INTRODUCTION
Before we head off to our constituencies and doubtless elsewhere over the summer recess, I did want to offer some end of term reflections on what has been a remarkable year for the Liberal Democrats.
It saw the most successful general election result in the Liberal tradition of British parliamentary politics in over 80 years.
Over a million more votes compared with 2001 and despite the corrupt first-past-the-post voting system 62 seats in the House of Commons.
Three party politics now firmly entrenched - and a narrower spread of votes between the 3 main parties than at anytime since 1929.
We are now set-up, with a view to the next general election, in second place in over 180 seats.
And, in Cheadle, further confirmation of our sustained and growing appeal. Not only did we defend successfully a held seat (our first experience of having to do that as Liberal Democrats) but we actually achieved a further swing in our favour.
Despite all their hype, the Conservatives are still failing to make progress, while Labour lost their deposit.
It's a very good feeling to be helping make history.
And to be doing so against a post-general election backdrop which has been dominated by three sets of exceptional events: Europe, the G8 and the London terrorist attacks.
Events over which we have been broadly supportive of the government, while not abandoning our critical faculties.
Events, consequently, which do not easily allow much in the way of completely distinctive space for opposition parties.
Yet, our voice has continued to be heard - and clearly continues to resonate with people.
We should feel greatly encouraged as a result.
Now, in my position as party leader, I am frequently being asked, one way or another, to gaze into the proverbial crystal ball.
People expect you to both predict and proclaim, with characteristic amazing powers of insight at all times.
When asked to, my advice is invariably the same:
Forget about the crystal ball; instead learn from the history books. And draw upon experience in charting the way forward.
It is upon that basis that I offer these reflections today.
UNITED, BOLD, DETERMINED
First, we are at our best and we do our best when we are positive and united.
People respond well to that, not least because these days politics has become less intensely ideological and needs to be more solution based.
As we Liberal Democrats advance solutions they need, of course, to be based on sound principles and a considered philosophy.
That's why opinion polls, in 2001 and 2005 alike, confirm the public as scoring ours to be the best campaign.
So positive unity is critical.
Second, we have to be bold and to be willing to take risks.
There is no way forward if we opt for the easy life, heads kept securely safe below the parapet.
If we're not prepared to live a little dangerously at times, then the far greater danger is that we just don't live at all.
Third, we need to think, plan and work with the longer term in mind.
This ranges from our own internal processes and procedures right through to the much wider, external policy considerations coming down the track.
Now, being influenced and guided by these lessons of personal and political experience that has led me - since May 5th - to make a number of early decisions and put the party to work in advance of our September conference.
These are important internal steps soon into this parliament.
If we get the judgements involved correct, they will stand us in very good stead indeed for the duration of this parliament - and at the next general election.
CHALLENGING OURSELVES
We find ourselves with our largest-ever parliamentary party, with a third of the colleagues new to Westminster.
So it's a great moment but it is also presenting some interesting challenges: mainly issues of how we organise ourselves.
After two decades as a much smaller party, it's time to move on.
We need to make a greater national impact reflecting our greater numbers.
That is why there are three internal parliamentary party reviews being undertaken.
One to look at the resources, staffing and tasks of POLD, the Parliamentary Office of the Liberal Democrats, which includes the Press Office, Resource Centre and Communications Unit.
Second, a Commission under Phil Willis MP, to look at communications within the Parliamentary Party; generally.
Thirdly, there is a review of the policy making process undertaken by the Federal Policy Committee to ensure that that process is both flexible and rigorous.
Housekeeping? - Well, yes, up to a point.
But a lasting, durable home has to be wind and watertight - able to withstand a hostile external environment and occasional unfriendly elements.
But most important is to rise to the political challenge.
I am determined that, despite our success at the General Election, we avoid complacency and maintain the Liberal Democrats as a dynamic, forward looking and progressive force in politics.
That is why we have initiated two formal policy reviews.
