambridge law lecturer (and future MP) David Howarth observed, Citizen’s Britain left the impression of “an energetic, slightly impatient man, bright rather than intellectual, eager for new ideas but not necessarily for the long lines of reasoning which might justify them.”Footnote 56
Two features of Ashdown’s political discourse are worth underlining at this point. First, although he was cautious about invoking “liberalism” for fear of upsetting social democrats, the imagined utopia of Citizen’s Britain was clearly based on liberal premises. Ashdown’s focus on citizens’ rights, the diffusion of power, and the limits of the state echoed arguments that Jo Grimond had been making since the 1950s, and overlapped with elements in New Right as well as New Left thinking.Footnote 57 Ashdown was also frank about his desire to “recaptur[e] the political ground of choice and individual liberty from Mrs Thatcher,” both for ideological reasons (since “choice was originally our territory”) and because the 1983 and 1987 elections seemed to have shown that it was popular with voters.Footnote 58 Ashdown’s enthusiasm for decentralization and choice pointed toward a “liberal market” economic policy, in which the state would act “as a regulator, enabler, and a sponsor of change” but largely avoid detailed planning.Footnote 59
Secondly, Ashdown’s post-Fordist analysis helped to justify his talk of replacing Labour as the main party of the center-left. Since Labour had more than two hundred MPs and the SLD just seventeen, this involved considerable chutzpah, especially as Neil Kinnock’s party rose and the SLD sank in the polls during 1989. Labour was also carrying out its own policy review, which jettisoned previous commitments to nationalization and unilateral nuclear disarmament and moved the party closer to the mainstream of European social democracy. As Colm Murphy has shown, however, Labour’s economic analysis remained strongly oriented toward manufacturing and a traditional conception of “full employment,” which Ashdown regarded as outdated.Footnote 60 Under Kinnock, the national minimum wage became a flagship Labour policy; by contrast, Ashdown feared it would exacerbate the UK’s unemployment problem.Footnote 61 Labour’s position on environmental issues, though moving in a green direction, was widely felt to be constrained by trade union interests, and much of the party was also hostile to constitutional reform.Footnote 62 Most provocatively, Kinnock’s deputy Roy Hattersley dismissed Charter 88 as a “charter of despair” and argued that a bill of rights was likely to entrench a narrow and negative conception of freedom.Footnote 63 These differences allowed Ashdown to portray Kinnock’s party as intellectual laggards and to claim that the SLD had a much clearer vision of what “modernization” required.
Political “Rebirth” and the Neoliberal Turn, 1988–91
When Citizen’s Britain appeared in September 1989, the Social and Liberal Democrats were polling between 4 and 8 per cent in the opinion polls.Footnote 64 The party’s staff had to be cut sharply to bring its finances under control, and Ashdown reluctantly accepted that he had got the name wrong: in October, the SLD finally became the Liberal Democrats. This period marked the beginning of what the young MP Matthew Taylor called a “rebirth” for the new party, though its poll ratings would remain lackluster for another year, until David Bellotti’s victory in the October 1990 Eastbourne by-election helped to set in train the series of events that led to Thatcher’s resignation.Footnote 65
One element of the Liberal Democrats’ “rebirth” related to political communications. As the advertiser Adrian Slade pointed out, every party was “judged by its Leader’s performance as seen and heard in the media,” so it was essential to “build up” Ashdown as a public figure and make “effective use of free TV and press coverage.”Footnote 66 With the help of the academic and speechwriter Max Atkinson, Ashdown became a confident media performer, and used policy interventions—such as a call for the government to give British subjects in Hong Kong the right of abode in the UK after the Tiananmen Square massacre—to help sharpen his profile. During the 1990–91 Gulf War, Ashdown became an almost ubiquitous presence on television: as George Parker of the Financial Times later noted, his “experience as a Marine who had actually done active service in Kuwait” gave him authority on the Gulf and burnished his action-man image.Footnote 67 By March 1991, 55 per cent of Gallup respondents thought he was doing a “good job” as Liberal Democrat leader.Footnote 68
Alongside Ashdown’s media work, a communications group chaired by Matthew Taylor overhauled the party’s visual identity, leading to the introduction of the “bird of liberty” logo.Footnote 69 The Liberal Democrats’ activist base also helped to see off the threat from the “continuing SDP” and the Greens: despite the problems of 1988–89, the party still had more than three thousand councillors and about eighty thousand members. National campaigns on health, food safety, and environmental protection under the slogan “People First” galvanized grassroots activity in 1989–90, and the Conservative government’s unpopular poll tax played into the Liberal Democrats’ hands. After three years of modest losses, the party began to make large council gains again in 1991, and the Eastbourne by-election was followed by further victories in Ribble Valley and Kincardine and Deeside, overseen by the party’s director of campaigns, Chris Rennard.Footnote 70
In the meantime, Ashdown and his advisors began to prepare for the next general election. Where the 1987 Alliance campaign had been cautious and bland, Ashdown argued that the first Liberal Democrat campaign would need to be “radical, fresh and risky: radical because that’s what Britain needed; fresh because we wouldn’t capture the public imagination unless we had new things to say; and risky because that’s what we had to be at 5 per cent in the polls.”Footnote 71 The decision to put the election campaign in the hands of the veteran activist Des Wilson, who had co-founded the homelessness charity Shelter in the 1960s, underlined Ashdown’s willingness to take risks in order to establish a distinct identity.Footnote 72 At the same time, the Liberal Democrats would also need a detailed manifesto in order to be taken seriously as a potential party of government. After all, Ashdown had made it clear during the leadership campaign that policy was central to his vision for the new party.
