The challenges that the next Liberal Democrat leader must address

I believe that there are several key challenges that Britain now faces and which the Liberal Democrats must address.

The role and power of the State has grown substantially over the course of the past two decades at a time when those who control the state apparatus are coming from an ever smaller pool of career politicians who lack the management skills required to administer the increasingly complex mechanisms that are supposed to deliver the promises that they make.

The result has been increasing disillusionment from an electorate that has learned that politicians can not deliver what they say. Furthermore, despite their manifest failures, the political class has largely escaped from personal responsibility for the mistakes that they make. A cosy consensus between the civil servants and successive governments has created a powerful, secretive and unaccountable State. Local government, dependent on Whitehall for its finances, has been eviscerated, and yet the legal responsibilities of Councillors are so arduous that ever fewer are prepared to take on the role except on a professional basis. Forty years ago we had MPS who were quite badly paid, since most had outside interests, and unpaid Lords and Councillors. Now the costs of our democracy have increased almost exponentially.

The scale of government has grown to a level that is beyond the capacity of the archaic systems of our constitution, and quite probably beyond the capacities of any constitution to control.

Britain faces a constitutional crisis.

In the wider world, the mismanagement of the Bush administration has created two challenges. The first is the result of the failure of the United States to deal with its lax credit market until it was too late. Essentially the United States has created an approximately $47 trillion debt that it can not repay. In effect, the fall of the Dollar is leading to a gigantic default on this debt. The overall result is that the economic role and prestige of the US- hitherto our closest ally- is being weakened at a time when it faces the new challenge of a resurgent China. Far from being a hyper-power the United States is becoming merely a first amongst several powers of roughly equal weight. Associated with this economic decline is the spectacular failure to meet the challenge of Islamic terror. The costs of the wars in Iraq and Afghanistan are beyond what the US can realistically sustain. In short, the US, leader of NATO, and of the democratic world has reached the position that Paul Kennedy warned of in the Rise and Fall of the Great Powers: Imperial Overstretch.

The challenge for Britain in the face of the decline of our leading ally is to define a new set of relationships that can maintain British security and influence. Furthermore, this must perforce be done in a manner that maintains liberal freedom. The challenge of the rise of the so-called BRIC powers- Brazil, Russia, India and China- is that neither Russia nor China are democratic and that Brazil and India have relatively unfree economies. The new economic and political world is both more politically unstable, but also more economically unstable. At some point, we may see the return of production from China to the United States as the costs of business tend to equalise. The risk is that China might become protectionist in order to weaken this process.

The consensus amongst the other European powers to meet this challenge has been to pool a degree of sovereignty and to forge closer political co-operation. However the process of reform in the European Union has been very slow and very piecemeal. There is a significant group that argue that the costs- economic and political and well as financial- of the EU, outweigh its benefits. However, in the face of the dramatic challenges emerging globally, it seems clear that a considerable effort must be made to ensure that the liberal, open economies of Europe continue to work together and to provide an example and a force that can promote liberal economics and liberal democratic values. Leaving the European Union is not an option: we must engage and make it work.

Britain faces serious political and economic challenges in this new world system.

Part of the challenge that the decline of the US Dollar and the growth of economic power in the BRIC powers is that there is a squeeze on global resources. In addition, the relatively energy inefficient Chinese economy is adding to global Carbon Dioxide emissions. As the planet faces the costs of the human population growth over the course of the next decades- leveling off at around 10 billion- combined with the forecast oil production peak, it is clear that our planet faces a serious problem of sustainability.

Britain faces serious challenges of sustainable growth and energy security.

In the past few years, the United Kingdom has been successful in attracting high quality individuals to work in our economy. The influx of several hundred thousand people, both from inside the European Union, and to a lesser degree from outside it, has been a major factor in the success of the British economy over the past decade. It is changed our country, but by and large these changes have been welcomed. However, that there is a cost to these social changes is undeniable. Furthermore, it underlines the weakness in several key areas of British infrastructure, including especially education. While the general quality of higher education is globally competitive, the quality of British schools has not kept pace. Too many pupils leave school lacking basic skills, such as literacy and numeracy. Furthermore, the average quality of British state education, despite the soaring grade inflation showing in examination results, appears to be declining. The lack of language skills in British pupils is particularly striking. Although the UK has benefited from the influx of hard working and well educated foreigners, our domestic education levels should cause us concern.

Britain faces serious problems across its whole infrastructure- and the failure to provide timely investment is undermining our competitiveness. Although we can plug the gaps in our human capital through immigration, the weakness across our physical capital will take decades to fix- even if a sustained programme of renewal was started now, which it has not been.

In my opinion the Liberal Democrats are the British political party that most recognises the challenges that we face and has developed coherent ideas to tackle them. In particular, the ideas of accountability and political reform that the party espouses makes it more likely that the challenges that we face can be dealt with in an intellectually coherent way.

I have listened to both Nick Clegg and Chris Huhne. Both have put forward ideas that are credibly Liberal. I have not had complete answers to the questions that this big picture survey raises, but I am satisfied that both would be credible and attractive leaders. I believe that either could take advantage of what I believe could become the best opportunity to achieve the reforms we believe are required to our country and to create a more open, fairer system of government and perhaps a fairer and more tolerant society. Although as regular readers of this blog will know, I am sceptical about the value of detailed policy promises, I believe that both have the right instincts. I will be happy with either as leader.

I am close to making my decision. I will make public that decision when I have made it.