"Meeting the Challenge" is a broad look at policy to complement "It's about Freedom" - which the party produced in the last Parliament.
It's not drawing up a manifesto;
It's not lurching to left or right;
It's intended to be a thoughtful look at the challenges facing our country and will report to conference in 18 months time.
A complimentary exercise is the Tax Commission to look broadly at our tax commitments.
It's over a decade since we did this as a party.
This will also go to conference in September 2006.
There is a political context to this process of course.
At the next General Election we are likely to have two new leaders of the other parties.
We have to have a process to adapt to the challenges that they will present.
Including adapting our targeting strategy and our overall electoral tactics.
As I predicted, our party and its policies were under scrutiny as never before at this General Election.
I was proud of how they stood up to that scrutiny.
And I was proud of our emphasis on fairness.
I am determined that wherever else our policy review may lead us, we shall not waver from that being the principal benchmark against which all of our policies must be judged.
A telling feature of the recent general election campaign was the extent to which our proposals and our costings were challenged more on the basis of their outcomes - although these were often misrepresented - rather than on their inherent credibility.
When we're asked about what the Liberal Democrats stand for we can point to a general election in which we established clear identity and distinctiveness across a range of central issues - from Iraq to the council tax, from top-up fees to long term care for the elderly.
That's never happened to anything like such an extent before. People need being kept reminded of that fact.
But what all of these internal nuts and bolts has to be about - and has to augment - is now fashioning a better developed account of ourselves and a prescriptive analysis of our country.
We need a more holistic picture, which brings together better in people's minds how our various individual policies both relate to each other and add up overall.
For such a process to succeed, it should spark fresh thinking and generate debate.
And a good thing too, because I want this process to be dynamic and creative.
We Liberal Democrats should be a force for radical thought - in touch with today's needs.
History again.
Nearly a century ago, the greatest reforming Government that this country had ever experienced set out the change the face of Britain.
That Liberal Government of 1906 took head on the issues of poverty and welfare provision.
With the establishment of Britain's first pensions system and National Insurance, Asquith and Lloyd George established the principles and began the construction of the British welfare state that emerged fully after the 2nd World War.
The National Health Service, with its doctrine of universal service, was largely the result of the work of the great Liberal Lord Beveridge.
A century on from that reforming Liberal Government, here in the 21st Century, some of the challenges that Lloyd George sought to address remain with us.
We are still grappling with how to make our pensions system sustainable.
Thankfully, Victorian levels of poverty, ignorance and disease have to a great extent been banished from these shores, instead social deprivation in Britain, exclusion, lack of opportunity and inequality blight many of our communities.
And of course in this global century, extreme poverty in the wider world stirs our conscience and demands that we, as a comparatively prosperous country, must act.
Globalisation has thrown up many new challenges.
Britain's prosperity and security is now inextricably bound up with events beyond these shores, events that we will struggle to control in isolation as a nation state.
But here at home too, new challenges have arisen to which we Liberal Democrats, as the philosophical successor to that great reforming Liberal Government, must, in the same spirit, apply ourselves.
Just as Lloyd George and the so-called 'new liberals' had to move on from classical 'Gladstonian' Liberalism, so do we Liberal Democrats have to develop our liberalism so it is fit for purpose in the 21st Century.
But we could do no better than to take as our watchword Gladstone's description of the Liberal Party as one on of 'Conscience and Reform'.
But we must define what conscience and reform means in modern Britain.
Political challenges may change, but liberal values have proven themselves the most resilient of the philosophies that have informed the main British political parties over the last Century.
Labour's traditional socialism has been replaced by Blair's managerial pragmatism.
He has claimed a liberal heritage, but with his statist, authoritarian and presidential Government since 1997 he has proven himself an unworthy carrier of the Liberal flame.
Increasingly I see him more in the mould of a continental Christian Democrat somehow conducting himself presidentially as a moderate Republican.