As the party’s first director of policy, Duncan Brack, later noted, the SDP had been a “magnet for policy intellectuals,” and “created a structure of rigorous, technocratic and detailed policy-making which was largely inherited by the Liberal Democrats.”Footnote 73 Ashdown decided to chair the party’s Federal Policy Committee (FPC) himself and made it “the engine room of policy development.”Footnote 74 The FPC had begun to set up working groups even before he became leader, and some of these laid down important policy foundations. For instance, groups chaired by the Scottish MPs Sir Russell Johnston and Robert Maclennan and the lawyer Tim Clement-Jones fleshed out the party’s vision for a federal EU and a new constitutional settlement, including an elected Senate, proportional representation for the House of Commons, devolved assemblies for Scotland, Wales, and the English regions, and the incorporation of the European Convention on Human Rights into British law.Footnote 75 John Macdonald QC drafted a written constitution for the UK which embodied these reforms, and some senior Liberal Democrats helped the recently launched Institute for Public Policy Research (IPPR) with a similar project.Footnote 76
Yet policymaking by committee also had disadvantages, as several Liberal Democrats would later point out.Footnote 77 Policy specialists were liable to push pet ideas, quarrel among themselves, protect the interests of their professions, or produce reports that were technically sophisticated but poorly suited to campaigning. Some of these problems became apparent in the party’s first working group on economic policy in 1988–89, which was chaired by the former Labour minister Dick Taverne. Its main expert, Richard Layard, was focused on developing Swedish-style active labor market policies and keen to frame the report around the idea of “personal fulfilment,” but it proved difficult to make this work as a unifying theme.Footnote 78 Taverne struggled to reconcile “grey” (industrial) and “green” (environmentalist) perspectives on economic growth, and the group also had “a major division of opinion … about employee representation on boards.”Footnote 79 Another working group, chaired by the veteran Liberal peer Nancy Seear, devised an ambitious plan for a “Citizen’s Income,” which chimed much more closely with Ashdown’s thinking. However, the weekly Citizen’s Income payments would initially be set well below subsistence level, and the complex tax and benefit changes involved meant that the report needed careful handling.Footnote 80
Given the wide range of economic views within the Liberal Democrats, it was not inevitable that the party would move in a free-market direction. The fact that it did so can largely be explained by three factors. One was Ashdown’s belief that the 1990s would be “the age of the individual” and that “collectivist, corporatist structures”—such as incomes policies and co-partnership schemes—were out-of-date in a post-Fordist era.Footnote 81 A second factor was pressure from the press, as journalists such as Andreas Whittam Smith of The Independent (who had supported David Owen’s “social market” ideas) encouraged Ashdown to lead the party in this direction.Footnote 82 A third was the growing prestige of mainstream neoclassical economics in Britain during the 1980s. As scholars such as Jackson and Mudge have noted, this played an important role in the wider ascendancy of neoliberalism.Footnote 83
Many economists and recent economics graduates had been drawn to the SDP-Liberal Alliance, and some of them remained active in the Liberal Democrats. Their impact is perhaps best illustrated by a working group report on Energy and the Living World (1990), which developed a market-based approach to reducing carbon emissions under the guidance of Matthew Bishop—an economist and former Liberal activist, then working at London Business School, who would later become New York bureau chief for The Economist.Footnote 84 One older Liberal, Alan Sherwell, thought Bishop “seemed to have an obsessive attachment to the market,” but his focus on taxes and emissions trading fitted well with Ashdown’s desire to transcend the “‘growth’ or ‘no growth’” debate through a “synthesis” based on “low resource use.”Footnote 85 By the time of the 1992 election, the Liberal Democrats were committed to introducing a carbon tax—ideally on a European level—and using some of the revenues to reduce other taxes, in line with “double dividend” arguments for environmental taxation.Footnote 86
Economic policy was highly salient during the 1987 Parliament, as the “Lawson boom” gave way to the early 1990s recession. The former SDP MP Ian Wrigglesworth pressed Ashdown to build up the new party’s economic credibility, and budget statements and other economic events offered frequent opportunities to secure media coverage.Footnote 87 In three key policy areas, Ashdown and his Treasury spokesman Alan Beith drove Liberal Democrat policy forward themselves, with advice from party members such as the Guardian journalist Chris Huhne and support from Beith’s researcher Ed Davey. First, in macroeconomic policy, they committed the party to British membership of the ERM, partly on pro-European grounds—as a step toward a single currency—but also as a way of reducing transaction costs and establishing a credible anti-inflationary anchor.Footnote 88 As the economy overheated and Tory divisions over Europe came out into the open in 1989–90, this became increasingly attractive. With interest rates at almost 15 per cent, Ashdown and Beith also urged ministers to tighten fiscal policy so that they could bring interest rates down and ease pressure on mortgage-holders and other borrowers.Footnote 89 After the UK entered the ERM in October 1990, Beith shifted his focus to the case for central bank independence, which had been “proven to work in controlling inflation” in West Germany and the United States.Footnote 90 By preventing ministers from changing interest rates for “short-term” political reasons, an independent Bank of England would help to reduce the risk premium that the UK government and other borrowers faced in financial markets.Footnote 91
Secondly, Ashdown used his September 1990 party conference speech to launch out in a pro-competition direction. He argued that the Thatcher government’s commitment to free-market reforms was lopsided: though Thatcher had (rightly) restricted trade union power, she had “given free rein to the other, equally powerful, corporate interests of monopoly industry and the giant financial institutions.” Ashdown floated the idea of breaking up “megalithic” privatized utilities such as British Telecom and the electricity firms, and also suggested that private operators should be allowed to compete with British Rail.Footnote 92 This line of argument was not wholly new, since Liberal MPs had frequently accused the Thatcher government of creating private monopolies (for instance, during the privatization of British Gas).Footnote 93 Ashdown’s more provocative tone, however, suggested that he wanted to shift the party’s economic stance “deliberately quite strongly to the right” in order to challenge the Conservatives on their own ground.Footnote 94 After the 1990 conference, Ashdown and Beith began a charm offensive with business and think-tanks such as the IEA in an attempt to strengthen the Liberal Democrats’ credentials as “a non-Conservative party of free enterprise.”Footnote 95
Thirdly, Ashdown placed a strong emphasis on education and training. Many Liberal Democrats valued education for its own sake, as a way of helping citizens fulfil their potential: if the National Health Service was “a Labour issue” (as Ashdown saw it) then education could be seen as a liberal one.Footnote 96 At the same time, “investment” in “human capital” was central to Paul Romer’s emerging work on endogenous growth theory, and could help to ease supply constraints in the UK economy.Footnote 97 In spring 1991, Ashdown began to float the idea that the Liberal Democrats might put 1p on the standard rate of income tax in order to invest an extra £2 billion a year in education, and Matthew Taylor helped to firm this up into a flagship policy commitment.Footnote 98 Like the Citizen’s Income, this provided a sharp point of differentiation with the Conservative government and helped to “flank” the Liberal Democrats’ embrace of market economics. It also reinforced the party’s forward-looking messaging and allowed Ashdown to suggest that Labour was still lagging behind.
