UK's Clegg makes appeal to win back disenchanted liberal voters

LONDON, June 9 Sun Jun 8, 2014 7:01pm EDT

LONDON, June 9 (Reuters) - Nick Clegg, leader of Britain's embattled junior coalition partner Liberal Democrat party, will on Monday propose a mix of liberal policymaking and economic prudence to recover from its disastrous election results in May.

His Liberal Democrats lost all but one of their 11 seats in European Parliament elections and more than 300 local council seats last month, sparking calls for Clegg, whom many activists accuse of forsaking the party's values, to resign.

With only a narrow opinion poll gap between the two election frontrunners, Prime Minister David Cameron's Conservatives and the opposition Labour party, the Liberal Democrats could be called upon to help form another coalition government in 2015, giving them a voice in policymaking for another five-year term.

Clegg has resisted calls to quit. On Monday, he will appeal to the party's core voters to back him at next year's general election, sketching out two new fiscal policy rules he said would set the Liberal Democrats apart from their rivals.

"I want people to know that we have our own distinct vision, based our own distinct values - a liberal belief in opportunities; a liberal faith in people's talents and ambitions," Clegg is due to say, according to extracts of his speech released in advance.

Staking out the future of the economy as the central issue at the 2015 election, Clegg sought to position his party as less focused on cutting spending than the Conservatives, but more fiscally responsible than Labour.

The Liberal Democrats have, in line with the Conservatives, pledged to wipe out Britain's structural deficit by 2017/18, but Clegg stressed that he wanted to do this in a "fundamentally different way" to Cameron's party.

"Responsibility, yes; austerity forever, no," he will say.

Conservative finance minister George Osborne has said he will focus on meeting the deficit reduction target through cuts alone, while the Liberal Democrats favour a 80:20 mixture of spending cuts and tax increases.

Labour has said it wants to eliminate the deficit as soon as possible, but has set itself a longer timeframe to do so.

Responding to Clegg's speech, Labour said voters would not forget that he had broken policy promises on issues like university tuition fees.

TWO FISCAL RULES

Clegg said that once the deficit had been erased he would permit more borrowing, but only to fund infrastructure projects that would enhance economic growth or financial stability.

"We cannot build a stronger economy and a fairer society where there are opportunities for everyone unless we are prepared to put our shoulders to the wheel and use the muscle of the state - if necessary through borrowing - to rewire and revamp our infrastructure," he will say.

He focused on the need to build more houses, citing warnings from the Bank of England and the International Monetary Fund that Britain's lack of homebuilding could threaten the country's economy if it led to a house price bubble.

Clegg also said his party would seek to reduce national debt as a proportion of the country's Gross Domestic Product (GDP), while the economy was growing, targeting what he described as "sustainable levels" by around 2025.

Clegg did not specify a target debt to GDP ratio.

The European Union and the Organisation for Economic Co-ordination and Development (OECD) have previously used a 60 percent debt level as a broad target. Britain's debt-to-GDP is forecast to peak at nearly 79 percent in 2015/16. (Editing by Tom Heneghan)

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