Lib Dems conference: Party members reject calls for economic U-turn

Lib Dem members were told a U-turn on the economy "would play into Labour's hands"

The Lib Dem leadership have fought off a challenge to their economic policy from a group of activists.

Party members rejected calls for the Lib Dems to abandon support for the coalition's deficit reduction plan - backed by Nick Clegg and his ministers.

Treasury Secretary Danny Alexander said financial stability was a "foundation" for Lib Dem objectives in government.

But members backed another amendment attacking Chancellor George Osborne for "inhibiting growth" in green energy.

Calls for the party to argue for growth measures outside the Treasury's "fiscal mandate" was overwhelmingly defeated in a vote following a conference debate.

The mandate obliges the government to work towards eliminating the structural deficit over a five-year period through a mixture of spending cuts and tax rises.

The government has admitted the target will not be met by 2015-6 as initially intended, but argues that the commitment helped the UK avoid "economic catastrophe" in 2010 and delivered low market interest rates.

'Change message'

But a number of party members spoke out against the strategy, including former MP David Rendel, who said there was a "growing consensus" the approach was not working.

"We have to change the message," he said.

He said they should "no longer" let "deficit reduction by means of cuts in public spending be our top priority".

"The priority has to be boosting the economy, reducing the cuts or at least spreading them out over a longer period."

And Ed Randall, who proposed the amendment, said the Office for Budget Responsibility, which the government relies on for its economic forecasts, had become a "laughing stock".

He said the Bank of England was "sitting on £30bn" that could be used to support growth and there was "so much more an intelligent and humane government can do".

'Hard work'

But Mr Alexander said the deficit reduction strategy was "flexible and credible" and the "foundation" of all the party had achieved in government and wanted to do in future.

To relax the strategy, he added, would "undermine all the hard work we have put in over the last two and a half years".

Expenditure as a share of GDP was still higher than at any time between 1997 and 2008, he told members, arguing that "our plan is not some small state madness".

He was backed by a series of government ministers, including Jo Swinson, who said adopting a "Plan B" on the economy would "play into the hands of" Labour.

Party president Tim Farron said it would be "flipping crackers" to abandon the deficit reduction goals, as it would lead to "market chaos" and rising interest rates and unemployment.

'Declaring war'

However, party members approved a separate amendment criticising Chancellor George Osborne's record on green issues and his "repeated attempts to inhibit growth" in renewables.

Duncan Brack, a former member of the party's Federal Policy Committee, suggested Mr Osborne "seemed to have declared war on green energy" by seeking to revise green regulation, cut subsidies for offshore wind and carbon emission targets.

He said the Green Investment Bank had been "hobbled" by its inability to borrow and called for energy efficiency to be given "equal value" to energy supply in policy-making.

"The government has to choose between a sustainable economy or right-wing Tory climate dogma," he said.

Mr Alexander, who backed the amendment along with Mr Clegg and other senior figures, said there should be "no more mixed messages" on green issues.

The government needed to demonstrate an "unswerving commitment" to its low-carbon strategy, he added.