Economics for the Future
The publication of Economics for the Future in September 1991 completed the Liberal Democrats’ early 1990s policy “matrix.”Footnote 99 This report was the work of a new Economic Policy Working Group, chaired by David Howarth, which sought to devise a more coherent and ambitious policy framework than Dick Taverne’s group had done. Howarth and his colleagues quickly agreed—in Vince Cable’s words—to “strive for a ‘liberal’, open, market economy tempered by compassion in the area of social policy,” on the grounds that markets decentralized power and were “generally better than command structures at collecting and processing information.”Footnote 100 On this analysis, the government’s role was to provide a stable and predictable environment for economic activity, “to remove the supply-side obstacles … to long-term success,” and to deal with market failures (for instance, in the environmental sphere), preferably through “near-market” solutions.Footnote 101 Perhaps more strikingly, Howarth also argued that liberals should seek to constitutionalize economic management so that it was based on rules rather than discretion. Simple, publicly announced rules would make policy “clearer, more predictable and therefore more credible,” increase “the political cost of reneging” on stated plans, and encourage individuals and firms “to act as if the government policy will work, rather than insuring themselves against the possibility that the policy will change.”Footnote 102
In many ways, Economics for the Future echoed the ordoliberalism of Walter Eucken and the Freiburg School, which had influenced West Germany’s post-war “social market economy.” In contrast to many classical liberals, ordoliberals emphasized the need for an “economic constitution” to provide a stable framework for the market order, and argued that governments should play an active role in fostering competition (for instance, through antitrust policies); at the same time, they doubted the wisdom of Keynesian efforts to “manage” the economy. As Tim Krieger and Daniel Nientiedt have shown, ordoliberalism enjoyed a modest academic “renaissance” in West Germany during the 1970s and 1980s in response to the perceived crisis of Keynesianism.Footnote 103 Perhaps more importantly, it was associated with the Free Democratic Party (FDP), whose pivotal role in coalition governments under Hans-Dietrich Genscher had enhanced its prestige among British Liberals.Footnote 104 Howarth’s enthusiasm for constitutionalism also drew on public choice theory, which he had encountered as a graduate student at Yale.Footnote 105 The macroeconomic analysis was based on a New Keynesian framework that James Meade and Martin Weale had developed in Cambridge during the 1980s, which recommended using tax policy and interest rates to “steer both Money GDP and national wealth to target values” while relying on labor-market reforms to bring unemployment down.Footnote 106 The target path for nominal GDP would serve to control inflation (in a way that focused attention on the “demand-pull” rather than the “cost-push” element in wage-setting), while the wealth target would help to prevent government from running a “lax fiscal policy” and boosting consumption at the expense of capital.Footnote 107
Meade and Weale had both been SDP members, and although Weale was somewhat wary of the merged party, he agreed to help Howarth’s working group.Footnote 108 Weale and Howarth argued that a wealth target based on the savings ratio was superior to a conventional budget target (such as the Public Sector Borrowing Requirement) for two main reasons: it related to the economy as a whole, not just the public finances, and it was more likely to be counter-cyclical. In the context of the late 1980s consumer boom, a savings target would have triggered tax rises so that the fall in the private-sector savings ratio was offset by a budget surplus, taming the boom and reducing the government’s reliance on interest rates to deal with inflationary pressures.Footnote 109 Unlike in strong forms of ordoliberal theory, the policy rules were not intended to be legally binding, and the group felt that fiscal policy might sometimes need to be used to keep the nominal GDP target on track; indeed, Meade was adamant that fiscal and monetary policy needed to be “planned jointly.”Footnote 110 The group’s framework thus stopped short of the mid-1990s “consensus assignment,” in which inflation control was regarded as solely a matter for monetary policy.Footnote 111
Ashdown was delighted by Economics for the Future, but some other senior Liberal Democrats were less convinced. The former SDP member Roger Liddle, then working with Taverne at the Prima Europe consultancy firm, found the report’s conclusions “frankly too right-wing in tone” and felt that it seemed “fanatically determined to impose on economic policy ‘the government of laws, not men’”: “[i]t would make the Liberal Democrats a Party that preferred Montagu Norman [the interwar governor of the Bank of England] to Maynard Keynes.”Footnote 112 The economist and Guildford candidate Margaret Sharp, though a member of Howarth’s group, was similarly wary, warning that “a rule based system … merely incorporates the fashionable theories of the moment” and that putting interest rates “into the hands of an independent City person (probably gent!)” could have a disastrous effect on the real economy. For Sharp, the Thatcher government’s pursuit of monetary targets in the early 1980s served as a cautionary tale.Footnote 113
David Marquand also protested against the Liberal Democrats’ turn toward market economics in correspondence with Ashdown and his advisor Richard Holme. As Ben Jackson and Nick Garland have recently shown, Marquand had moved away from earlier concerns about public-sector “overload” during the 1980s and become a trenchant critic of liberal individualism, which he saw as a persistent weakness in British culture.Footnote 114 Echoing emerging academic work on “varieties of capitalism,” Marquand insisted that West Germany and Japan—“[t]he most successful economies in the world”—were “not market economies” in the Thatcherite sense. Instead, he argued:
Their success comes from an intricate inter-weaving of public and private powers, underpinned by a network of co-operative practices of the kind you condemn as “corporatist,” though apparently without knowing what the word means.Footnote 115
Marquand argued that the “eighties rhetoric of ‘choice’, ‘market’ and ‘enterprise’” was increasingly “out of date” in the “collectivist nineties.”Footnote 116 Ashdown, by contrast, thought the post-Fordist turn toward individualism was still playing out, and saw corporatism in terms of interest-group politics and private influence over the state. (Jo Grimond was blunter still, complaining that corporatism had “spread wide and deep” during the Thatcher years and calling it “a polite word for fascism.”Footnote 117)
Despite these criticisms, Economics for the Future was approved “overwhelmingly” at the September 1991 Liberal Democrat conference.Footnote 118 Delegates had little appetite for a pre-election row, and though the rule-based framework sounded tough, it left room for the Liberal Democrats to advocate a fiscal stimulus (focused, inevitably, on investment and training) to help lift Britain out of the early 1990s recession.Footnote 119 As Ed Davey subsequently noted, “the recovery package and the 1p on income tax for education” became the party’s highest-profile policies in the 1992 election campaign.Footnote 120 Both were relatively easy for voters to understand, providing a concrete answer to the perennial question of what the Liberal Democrats stood for. Indeed, candidates reported that the commitment to education spending was by far the most popular Liberal Democrat policy.Footnote 121
Ashdown, Holme, and Brack summed up their policy synthesis in the “five Es”: “Economic, educational, and environmental policies” were “the building blocks of our future,” and “European union and electoral and constitutional reform the essential foundations upon which they must be built.”Footnote 122 This was an ambitious vision of Britain as a fully committed EU member state, with a written constitution and depoliticized economic governance, embracing the transition to a flexible, knowledge-based, post-industrial economy. Whether it amounted to a coherent agenda for government was more debatable. The City economist Bill Martin of UBS Phillips and Drew was impressed, writing that the Liberal Democrat economic program was “easily the most logically argued and the most sensibly radical” of the three main parties, and The Guardian also praised the 1992 manifesto, declaring that it “far out-distance[d] its competitors with a fizz of ideas and an absence of fudge.”Footnote 123 The Financial Times reporter Ralph Atkins was less convinced. Far from constructing a “cohesive ideology,” Atkins thought the Liberal Democrats had simply strung together an “assortment” of “bright wheezes” that mirrored “Mr Ashdown’s impulsive and sometimes contradictory political convictions.”Footnote 124
“The Gathering Point for Opposition Forces,” 1992–94
The 1992 election was a qualified success for the Liberal Democrats. The Independent thought Ashdown’s party were the “clear winners” of the campaign, standing out for their “positiveness” and “seriousness,” and Ashdown felt he had made “significant progress” in “sharpening our policy identity.”Footnote 125 On the other hand, the party’s haul of twenty seats—two down from the Alliance in 1987—was disappointing. Ashdown’s talk of demanding proportional representation in a hung parliament was widely felt to have backfired, and some candidates and activists believed that fear of Labour’s tax plans had pushed floating voters back to the Tories.Footnote 126 Labour’s fourth consecutive defeat created the opportunity that Ashdown had hoped for to pursue realignment, but the academic-turned-journalist Andrew Adonis (who was then a Liberal Democrat) warned him that the situation was more complex than it seemed.Footnote 127 Although the election result had “confirmed Labour’s unelectability,” Adonis argued, it also suggested that “we too are unelectable until middle England ceases to be terrified of a Labour-led government.”Footnote 128
Ashdown signaled his desire for Lib-Lab cooperation in his May 1992 Chard speech, offering “to work with others to assemble the ideas around which a non-socialist alternative to the Conservatives can be constructed,” and this realignment “project” increasingly came to define his leadership.Footnote 129 This inevitably raised the question of how far the Liberal Democrats could retain policy distinctiveness. Ashdown thought Labour was likely “to move lock, stock and barrel on to our policy ground, especially in economic and constitutional terms,” but he doubted whether they would “make a complete or convincing transition.” Instead, he thought, Labour would “remain, at core, a Party too tied to the producer interest to be able to respond to the new agenda of individualism which is emerging.”Footnote 130
Ashdown’s hopes of providing “the gathering point for opposition forces” implied a less “exclusive” approach to policy than hitherto.Footnote 131 Although John Smith invited the Liberal Democrats to contribute to Labour’s Commission on Social Justice and made a significant step toward the party’s position on constitutional reform, however, it quickly became clear that he was “not interested” in a broader policy “dialogue.”Footnote 132 In any case, Ashdown recognized that the Liberal Democrats would still need to maintain their own identity. He thus put Matthew Taylor in charge of the Campaigns and Communications Committee and tasked him with working up a plan to make “opportunity” the Liberal Democrats’ “core message,” which was eventually rolled out in 1993–94.Footnote 133 The party also simplified its policymaking process and sought to integrate it more closely with “campaigning priorities.”Footnote 134
