How Labour’s economics of the madhouse would ruin UK, says ROSS CLARK


THIS was supposed to be the Brexit election, settling once and for all the agonising stalemate of the past three years. For many people on polling day the deciding factor will indeed be whether they want Brexit to be resolved, reversed or allowed to drag on.

But with the launch of Labour’s campaign it has become clear that an even more important choice confronts us all: do we want to carry on being a market economy, in which we are largely left alone to spend our own money and make decisions which affect our lives, or do we want to be a Soviet-style command economy in which the government makes these decisions for us? Astonishingly, Jeremy Corbyn told an audience in Telford that he finds “depressing” the thought that young people should “have to make their own way in the world”.

It says all you need to know about him – that he doesn’t trust us to be put in charge of our own lives but wants an all-encompassing state to dictate just about all we do. It is the same with his attitude towards business. He talks about entrepreneurs as if they were evil and treats profit as a dirty word. Through his nationalisation plans he would put civil servants back in charge of running major industries – in spite of the mess they made in the 1970s.

And there are Labour’s tax-and-spend plans which would involve a massive expansion of the state. Shadow Chancellor John McDonnell says he wants to spend £150billion over the next five years on a “social transformation fund”, as well as £250billion over the next decade on a green transformation fund. An extra five per cent income tax on anyone earning more than £80,000 a year would be quite a hit in the pay packet for doctors and headteachers, but you wouldn’t end up with many people fleeing Britain just over that.

But when you start to examine Labour’s plans in more depth the consequences become clearer. The two commitments announced so far would mean the government spending an extra £55billion a year. That is nearly a seven per cent increase in public spending – and that is before the manifesto launch. If Labour commits to abolishing tuition fees, for example, that will add another £10billion annually.

McDonnell isn’t going to raise this money through higher income tax on the better off. Labour’s own analysis before the 2017 election suggested that it would raise only £4.5billion this way. The Institute of Fiscal Studies warned the tax rise might raise nothing at all, as high-earners emigrated or did less work.

As for Labour’s plan to raise an extra £19billion by jacking up corporation tax rates by 50 percent, it is laughable. It assumes that companies will just sit by and cough up the extra money. In practice, many companies will shift profits abroad – if not relocate their entire operations.

McDonnell is threatening to take a hammer and sickle to the City of London, and to seize 10 percent of company shares in order, so he says, to set up funds for workers, from which they might, if lucky, get £500 a year in dividends. For that modest reward, workers will suffer massive losses from their pension funds. Shareholders aren’t all wealthy capitalists – almost all of us own shares indirectly through our pension funds.

McDonnell’s only realistic way of raising an extra £75billion a year is to borrow it. But who from? International investors will be pretty shy lending money to a man who has seized shares with no compensation to shareholders. How could they be confident he wouldn’t default? If they do lend, they will demand substantially higher interest rates.

For now, the Government can cope with the debt left over from Gordon Brown’s own spending splurge because interest rates are still at 400-year lows. But if rates rise, government debt will very rapidly become an albatross around the nation’s neck. Few taxpayers remember the 1970s when Labour chancellor Denis Healey was forced to go cap in hand to the International Monetary Fund to bail out his government – a request which was granted but only in return for deep spending cuts. But if McDonnell gets his hands on the public finances that will have been a mere rehearsal for national humiliation.

Unfortunately, a lot of voters have yet to appreciate the economic dangers of a Corbyn government. According to a YouGov poll yesterday, a shocking 52 percent of the population don’t think that taxes would rise under a Labour government – even though the party has said numerous times that they will. Hopefully, as the election campaign draws on, voters will become better aware of Labour’s real plans.


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