Driven by data; ridden with liberty.
It has been a week since Jeremy Corbyn, the MP for Islington North since 1983, was elected as leader of the Labour Party . There has been much consternation about his fashion sense, or lack thereof, his abstinence from singing the national anthem and his appointments. Let us discuss policy instead.
On personal taxation , Mr Corbyn does not specify what the highest rate of income tax should be, but instead makes the following pledge:
Labour must make the tax system more progressive.
Mr Corbyn has also said there should be a national maximum wage , which among other effects, would limit the tax receipts on this highest rate of income taxation. Such a policy would be counterproductive, requiring greater taxation on other people to fill this artificial chasm.
With regards to corporation tax rate reductions, Mr Corbyn claims:
That political choice will see our revenue intake from big business fall by £2.5 billion in 2020.
No source is given for this estimate, but the Office for National Statistics suggests that corporation tax receipts — plus the bank levy — were £45.7bn in 2014-15, compared to a peak of £47.0bn in 2007-08 .
On ‘rebalancing’ the economy, Mr Corbyn suggests:
Another option would be to strip out some of the huge tax reliefs and subsidies on offer to the corporate sector. These amount to £93 billion a year – money which would be better used in direct public investment, which in turn would give a stimulus to private sector supply chains.
This estimate comes directly from Dr Kevin Farnsworth, a sociologist at York University . Whilst it is agreed that the British government does offer favourable tax reliefs to corporations, the single largest component of the £93bn estimate is capital allowances of £20bn. As highlighted by tax barrister Jolyon Maugham , capital allowances are not a subsidy: they are a recognition of costs when calculating corporation tax, which is a tax on revenue minus costs. To that extent, the report wrongly asserts: “capital allowances effectively socialise the risks associated with private business investment”.
Moreover, if Mr Corbyn wishes to remove capital allowances, then he proposes to place greater taxes on capital-intensive businesses, such as manufacturing companies, which his document claimed that he wished to “rebalance” the economy towards. It is implausible that simply removing some of these tax reliefs will have no negative consequence on production.
On ‘tax justice’, Mr Corbyn repeats another erroneous estimate:
A detailed analysis last year produced by Richard Murphy suggests that the government is missing out on nearly £120 billion in tax revenues, per year.
That’s enough to double the NHS budget; enough to give every man, woman and child in this country £2,000.
This statement implies the ballooned amount is fully recoverable . It is plainly not. Whilst this overall tax gap estimate sits much higher than the HMRC estimate, HMRC do not believe their lower estimate of £34bn is recoverable .
Mr Corbyn continues onto infrastructure investment:
These funds could be used to establish a ‘National Investment Bank’ to invest in the new infrastructure we need and in the hi-tech and innovative industries of the future.
Other banks of this kind, such as Germany’s KfW , have much wider remits, funding their activity “almost entirely thorugh international capital markets”. National investment banks are normally buttressed by taxpayer funds, rather than wholly government-run. Also, if the remit is entirely within public infrastructure, then it will be permanently dependent on taxpayer support, meaning it is not clear if this bank would increase — rather than simply supplant — the state investment in infrastructure. In this sense, the proposed bank is not a bank at all, since it provides no financial return, but it would be a misnamed state investment organisation.
Another option that Mr Corbyn posits is:
One option would be for the Bank of England to be given a new mandate to upgrade our economy to invest in new large scale housing, energy, transport and digital projects:
Quantitative easing for people instead of banks.
Firstly, quantitative easing was not for the banks. Its purpose is to lower longer-term borrowing costs. This is explained by the Bank of England itself :
The Bank of England electronically creates new money and uses it to purchase gilts from private investors such as pension funds and insurance companies. These investors typically do not want to hold on to this money, because it yields a low return. So they tend to use it to purchase other assets, such as corporate bonds and shares. That lowers long-term borrowing costs and encourages the issuance of new equities and bonds and that should stimulate spending. When demand is too weak. QE can help to keep inflation on track to meet the 2% target.
QE does not, as is sometimes suggested, involve printing more banknotes. And QE is not about giving money to banks. Rather, the policy was designed to help businesses raise finance without needing to borrow from banks. And also to lower interest rates for all households and businesses.
Secondly, according to Mr Corbyn’s own statements, “quantitative easing for people” would involve the central bank directly increasing the money supply, rather than the broader monetary base, which is clearly inflationary . It is not explained whether Mr Corbyn wishes to have substantial higher inflation, nor considered the effect of inflation on those with low or fixed incomes: the people that Mr Corbyn has pledged to assist.
Thirdly, this policy lacks the reversibility of quantitative easing, as infrastructure could hardly be left unfinished, meaning this is another misnomer.
Fourthly, this mandate on the Bank of England contravenes Article 108 of the Treaty establishing the European Community :
Neither the ECD, nor a national central bank… shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body.
Given that Mr Corbyn has reasserted Labour’s commitment to membership of the European Union , this contradiction requires a resolution. Moreover, despite the assertion of his supporters that Mr Corbyn is a man of principle, the idea of “quantitative easing for people” is insiduously populist.
On energy matters , Mr Corbyn says:
We must take action now to keep fossil fuels in the ground – end dirty energy handouts, ban fracking and set a target date to end new fossil fuel extraction, and begin to phase out high polluting coal power stations with support for workers to re-train.
However, Mr Corbyn said on re-opening the coal pits :
Where you can re-open pits – yes – and where you can do clean burn coal technology yes.
Hence, despite wanting to end new fossil fuel extraction, Mr Corbyn vowed to begin new fossil fuel extraction.
Similarly, Mr Corbyn’s statements on foreign affairs are muddled. Mr Corbyn has suggested his predecessor Tony Blair should face trial :
If he has committed a war crime, yes. Everybody who has committed a war crime should be.
As Public Policy and the Past iterates , the questions are abound: what crimes against what laws in which court? When asked by fellow candidate Liz Kendall if he foresaw any circumstances in which we would deploy Britain’s military forces, Mr Corbyn replied :
Any? I am sure there are some. But I can’t think of them at the moment.
The Guardian summarised Mr Corbyn’s views are that the United Nations “should approve any British military deployment”, meaning that foreign nations would have a veto on Britain’s use of military force.
Mr Corbyn’s statements on the death of terrorist Osama bin Laden have suffered some misrepresentation. Mr Corbyn leads his comments with :
I think everyone should be put on trial. I also profoundly disagree with the death penalty under any circumstances for anybody, that’s own my view.
However, Mr Corbyn does say on the Iranian state network Press TV that “Bin Laden may well have been dead a year or two for all we know”, continuing:
We can only guess that there’s something fishy here. Either Bin Laden wasn’t there, therefore there has to be a story, or the pictures are very gory, or they show something else such as that he was unarmed and was shot, as may well be.
This actually contradicts his reasoning behind the description of this “tragedy”. If Osama bin Laden was armed and posing a threat to the life of those committing Operation Neptune Spear, then it was not an assassination. Mr Corbyn, on Iranian state television, espoused conspiracy theories concerning bin Laden’s death.
Labour’s leadership election transmuted Mr Corbyn from a consummate backbench campaigner into the constitutional leader of an alternative government. Whilst his supporters demand intellectual purity, there are distinct incentives and constraints binding backbench MPs and opposition leaders.
Whilst a backbench MP can pursue lone and implausible ideals, the Leader of the Opposition must provide a coherent, comprehensive and pragmatic policy programme. To its supporters, Labour are the party of the modern world, of progressive politics, of internationalism. Thus far, Mr Corbyn produced a list of reactionary and incoherent proposals. To recycle a phrase used by former leader Ed Miliband, Labour can do better than this.
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