As the Major government’s popular support collapsed after “Black Wednesday” (when sterling was forced out of the ERM) and the tax-raising March 1993 budget, the Liberal Democrats enjoyed a golden period. Between May 1993 and June 1994 Ashdown’s party took three seats from the Conservatives in by-elections—at Newbury, Christchurch, and Eastleigh—and was consistently above 20 per cent in the polls. Ashdown’s decision to help John Major get the Maastricht Treaty legislation through the House of Commons burnished his pro-European credentials and contrasted with Labour’s more tactical approach to the issue. His second book, Beyond Westminster (1994), was based on a series of visits to local communities, through which he sought to understand the “profoundly depressed and bewildered state” of Britain and the “growing gap between government and the governed.”Footnote 135 The book also recorded a visit to British troops in Bosnia, and the pursuit of an effective solution to the conflict there became a major preoccupation for Ashdown during the mid-1990s.Footnote 136
Local election results suggested that the Liberal Democrats were well placed to make gains from the Tories in what Ashdown called the “golden box,” from Land’s End up to the edge of Bristol and across to Surrey and East Sussex—mostly rural and suburban parts of southern England where Labour had only a limited presence. During 1994 the party began to put in place a well-funded target seats operation under Chris Rennard.Footnote 137 The Conservatives recognized their vulnerability, particularly in the West Country, but struggled to launch an effective counter-attack.Footnote 138 The Tory researcher Julian Lewis thought the “growth in support for the Liberal Democrats ha[d] nothing to do with their policies,” and was better seen as “a ‘double dustbin’ vote” by people disillusioned with the two main parties.Footnote 139
Internally, however, Ashdown faced growing dissent, both over his talk of Lib-Lab cooperation and over policy. The September 1992 conference defeated a proposal for part-privatization of the railways and only narrowly approved a consultation paper setting out a “new agenda”: as the veteran Liberal activist Tony Greaves put it, the party seemed to have “lost the eggshell timidity and platform regimentation of the first few years.”Footnote 140 In 1994, a disastrous conference in Brighton was dominated by debates over drugs policy and the future of the monarchy (the latter featuring an impassioned republican speech by the future Conservative prime minister Liz Truss), and representatives defied the leadership by voting (with Shirley Williams) in favor of a regionally varied minimum wage.Footnote 141 Frustration at Ashdown’s enthusiasm for market economics became a recurrent theme, though it did not imply any serious threat to his leadership.
Ashdown continued to urge ministers to “depoliticize macro-economic policy” during the 1992 Parliament. In a speech to the American Chamber of Commerce in London, for instance, he argued that politicians “should kick the habit” of trying to stimulate growth through demand-side measures, and focus instead on supply-side reforms:
I will not seek to emulate Francis Fukuyama by claiming that the “end of history” is being followed by the “end of economics.” But the truth is, and we should admit it, that politicians have far less power over the macro-economy than they like to believe.Footnote 142
Some of the proposals in Economics for the Future, however, became increasingly difficult to sustain as time went on. After Black Wednesday, for instance, ERM membership could no longer be a cornerstone of Liberal Democrat policy, and the case for a European single currency became more difficult to argue.Footnote 143 Although Vince Cable led new work on environmental tax reform, the party became more cautious about campaigning for a green tax shift, especially after opposing Norman Lamont’s 1993 decision to extend VAT to domestic fuel and power.Footnote 144 The Citizen’s Income was dropped entirely, after a new working group realized that raising it toward subsistence level would be extremely costly and “would pre-empt other spending increases that we might want to adopt in fields such as education.”Footnote 145 In its place, Ashdown began to talk about “employability” and targeted wage supplements like working tax credits, which implied a turn toward active labor-market policies.Footnote 146 Later, in 1995, the savings target and the nominal GDP target were also abandoned. Liberal Democrat activists working in the City of London argued that the allocation of savings was more important than the aggregate level, and that running a budget surplus just to meet a savings target “would be hard to justify to the electorate,” and the new Treasury spokesman Malcolm Bruce agreed.Footnote 147 Instead, the party adopted a more conventional “golden rule”—pledging to borrow only for capital investment over the economic cycle—alongside a straightforward inflation target.Footnote 148
Despite these setbacks, Ashdown was still keen to develop new ideas and to strengthen the party’s economic profile. As a counterpart to Labour’s Commission on Social Justice, he persuaded Ralf Dahrendorf to lead a Commission on Wealth Creation and Social Cohesion, with Marquand, Will Hutton, the Labour MP Frank Field, and the economist Andrew Sentance among its members. He was impressed by Dahrendorf’s warning that technological change was starting to break up the middle class, and also by Hutton’s book The State We’re In (1995); indeed, he had already told the 1994 Confederation of British Industry conference that he wanted to create a “stakeholder society.”Footnote 149 The Dahrendorf Commission’s 1995 report echoed much of Hutton’s analysis, highlighting the “social and economic cost” of the US liberal-market model and setting out a range of measures to promote long-termism and higher investment.Footnote 150 Talk of “stakeholding” could be seen as a partial retreat from the neoliberal optimism of the late 1980s and early 1990s. By this point, however, the political landscape had been transformed by John Smith’s death and the creation of “New Labour.”
