As I See It: Terry Murden
For three years businesses have been told to prepare for the potential upheaval of Brexit and the ultimate test of a No Deal exit from the EU. But a potentially more disruptive challenge is looming that could put any new trade deal negotiations in the shade: a Jeremy Corbyn government.
The Tories are maintaining a significant lead in the polls, but even the pollsters caution against too many assumptions. There are just under three weeks to polling day and plenty of time for Mr Johnson’s party to let a commanding lead slip. A minority government led by Mr Corbyn cannot be ruled out given that neither the LibDems or SNP would prop up another Conservative administration.
A programme of investment in infrastructure and public services, together with widespread nationalisation, will appeal to those tired of austerity and impatient for improvements to a worn out and underfunded state sector.
For those less enthusiastic about the promised spending splurge it conjures up images of a return to an economy beset with 70s-style inefficiencies and industrial unrest, as well as huge tax increases and massive borrowing to meet the cost of this largesse.
While the numbers are eye-watering, the impact on re-sizing the state is not perhaps so great as the numbers may suggest. Labour’s plans would take the state as a share of GDP to just above the OECD average, a reflection perhaps of how much it has shrunk. Many European countries which consider themselves flag bearers of free enterprise also have large public sectors which Labour would merely be hoping to match. The party’s demand for a rebalancing of income so that the top earners pay a little more seems reasonable enough, though as explained below the tax plan also hits the less well-off.
Few could disagree with Labour’s vision of a country where hospitals and schools have the funds they need to provide the level of care the public demands, where everyone has a decent home, works fewer hours, can travel freely on the bus network and climate change is properly addressed. If it stopped at promising basic rights it may pass muster, but it extends into free university tuition fees and halting the changes to state pensions as well as buying out large chunks of industry. These are costly items and the spending spree keeps mounting, In the past week it has conjured up an extra £30bn for Scotland alone.
Labour says its plans will be partly paid for by rebalancing the tax burden on to wealth (unearned income), through such measures as hiking capital gains tax on shares, while overlooking the impact that this has on pensions and other investments, including those of “working people.
Its plans to compensate women born in the 1950s who have lost their entitlement to state pensions until they are 66 is another eye-catching pledge and one that comes at a high price. Paul Johnson, director of the Institute for Fiscal Studies says it immediately breaks the party’s promises in their manifesto just last week to only borrow to invest. The party would need even more than its £80bn of tax rises if it wanted to cover the pensions shortfall.
Paul Johnson also points out that whilst some of this so-called Waspi women have suffered hardship, many of them are quite well off.
Aside from convincing sceptical voters that he can actually create this new utopia Mr Corbyn’s biggest challenge is himself. He is regularly rated the least popular leader and his radical agenda is certainly frightening a few horses. Businesses feel they will be hammered and already he has talked of hiking corporation tax at a time when rising costs is a major headache. Labour’s tax plans threaten to undermine Britain’s status as an attractive destination for overseas investors.
The party’s faith in the state is nothing new but it has very loud echoes of a less than glorious past, including the failed experiments in state ownership of industry that crippled the post-war economy. Nationalising rail, energy and broadband cuts out the shareholders whom Labour sees as good-for-nothing money-grabbers and has already sent shivers through two energy companies – SSE and National Grid – who have re-incorporated abroad in order to protect their investors.
The nationalisation of industries is usually sold as ownership by the people, although it rarely means giving power to the people. Instead it creates a new and expensive bureaucracy with the managers drawn from the same pool who operated them in the private sector. Taxes rise to compensate for the free buses and broadband being offered so that consumers are no better off.
In terms of performance nothing much changes, a lot of money is spent and we’re all made to pay for it.