The Tories are scrabbling round for a philosophy to underpin the atavism that has plagued them since Thatcher.
They have been at odds with modern Britain ever since.
They understand the fact that things have changed - and that Britain has moved on.
But they don't understand how or why.
Take the most recent example that by-election in Cheadle.
Among many other slurs, the Tories labelled our candidate as "the unpopular outsider".
Given the result, where does that leave them?
The problem with and the problem for the Tories is that the closer you get, the more you see and hear, the less likely you are to want to vote for them.
The more intelligent Tories realise this dilemma.
Yesterday, David Willets of their Shadow Cabinet told one newspaper:
"It's no secret the Conservative party has a problem winning elections. We've had three heavy general election defeats, and we face a threat from the Liberal Democrats."
The same newspaper cited an unnamed Tory "leading MP" as describing their Cheadle campaign as being "very negative, very personal.
It was exactly the sort of campaign everyone has agreed in the past few weeks we shouldn't have fought in the general election."
The Tories may have dominated government office for most of the twentieth century, but they are increasingly a spent force where the new realities of the twenty-first are concerned.
Essentially, where both other parties are concerned, both are too instinctively conservative.
Labour, particularly where on-going constitutional reform is concerned; the Tories are increasingly inward and backward looking.
We don't want more conservatism in British politics; what we need is the third alternative called Liberalism.
21st CENTURY LIBERALISM
In the last Parliament, our political challenge to the Labour Government developed and grew.
To a large extent our principled opposition to Labour was based events that either did not feature much if at all in the 2001 general election or which could not have been predicted as we began the Parliament which followed it.
We led the opposition to Labour's broken manifesto promise over top-up fees.
We were the only party campaigning to scrap the council tax and introduce a local income tax.
Ours was the distinctive mainstream voice over Iraq.
All based on events that would have required the crystal ball to predict.
But all policies and stances based on the solid foundations and permanent values inherited from our preceding political lineages.
Civil liberty and civil reform;
Fairness and financial discipline;
Opportunity and social justice;
Reward for enterprise and the creation of real personal responsibility by empowering local citizens to make their own choices wherever possible.
And Internationalism - about which I spoke at length last week, as well as a detailed address on European reform the week before.
REFORM AND LIBERTY
21st Century Liberalism has to be about more than the politics of protests or the need for principled positions within politics.
It has to be about presenting ourselves as credible contenders for power - not just for its own sake, but because of what we want to do with it as we gain more.
We can point to hands on experience here at all elected levels - local authorities, the London Assembly, the Welsh Assembly, the Scottish Executive and the European parliament.
Liberal Democrat controlled councils are responsible for budgets worth £10bn.
We run cities like Liverpool, Newcastle, Durham, York and Stockport in the North.
County Council like Somerset, Devon and Cornwall in the South.
We can point to our track record in Government in Scotland.
Free personal care for the elderly - delivered.
Abolishing tuition fees - delivered.
Legislation to provide free eye and dental checks for all - being delivered.
Fair votes for local government elections - being delivered.
And a new Environment Bill so that a green thread runs through the heart of Scottish government, one where every policy will be audited for its environmental impact - being delivered.
Conscience and reform.
What strikes me most, as I visit, observe and listen to Liberal Democrats in power, at whatever elected level, is the reoccurrence of one theme above all else.
It may manifest itself in various guises, but it's almost always there - at or very near the surface.
When and where we secure real political power, invariably we set about trying to share it;
To involve and empower more people than before, not to become encumbered by the straight-jacket of purely party politics;
To seek more localism and local mechanisms which get through to the citizen directly.
Take the words of Peter Arnold who took over leadership of Newcastle City Council in 2004 - after thirty years of Labour rule -
"For Newcastle Liberal Democrats, one of the most important success criteria will be the extent to which we are able to give the city back to the people...We will be doing things differently, by making sure the Council is less politically partisan and more inclusive."