The Liberal Democrats and New Labour, 1994–99
From 1988 onward, Paddy Ashdown’s political strategy had been built around the attempt to articulate a distinctive vision for post-Thatcherite Britain, rooted in liberal ideas and values. This was difficult enough in the run-up to the 1992 election, as other parties echoed Ashdown’s emphasis on citizenship and the environment, and as Neil Kinnock began to engage with the debate over constitutional reform. It became almost impossible after Tony Blair became Labour leader, as Ashdown lamented to Richard Holme in August 1994:
I have been building the Party to fill a certain gap in politics, which I know is there and which would give us real electoral appeal. But then along comes Blair with all the power of Labour behind him, and fills exactly the space I have been aiming at for the last seven years!Footnote 151
John Smith had seen the Liberal Democrats as an individualist, middle-class party, “less interested in collective solutions” than Labour, and regarded Ashdown’s opposition to a minimum wage as “disgraceful.”Footnote 152 By contrast, Blair had put out feelers to Ashdown even before Smith’s death, and the two men began a series of informal meetings to discuss the scope for cooperation.Footnote 153 Ashdown thought he and Blair agreed on “almost everything,” with the notable exception of proportional representation.Footnote 154 One senior Liberal Democrat who heard Blair speak at a Guardian/Fabian Society conference in June 1994 thought he gave “the best statement of the Liberal Democrat core message I have ever heard.”Footnote 155
The policy convergence that emerged in 1994–95 went beyond Blair’s move to revise Clause IV, which had been a firm ideological dividing line between the Labour Party and British Liberals since the First World War: it also extended to much of New Labour’s economic analysis. As Margaret Sharp noted, both parties now talked about “working with the grain of the market” while recognizing that markets “should not always rule supreme,” constructing a stable macroeconomic framework based on New Keynesian theory, and investing in education and infrastructure. This made it difficult for Liberal Democrats to explain their own policies without sounding “just like Tony Blair.”Footnote 156 At one point in 1996, Gordon Brown apparently told Ashdown that he had drawn ideas directly from the Liberal Democrats:
I reviewed the situation after 1992 and discovered that you lot were right. In all the economic policies you’ve been trying to pursue, especially competition, and enterprise and equality of opportunity, you have been leading the agenda… I have decided that what we have to do is basically adopt the classic Liberal agenda, in favour of competition, in favour of enterprise and centred around equality of opportunity.Footnote 157
Of course, these comments should be treated with caution, since Brown clearly had an interest in laying the groundwork for Lib-Lab cooperation in the event of a potential hung parliament.Footnote 158 Labour’s Shadow Treasury team was doing its own work on issues like tax credits, welfare-to-work schemes, and central bank independence: indeed, Ed Balls had already published pamphlets on some of these topics, and had direct links with New Keynesian economists such as Lawrence Katz and Larry Summers at Harvard.Footnote 159 Nevertheless, it is also true that Ashdown and Beith had been ahead of Blair and Brown in making what we would now see as characteristically New Labour arguments.
Blair’s rise ended Ashdown’s hopes of making the Liberal Democrats the fulcrum of realignment. Labour jumped ten points in the opinion polls between May and October 1994, largely at the Liberal Democrats’ expense, and several former SDP activists—such as Roger Liddle, Andrew Adonis, and David Marquand—defected to Blair’s camp over the next two years. Richard Layard also resurfaced as a Labour advisor. Roy Jenkins, Shirley Williams, and Bill Rodgers remained on the Liberal Democrat benches in the Lords, but pressed Ashdown to abandon “equidistance”—as he did in May 1995—and make it clear that he would support a Labour-led government.Footnote 160 As the Guardian journalist Hugo Young pointed out to Ashdown, the new political context meant that “the old LD role as a party of ideas seemed to be waning.”Footnote 161 With Labour moving into the Liberal Democrats’ economic terrain, Ashdown became ever-more reliant on Europe, proportional representation, and “honesty” about the need for tax rises as points of differentiation.Footnote 162 At the same time, polling of “target voters in target seats” prompted the Liberal Democrats to place more emphasis on crime and health, which had not featured prominently in Ashdown’s early 1990s agenda.Footnote 163
The result of all this is well known. Although the Liberal Democrats’ vote fell slightly (to 16.8 per cent) in the 1997 election, the Tory collapse allowed the party to win forty-six seats, as Blair swept to power in a landslide. Labour’s tally of 13.5 million votes—two million higher than in 1992—included about 1.5 million people who had supported the Liberal Democrats in the previous election.Footnote 164 A tacit non-aggression pact helped to keep the campaign focused on the Conservative government’s failings, and political scientists found that both Labour and the Liberal Democrats benefited from increased tactical voting.Footnote 165 As Glen O’Hara has noted, this “turned a very large [Labour] victory into a rout.”Footnote 166
