Nick Clegg should keep his distance in this relaunched coalition | David Hall-Matthews

What would grassroots Liberal Democrats like to see in the Queen's speech? For a start, a bit of humility on economic policy

After the dire local election results that both governing parties suffered last week, Nick Clegg and David Cameron have responded by "relaunching" the coalition. Cameron's motives are clear: he needs to demonstrate his ability to stick to a task. But is a restatement of coalition unity the best step for Clegg? His very justification for sticking with the programme shows that he realises there is an alternative to George Osborne's austerity.

Clegg's emphasis is on job creation and switching the burden of taxation away from working families and on to the rich. This is exactly the direction of economic policy that most Liberal Democrats – and most voters – want to see. But it was all too apparent in last month's budget that Osborne does not. While Clegg could claim credit for raising the tax threshold to over £9,000 and increasing overall taxation on the wealthy, these significant steps forward were overshadowed by Osborne's incomprehensible and unforgiveable reduction in the top rate of income tax.

If Clegg wants to revive Liberal Democrat fortunes, he needs to be willing to distinguish himself more clearly from Tory policy. The coalition would not have fallen if he had declared himself to be furious at Osborne's largesse to the rich – it is, after all, what one would expect from a Liberal Democrat. Similarly, there was no need to support Andrew Lansley's dangerous mish-mash of NHS changes. Negotiation is a necessary part of coalition government – but there is also a need to speak out.

ConservativeHome has set up an alternative Queen's speech. Though it appears to be designed more to undermine both Cameron and Clegg than to contribute seriously to government policy, such interventions from the Tory right help to emphasise political differences within the coalition. So far removed are most of its proposals from the likely content of the actual Queen's speech that it will be obvious how much the Liberal Democrats have actually succeeded in constraining the Tories' baser instincts.

More positively, though, what would grassroots Liberal Democrats like to see in the Queen's speech? First, a bit of humility on economic policy. The local election results showed that the government had failed to come up with convincing narrative as to how the squeeze on living standards would be reversed. Investment in affordable housing is the obvious place to start. Creating sustainable employment is a more urgent priority than deficit reduction – and reducing the state's role in the economy has not stimulated growth. Nor will attacking workers' rights or benefits. The Social Liberal Forum's vision for a sustainable, fair economy – Plan C – argues instead that we should strengthen people's security in times of hardship in return for labour flexibility.

Second, we need to finish the job of creating a safe but dynamic banking system that does not gamble public resources for private gain (as Vince Cable argued for years before the financial crash) but instead facilitates investment in infrastructure and skills. Further, government must take action on inequality in the workplace, following growing evidence that dissatisfaction at unfair rewards for the elite has reached tipping point. Only a push from the Liberal Democrats will force Cameron to empower shareholders and engender real workplace democracy that covers conditions for all employees as well as pay.

Third, government needs to target resources where they will make the most difference to social justice. Support for parents and children in their early years is an established Liberal Democrat priority that needs further fleshing out. And the Liberal Democrat spring conference called for pensions reforms that, if enacted, would restore effective retirement plans in both the public and private sectors.

Liberal Democrats cannot afford to re-engage in the detoxification of the Tory brand. But they should stay in the government precisely in order to stop toxic ideas becoming law – and to fight for the interests of those who need most support during these difficult times.

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David Hall-Matthews

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