09/08/2012 05:47 BST | Updated 09/08/2012 06:07 BST

Tories Owe Nick Clegg Economic Stimulus Plan In Return For Lords Reform, Says Lib Dem Adviser

Nick Clegg should use the death of House of Lords reform as an opportunity to force the Tories to support a more "liberal" approach to the economy, according to a Lib Dem policy adviser.

David Hall-Matthews, the chair of influential Social Liberal Forum, says the deputy prime minister should use the parliamentary time freed up by the ditching of the Lord Reform Bill to begin changing the government's economic strategy.

"Now it is time to demand a Liberal approach to the economy: Keynesian stimulus, wealth taxes and more, not less, support for the most vulnerable," he writes on The Huffington Post today.

"Of course, his Tory cabinet colleagues won’t like it – but, frankly, they owe him. And pleasing them should never have been his main concern."

He added: "House of Lords reform is important - it attacks vested interest and over-concentration of power, as Liberals have always done. But it doesn't stir the blood in mid-recession. "

Yesterday the Bank of England slashed the UK’s economic growth forecast for 2012 to zero from 0.8% in its May estimate, as the eurozone crisis continues to blight Britain's ailing economy.

The Bank's governor, Sir Mervyn King, said the underlying picture is that output has been at best “broadly flat” over the past two years and has “continually disappointed” expectations of a recovery.

George Osborne said he would now focus "110%" on pulling the UK economy out of recession and indicated that he would use the free parliamentary time to legislate on the economy

"Now we've got to have the undivided attention of the government to do everything possible to get the economy moving," he said.

As HuffPost reported on Monday, there is talk among some senior Lib Dem MPs of taking everyone on the minimum wage out of income tax.

At current pay levels it would require the tax-free threshold to be raised from £10,000 to £12,000, a substantial jump.