Yet that was not quite the end of the story. Despite Labour’s huge majority, Ashdown continued to press Blair for a coalition as a way of consolidating a Lib-Lab alliance and securing a referendum on proportional representation for Westminster. As he put it in his memoirs, Ashdown believed the Liberal Democrats had a rare opportunity to “initiate a process of deep constitutional reform and realign the Centre Left around a broadly liberal agenda.”Footnote 167 He had always wanted to avoid oppositional populism, and found it hard not to sympathize with the governing challenges that Blair and Brown faced.Footnote 168 In his most optimistic moments, he thought cooperation with New Labour could be seen as “a sort of reverse takeover process.” In a January 1998 “position paper,” for instance, he argued that “The project before us is the wholesale modernization of our country, along the lines we have always proposed and in which our ideas, policies and language are now dominant.”Footnote 169
The Joint Consultative Committee set up in July 1997 to help implement the Cook-Maclennan agreement on constitutional reform was the most tangible fruit of Ashdown’s efforts. Right up to autumn 1998, however, he continued to discuss the prospect of Cabinet posts with Blair, in the belief that the Liberal Democrats should be “active participants in change” rather than mere “bystanders.”Footnote 170 Some liberal thinkers, such as Ralf Dahrendorf, thought that “go[ing] in with Blair” was logical, but many MPs and activists disagreed.Footnote 171 David Howarth, for instance, led efforts to rule out a coalition, and warned that Ashdown’s secretive negotiations were destroying trust within the party.Footnote 172
Ashdown’s maneuvering led to bitter rows at Liberal Democrat committee meetings; more positively, it also sparked a lively debate about New Labour’s relationship with the British Liberal tradition. During 1998, this came to revolve around Anthony Giddens’s analysis of The Third Way (1998), which Blair took up in a Fabian Society pamphlet.Footnote 173 Jo Grimond had talked of “a third way” in his foreword to Citizens’ Britain, and though Ashdown himself had rarely used the phrase, it clearly chimed with his efforts to transcend the left-right divide by combining market economics with progressive liberal goals.Footnote 174 The party’s mid-1998 policy review document, Moving Ahead, made this point explicitly:
Those who talk of the development of a “Third Way” in British politics should realise that this already exists. It’s called modern liberalism and is represented in Parliament by the Liberal Democrats.Footnote 175
In so far as the “third way” involved “the left coming to terms with international liberal capitalism” while “creat[ing] space for redistribution and greater public service provision,” there was something to be said for this view, as Vince Cable noted.Footnote 176 Many Liberal Democrats, however, were more impressed by the differences. Dahrendorf, for instance, thought the idea of a single third way was dangerously Hegelian, and pointed out that Giddens and Blair hardly talked about liberty (or, indeed, representative democracy).Footnote 177 To the historian and Liberal Democrat peer Conrad Russell, Giddens’s mantra of “no rights without responsibilities” seemed especially illiberal, and Blair’s welfare-to-work and law-and-order policies revealed an underlying authoritarianism.Footnote 178 Other Liberal Democrat thinkers reached back to T. H. Green and the Edwardian “New Liberals,” arguing that a truly progressive government would fight inequality and defend the public-service ethos in the face of marketization.Footnote 179
For a decade, Ashdown had led Liberal Democrat policymaking from the front; now, as a broader ideological debate opened up within the party, he had little new to say. Moving Ahead was themed around the concept of the “Powerful Citizen,” but The Observer thought the policy review was “thin gruel,” and its flagship proposal to let community groups form Neighbourhood Schools Trusts was voted down by the September 1998 party conference.Footnote 180 Liberal Democrat critics thought (rightly) that Ashdown was trying to narrow the party’s differences with Labour, but Blair’s advisors were also unimpressed. Andrew Adonis, for instance, thought New Labour had overtaken the Liberal Democrats on public service reform, and that Blair “no longer need[ed] them much for their ideas or people.”Footnote 181 Even if Blair had been able to deliver a referendum on proportional representation, it was hard to see what the Liberal Democrats would achieve by joining the Labour government. To many activists, such as Tony Greaves, New Labour seemed to be “centralist and undemocratic control freaks, conservative on the economy, right-wing and illiberal on social policies.”Footnote 182 From this perspective, the Liberal Democrats’ choice lay between “blundering right with Blair” and “standing firm—in traditional spectral terms on the centre-left—with our own radical Liberal philosophy.”Footnote 183
Conclusion
When Paddy Ashdown resigned as Liberal Democrat leader in 1999, assessments focused largely on his success in leading the party back from the brink of oblivion in 1988–89 and his failure to achieve a structural “realignment.” When he published his diaries, the editor left out most of the passages on Liberal Democrat policymaking in favor of material that was more likely to interest “a wider circle.”Footnote 184 Yet Ashdown’s intellectual impact on his party was more significant than any British Liberal or Liberal Democrat leader since Jo Grimond. Between 1988 and 1992, he lifted Liberals’ vision of a modernized and Europeanized political system off the Keynesian political economy on which it had rested since the 1960s and linked it firmly to a belief in markets, globalization, and depoliticization. The institutionalist economics of the Yellow Book and the early SDP-Liberal Alliance—of public corporations, industrial democracy, and incomes policies—disappeared almost entirely. Ashdown also integrated the green economics of the 1970s and 1980s Liberal left into a market-based synthesis, while curbing its heterodox tendencies. Small might be beautiful, but the transition to a sustainable economy was best achieved through international cooperation and the intelligent use of market mechanisms.
