At their conference, leading Liberal Democrats outlined a new opportunity for their party in 'new spaces' on the centre ground of British politics. While offering some hope to a party battered – though not dispirited – by recent election results, this risks defining the party merely against its opponents' positions, rather than promoting a positive vision for liberalism in the 21st century.

This week at their party conference, the Liberal Democrats were in good spirits, despite their plight. I have found this to be true of their conferences down the years: the mood is resilient, almost chirpy, and there is none of the rancor that you often encounter at the Labour and Conservative conferences. Delegates were buoyed up by their new leader’s speech, and warm to the leader they had just lost (and lost with). It didn’t seem to matter that there were only eight MPs in the hall.

This resilience may be down to long years in opposition, when few corporate sponsors and newspaper editors bothered to make the trip down to their conference. It also reflects a security Liberal Democrats feel in their identity – they are confident of who they are and what unites them.

This may now be a weakness, as much as a strength. The Liberal Democrats have just suffered a crushing defeat, and have been wiped out in two of the great bastions of liberal Britain: Scotland and the south west. They need to come to terms with that defeat and ask what it means to be a liberal in the 21st century. But the signs of that happening are too few and far between.

In their different ways, Tim Farron and Nick Clegg both argued that a huge new swathe of centre ground had opened up in British politics, with Labour shifting to the left and a newly emboldened Conservative government moving to the right. That is a risky assertion. It defines liberalism against its opponents, rather than for itself. It leaves the Liberal Democrats vulnerable to shifts in the landscape – say, for example, if the Corbyn project collapses and Labour elects a more centrist leader, or the Tories succeed in defining and colonising the centre of British politics. More importantly, it leaves big questions about contemporary liberalism unanswered.

That is why Clegg and Farron also sought to assert that they stand on liberal, not just centrist ground. Some of that is easy to define. It is pro-European, internationalist in outlook, environmentalist, and supportive of electoral and constitutional reform. It prizes civil liberties. This gives contemporary liberalism a clear compass on some important issues in contemporary British politics, notably Britain’s future in Europe. It allows them to oppose, without a second thought, further incursions into individual privacy or human rights.

But it is silent on a whole raft of other questions. On economic policy, the Liberal Democrats chose to put behind them their Keynesian and social liberal traditions when they joined the coalition government in 2010. Is that where they wish to remain? What will it mean for their response to the spending review in the autumn, or for their local government representatives facing deep cuts to their budgets?

Similarly, what should a liberal approach to public services look like: in favour of state provision of services, within a framework led largely by local government? Or more market-orientated, concerned chiefly with social mobility? It was largely on the altar of public services – the funding of universities and the reform of the NHS – that the Liberal Democrats were sacrificed in coalition. They need a reckoning with those choices, even if they remain proud of their role in that government.

During an IPPR event at the Lib-Dem fringe this year, I suggested that the Liberal Democrats could do worse than to return to their leader of the late 1950s and 1960s, Jo Grimond, for inspiration.

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Grimond took over the leadership of the Liberal party in 1956, when it was at its lowest ebb. It had six MPs and a miserable 2.5 per cent of the popular vote. He had the foresight to see that its natural role was to be at the heart of a new progressive centre in British politics, between the left of the Labour party and the Conservatives. He repositioned it as a centre-left party, anticipating by a generation the formation of the Social Democrats and their merger with the Liberals in the 1980s. It was a repositioning that remained intact for the most part until Nick Clegg became the Liberal Democrat leader.

Grimond's relevance for contemporary debates is rather more subtle than this would imply, however. He was the author of a number of works of political theory and policy reflection in which are contained themes and insights that bear directly on the question of what character a future progressive alliance might possess. None of these books is particularly deep or profound – Grimond didn't possess Tony Crosland's intellectual gifts – but he plugged away at a set of ideas which are surprisingly resonant today.

First, Grimond believed in breaking down concentrations of power in the economy, establishing co-ownership of firms and distributing wealth more widely. 'You cannot have a contended, industrious and stable society where property is concentrated in a few hands, or worse still under the control of the State,' he argued in 1959. In terms that would resonate with Labour's Jon Cruddas today, he argued then that 'the system ought to stress the community of interests among those taking part in production. It ought to emphasise joint responsibility.'

Workers, Grimond contended, should be given status alongside shareholders in company law, and 'the growth of a body of worker-shareholders taking part in the affairs of the company in both capacities' should be encouraged. He put forward a save-as-you-earn plan for share ownership and praised employee mutuals like John Lewis.

All of this was of a piece with a strand of postwar liberalism that promoted a third way between state and private ownership and argued for a wider distribution of wealth and asset ownership. It re-emerged more recently in a renewed focus on employee ownership among Lib-Dem ministers in the coalition government, but this didn’t get very far. In an age of automation, when workers need to own the robots, rather than be displaced by them, it could become resonant again.

Second, Grimond was a staunch critic of centralised statecraft and public bureaucracies, and a promoter of new forms of community welfare provision. Some of his harshest words were reserved for Beveridge himself, who he claimed had been 'carried away by dreams of grandeur', deluding himself that 'under his name and proposals the Liberal party, for which he stood in the 1945 election, would sweep the country.' In fairly predictable liberal terms, he criticised the cost, redistribution and expansion of public administration implied by the Beveridge report. But he also castigated its results in terms that speak to contemporary critiques of centralised statecraft:

'Another feature of the Beveridge report was that it did not contemplate that the recipients of its benefits would have the right to say in what they wanted. They were not to be involved in the administration of the scheme. Benefits decided by a beneficent government passed by parliament ... were handed out by methods of greater and greater complexity. It was tainted with corporatism and paid scant attention to the opinions and wants of people.'

The Common Welfare, 1978

Grimond argued for radical localism, community welfare programmes, and diversity and choice in public services. By the late 1970s, he was both of his time – picking up the winds of change that would sweep Thatcher to power in the 1980s and turning towards the right as he did so – and ahead of it, anticipating elements of Blairism in public services, as well as critiques of the latter's centralism and managerialism. On occasions, he gets close to just the sort of 'new and blue' mix that might have rescued Labour on public service reform, if it had been listening.

But Grimond also had an appreciation of the spaces between state and market, and the institutions that fill them, which Nick Clegg sorely lacked. When it reflects on the somewhat desiccated account of social mobility it pursued in the Coalition, the Liberal Democrat party will have to rediscover insights like these, from the late 1950s:

'There have always been in civilised societies places like the church, the universities and some branches of medicine, open to non-competitive people. We are in danger ... of carrying the race for promotion, business, wealth into unsuitable fields. I rather shrink from the phrase 'opportunity state' ... for when the state competes it becomes entangled with every sort of ambition for prestige, it becomes tyrannical, and into the bargain it is usually inefficient. There is a better role for the state in protecting public bodies which can offer different satisfactions.'

The Liberal Future, 1959: 58

Then-prospective Liberal Democrat leader Tim Farron spoke at IPPR in June, offering his early thoughts on the future of the party and its place in the British political landscape.

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