That is a vital distinguishing feature of the Liberal Democrats; we need still more of it.
The reform agenda goes much further than our traditional promotion of proportional representation.
This is about the renewal of our democracy.
Connecting directly with people.
Engaging.
And a great opportunity is before us, because this is the promising territory upon which the coming generation in politics is being built.
There is no shortage of vacant space for us to occupy, partly through our instincts and gut political convictions and partly also because of the territory vacated by Labour and Tory alike.
Consider Labour.
By the time of the next election they will have been in power for over a decade - and they will in all likelihood be led by someone who has been at the epicentre of all that entails.
Everything about Labour in power suggests increased central authoritarianism as every week and month goes by.
It is revealing that the Prime Minister's most recent and most favourable critiques for a long time come at a time, and on a set of issues which, by their very nature, demand central control.
But veer towards localism and Labour very soon begin to lose the plot.
Consider the Conservatives. Their 18 years in Government saw the huge growth of the centre at the expense of everywhere else.
Little surprise then that today they are all but moribund in municipal politics.
So we need to maintain our strong stand against centralism and authoritarianism, but we do need to ensure that we are articulating this in a language that people will understand.
This is particularly true when it comes to defending civil liberty, especially in the current climate.
Our response to the barbaric attacks in London will have to be far wider than simply reviewing our anti-terrorism legislation, important though that is, not least because of the sickening confirmation that the perpetrators were themselves born and bred British citizens.
We have a responsibility to demonstrate how the correct balance is struck between liberty and security.
We need to show that it is not an either/or - but that we can achieve both in a Liberal Britain.
We must work hard to promote our distinctive approach.
That is true in the way we approach Criminal Justice;
An approach which brings local communities into the process so that people can be part of the solution rather than powerless victims.
With perhaps the greatest challenge being to bring back into society that small proportion of our young people who are slipping away from us.
I believe this alienation is fundamental to the crime and anti-social behaviour problem.
Crime becomes easier if the victim is somehow anonymous - and if there is no community to help censure and correct criminal behaviour.
Liberal Democrat Councils have been doing some innovative work in making anti-social behaviour legislation work better.
That is part of the response and I want to build on that.
But we need to go much further.
I will be speaking a lot more about this in the period ahead.
Meanwhile, I am announcing today a new initiative focussing on providing our teenagers with pathways to opportunity; positive steps, not simply punishment, aiming to produce new ways to tackle the problems of discipline and anti-social behaviour.
I am announcing today that I have asked Mark Oaten MP, our Shadow Home Secretary, and Ed Davey MP, our Shadow Education Secretary, to collaborate on a unique piece of work.
They have been tasked with looking at the interface between school and society and those important years when children move into adulthood.
I am looking to them to report with innovative ideas about how we, as a society, can help nurture that process.
FAIRNESS AND DISCIPLINE, OPPORTUNITY AND SOCIAL JUSTICE
No party will be elected to Government in Britain without credibly demonstrating a belief in financial discipline.
And neither will a party be elected without credibly demonstrating a commitment to the delivery of high quality public services.
As an issue of liberal conscience our taxation system must be progressive, fit for the purpose of providing world-class public services and providing for those in need.
As a party we must not shy away from our commitment to fairness.
As a party we are not afraid to use the word redistribution.
But we should feel no awkwardness about the use of the word profit either.
We do not need and we should not seek a punitive taxation system.
High taxes are not a moral good in themselves.
We were correct to point out at the general election that only 1% of all taxpayers would be affected by our proposals on top-rate taxation.
But we must not lose sight of those who aspire to achieve income levels which will bring them into the top rate taxation band in time to come.
So we should not fall into the trap of believing that through taxation and spending we can cure all ills.
And we must maintain our liberal commitment to an enabling state - small Government - decentralisation.
Again this is about striking the right balance.
We credibly argued at the last election that rises in taxation were needed to pay for specific priorities.
Those priorities may still exist in 5 years time - or new ones may emerge.