The Liberal Democrats’ neoliberal turn both reflected and reinforced wider trends in UK political economy. As Duncan Brack put it, Liberal Democrat policymaking in the early 1990s was partly an exercise in “stay[ing] at the forward edge of current thinking.”Footnote 185 There was clearly an element of accommodation with the legacy of the Thatcher years, as Ashdown and his colleagues responded to the prevailing view that the government’s supply-side reforms had worked and that “competition” and “choice” were what middle-class voters wanted. The intellectual self-confidence of market economists—and their supporters in the press—reinforced this tendency. At the same time, however, Ashdown’s policy agenda also had other roots, not only in older Liberal thinking about the market, but also in New Left-inflected ideas about post-materialism and post-Fordism.Footnote 186 The fact that an independent central bank and a tough competition policy could be presented as steps toward West German practice was important in a pro-European party; so, too, was the way these neoliberal or ordoliberal policies could be used to critique the Conservative government’s record. Ashdown’s background on the Liberal left meant that few activists saw him as a closet Thatcherite. As The Economist noted in 1991, “Ordinary party members will take things from him for which they would have lynched David Owen.”Footnote 187
Ashdown’s influence on New Labour is more difficult to assess. His analysis of what “modernization” required certainly had much in common with Blair’s: as Ashdown put it after meeting Blair for dinner in December 1993, the two men had “come to the same analysis from different directions.”Footnote 188 Rhetorical triangulation came naturally to a third-party leader, and Liberal Democrat policies provided proof of concept for what a “third way” policy synthesis might look like: if, as Colm Murphy has put it, “New Labour’s leaders deliberately constructed and then performatively occupied a political ‘centre’,” then it is tempting to suggest that Blair and Brown moved onto ground that Ashdown was already cultivating.Footnote 189 In the political context of the mid-1990s, policy convergence with the Liberal Democrats helped Blair to rebut accusations that Labour was still old-fashioned, to create a “two-against-one” dynamic in the 1997 campaign, and to ensure that Ashdown did not reinforce Tory attacks on Labour’s economic credentials.Footnote 190 Nevertheless, any claims about Ashdown’s impact must be carefully qualified. New Labour had no shortage of political models—most obviously, Bill Clinton in the United States and Bob Hawke and Paul Keating’s governments in Australia—and the evidence of direct engagement with Liberal Democrat policy appears to be relatively slight.Footnote 191 Many of Ashdown’s flagship ideas also had other proponents. The case for Bank of England independence, for instance, had been set out by Nigel Lawson in his 1989 resignation speech and was widely canvassed by politicians and journalists during the 1992 Parliament.Footnote 192
As David Geiringer and Helen McCarthy have noted, “contemporary understandings” of globalization and technological innovation in the 1990s “frequently overstated the pace and potential of change.”Footnote 193 This was as true of Ashdown as it was of Blair, though his enthusiasm for these shifts—and desire to shape the form they took—should not be confused with a naïve determinism. The Liberal Democrats’ policy program also had other limitations. As Will Hutton pointed out, the “not quite Keynesian, not quite Lawsonian approach to policy” set out in Economics for the Future rested on an “implicit assumption that markets can be expected to work efficiently if only savings are stable and growing.”Footnote 194 Whatever the theoretical merits of savings targets and nominal GDP targets, they were not especially simple policy rules, and the party’s enthusiasm for central bank independence sat uncomfortably with Meade and Weale’s belief in fiscal-monetary coordination. If the Liberal Democrats were bolder than New Labour in some areas—such as Europe, the environment, and the politics of rights—this also made them more vulnerable to attacks from the right-wing press. Labour’s historic working-class base meant that it was better placed to overcome David Marquand’s “progressive dilemma,” tapping into liberal ideas while remaining sensitive to laborist and socially conservative strands in public opinion. At the same time, Labour was also somewhat more forthright (though still often cautious) about integrating feminism and multiculturalism into its policy agenda.Footnote 195
In their optimism about European integration, liberal institutions, and the ultimate trajectory of social change, the Liberal Democrats have remained a party of what Chris Bickerton has called “Europe’s long 1989.”Footnote 196 Yet Ashdown’s legacy was also ambiguous, as the disputes that broke out after 1997 showed. Within the party, the market turn of the early 1990s was driven through from the top and never fully consolidated: indeed, one future leader thought it was a “bit dodgy.”Footnote 197 Labour’s move into “third way” policy terrain made it difficult to present progressive neoliberalism as a distinctively Liberal Democrat intellectual project. Many of Ashdown’s colleagues—including his successor Charles Kennedy—were more comfortable with the Croslandite tradition of tax-and-spend social democracy than he had been, and recoiled from Blair’s enthusiasm for market-based public-sector reforms.Footnote 198 Ashdown’s support for the 2003 Iraq War further underlined his differences with much of the party.Footnote 199
Even so, Ashdown’s leadership remained a touchstone for many Liberal Democrats, especially on the party’s center-right. MPs and activists who despaired of Kennedy’s laid-back style drew unfavorable comparisons with Ashdown’s energy and drive, and Paul Marshall and David Laws’s controversial essay collection The Orange Book (2004) restated the case for “economic liberalism” in provocative terms.Footnote 200 Ashdown handed on his Yeovil seat to Laws, and subsequently became Nick Clegg’s most important supporter and patron. What followed was, of course, replete with ironies. By the time the long-awaited hung parliament finally came in 2010, the financial crisis had severely damaged the post-Thatcherite economic model on which third-way politics was premised, and the parliamentary arithmetic dashed Ashdown’s hopes of a “progressive alliance” with Labour. Instead, his protégés led the Liberal Democrats into coalition with David Cameron’s Conservatives.
Peter Sloman is Professor of British Politics at the University of Cambridge.
I am grateful to David Howarth and the journal’s editors and reviewers for extremely helpful comments on previous versions of this article, to Nick White at the LSE Archives for helping me to access recently catalogued party papers, and to the Department of Politics and International Studies (POLIS) at Cambridge for supporting the research on which the article is based. Please address any correspondence to: pjs93@cam.ac.uk
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