Similarly, economic circumstances will change.
We will have to maintain and adapt our position of financial discipline.
I do not intend to prejudge the Tax Commission that is now beginning its work under Michael Williams, a former senior Treasury civil servant with over 30 years experience working at the heart of UK economic policy.
But it will not have succeeded unless its work is based on our principles and values.
That Taxation should be fair - based on people's ability to pay;
That it should be straightforward and open - so that people see where their money is being spent;
That Taxation should frame a competitive business environment and it must encourage sustainability, with economic instruments used to deliver public policy objectives.
This is the liberal approach to taxation.
It offers a real alternative, and stands in stark contrast to Labour's approach under Gordon Brown -
complication, stealth and short-termism.
The whole system of direct taxation has become extremely complicated for both business and for individuals.
I will be looking to our Tax Commission to make proposals to strip away complicated allowances and create a simpler and fairer structure of taxation along with measures to tackle tax avoidance and evasion.
And we will have to maintain and adapt our agenda of tough choices on spending.
And we will have to develop credible, alternative proposals to the changes that Labour is making in the structure and delivery of our public services - particularly in health and education.
I remain committed to the delivery of quality, local public services adapted to fit the needs of local people.
This is not about merely maintaining a welfare safety net for those in acute need.
This is about equality of opportunity.
Quality health and education free at the point of delivery.
Let me be clear - we do not reject choice - how could we, we are Liberals.
But choice used as Labour would like simply as a market mechanism will not work in our public services.
Choice is not a panacea.
No-one has stopped me on the streets and said, "I want the choice to travel to the hospital 50 miles away for my operation."
What people want is to be treated swiftly and efficiently as near to their home as possible.
We should be addressing what people want.
Let us reject the false choice that has become currency in the last few weeks, particularly with regard to Europe, that somehow you must back either laissez-faire, free market capitalism or an extensive welfare state supported by high taxation and restrictive labour rights with powerful trade unions.
We are a party that believes in free markets but not unbridled markets.
We are also a party of social justice but recognise the limitations of the state.
So I stress - when it comes to the public services, financial discipline goes hand in hand with fairness.
Conscience and Reform.
REWARD AND RESPONSIBILITY
Finally, we must be at the forefront of the environmental debate.
This in an area where we have a distinct lead on the other parties and we must articulate that lead.
Again our environmentalism must be realistic - but it must be realistic as to the consequences we face if we don't act.
Our environmentalism is not just an issue of conscience - but an issue of
long-term, self-interested necessity.
The environment is central to the Liberal Democrat vision of a vibrant, thriving Britain.
A Britain in which sustainable living is a reality so that we minimise the impact of the way we live on the world around us.
A Britain that acts not at the expense of competitive business, but together with business to encourage environmental reform, to encourage the development of new products and processes and to put Britain at the forefront of the new green revolution.
We see the environment as an opportunity to put into practice our principles of reward and responsibility.
Let me tell you how.
In order to put the environment at the heart of government, we need to put the environment at the heart of the Treasury.
Financial mechanisms have long been used to change behaviour.
We propose a similar concept for environmental taxation: summarised as encouraging 'goods' and discouraging 'bads'.
Reward and responsibility.
This isn't about punitive action, but about showing how environmentally responsible action is not only economically viable, but ultimately economically sensible.
In this parliament we must push on with the green agenda.
CONCLUSION
I come back to what I said at the beginning.
We need a coherent narrative that will take us through the next 5-10 years.
All the elements are there I believe;
Liberty and security, internationalism and environmentalism, financial discipline and social justice.
But we must ensure that our policies flow from our values.
And that they illustrate our values.
We must ensure that our critique of the Government - and the Conservatives - is telling - and strikes a chord with the public.
The public require clear, coherent and credible messages if they are to vote Liberal Democrat.
And that is what we should make it our business to provide - through our actions as well as our words.
ENDS.
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