There is more to Labour than Corbyn and Blair

This good, noble Corbyn vs. the evil, bad Blairites is probably the most unhelpful and self-pitying false dichotomy I’ve come across in a long time. It’s a profound misrepresentation of an extremely complex situation that simplifies and distorts the total rejection of Jeremy Corbyn by the PLP into some ridiculous good vs evil narrative, ignoring Corbyn’s own complicity in sabotaging the Labour Remain campaign and putting his own personal positions above the good of his party.

There are a whole range of positions in between Blairite and Corbynite, some of which are in fact also anti-austerity – most prominently, the soft left (which is where the PLP have drawn their candidate for this leadership contest) – Ed Miliband, Stephen Kinnock (although a hashtag like‪#‎StandUpForSteel‬ being used by the son of that well-known member of team blue, Neil Kinnock? Basically Tory!!!111) and Angela Eagle are not blue Labour. Moreover, do some basic research into the names that honestly none of us know from the Shadow Cabinet, and you’ll also see plenty of soft left and even Corbynite resignations: Karl Turner; Lisa Nandy (who is so left Owen Jones once considered trying to make her leader when Miliband resigned); Kate Green; Luciana Berger. All fall to the left of centre by some margin.

Several former prominent allies have turned on him. Economic advisers such as Richard Murphy, David Blanchflower, and Simon Wren-Lewis have disavowed Corbyn, whilst well-known socialist blogger and columnist Owen Jones has turned on Jeremy Corbyn – for not being radical enough.

Yet when Owen Jones – a prominent Chavista – has been dismissed as a Blairite by angry Corbynistas, then clearly things have gone too far. This is not a case of the Blairites vs Corbyn the underdog, it is a case of a broad spectrum of progressive ideologies – including even some who subscribe to Corbyn’s politics – within Labour, where essentially all have recognised Corbyn is simply unfit to lead the party.

What does Blairite even mean? I always picture a little cult lead by Alistair Campbell, meeting up in hood-and-cloak and using the dodgy dossier as their bible – before sacrificing a Bennite backbencher to a statue of their glorious leader, screaming “elections are won from the centre ground”.

But I don’t know. I mean, if you like budget surpluses, investing in the NHS and the minimum wage, but aren’t so keen on illegal wars, does that make you a Blairite? Can you despise Blair but subscribe to New Labour and be a Blairite? What if you served in cabinet under Blair? What if you thought New Labour was right at the time but now want to move the party in a different direction; a new clause iv moment?

Because of this, “Blairite” is a useless pejorative designed to tie up New Labour and its successes (economic stability and budget surpluses, tackling monopolies, investing in schools and the NHS, introducing the minimum wage, same-sex adoption) with the personal failures of Blair (illegal wars and allowing Labour to drift away from the borrowing to invest mantra of the early years in the later years). It’s a cheap and tacky way to associate even the hint of support for New Labour policy with condoning the personal actions of Blair, and has no place in enlightened and reasonable political discourse.

Finally, let’s get some perspective when attributing motivation. Looking at this through this good v evil, Blairite or Corbynite lens, it’s easy to paint this as a self-interested coup by Blairites trying to get an edge before Chilcot. However, try and view the split with a bit more nuance and objectivity (as much as is possible in such things), and without imposing your own motivations and beliefs onto others, and you will see that from the start of Corbyn’s leadership of Labour, the opposition of the PLP to Corbyn has been that he has only appeals to the core of the party, and to very few outside of this core.

Similar to Trump in the Republican primaries, it is the parochial nature of his appeal that both guaranteed his success in a narrow vote (his “historic mandate” measures at less than 1% of the total number who voted in the 2015 GE) by Labour activists, and dooms him to failure in a general election (YouGov, Ipsos Mori, candidate polling during the 2015 leadership contest, leaked internal Labour polling of 2015 Labour voters all attest to his fundamental unelectability, even in the rare windows when his personal approval ratings were above Cameron’s).

Most of these MPs are probably scared that many of their colleagues and friends (20-60 depending on whose estimates you believe) are going to lose their jobs – in 2020, or perhaps in 6 months if Theresa May chooses to try and overcome the 66% commons vote needed to secure an early general election per the FTPA.

More than that, most of these MPs are scared that their party is on the verge of a split and preparing the country for a massive Tory majority – and the brutal policies that will accompany this. Furthermore, don’t dismiss the EU referendum as merely an excuse for this vote – I’ve no doubt that some “ringleaders” have been plotting for a while, but many from the soft left, including some of Corbyn’s allies, have either resigned from their positions or spoken out against him, generally citing personal reasons.

So basically, as much as we like the greedy, self-serving MP narrative, most MPs have at least some ideological preferences, and even if some in the PLP are 100% Machiavellian, I can guarantee that the overwhelming majority of those voting against Corbyn simply don’t want a blue decade. I don’t support the coup and would just personally leave Corbyn to lose next election as Labour regardless are unlikely to win, but I can fully understand the motivations and actions of those in the PLP, which are largely about the good of the party – and neither motivated by self-interested nor Blairism.

Conor Dunwoody

Corbynomics: Fantastical Solutions to Real Problems

 

13876195_10206403475116814_8645167642254572660_nCorbynomics: that vision of a fairer society, built upon an economy that worked for the 99%, and trumpeted by the likes of Nobel prize-winner Paul Krugman…what on earth has happened to it?

Trouble has been brewing for a while, but things reached a head with the revelations of Corbyn’s inept management of the PLP during and after the failed coup. Notably, TUC economist Richard Murphy delivered an absolutely stunning attack piece on Corbynomics, where he criticises Jeremy Corbyn, John McDonnell, and the Corbyn office as a whole. The formerly fervent Corbynista, described as “the creator of Corbynomics” on the cover of his ‘The Joy of Tax,’ has gone so far as to brand Corbynism as ‘an empty shell that opposes capitalism for the sake of the oppressed but has no clue as to what to yet [sic] in its place.’ [1]

McDonnell tried to dismiss Murphy as merely an influence on fiscal rather than macroeconomic policy, but considering how Corbyn appropriated Murphy’s ideas beyond merely taxation (namely a National Investment bank and People’s Quantitative Easing – more on that below), this seems to be fairly empty spin that is trying to obscure one simple fact: Corbynomics is imploding in on itself.

Murphy was not the last Corbynomicist to disown the approach as a lost cause, with two senior economic advisers to Corbyn defecting to the Owen Smith camp. In amongst all of this, the Corbyn team has been cleaning up their website, with the deletion of specifics of Corbyn’s policies (eg. on investment and tax justice) only heightening confusion over what exactly Corbynomics actually means.

In amongst these chaotic ruins of Corbynomics, we can still try to salvage some kind of idea of which economic policies Jeremy Corbyn favours ahead of the upcoming Labour leadership contest. Due to the confused subsequent information, and in lieu of a proper manifesto, we will have to have to make do with the broad economic vision that Corbyn outlined in 2015: ‘The Economy in 2020.’


The Budget and Austerity

“Austerity is about political choices, not economic necessities.”

Here is the central thrust behind Corbyn’s entire political platform – and it is a stance that is more or less true. Austerity largely was the result of an emotional appraisal of the 2008 financial crisis as resulting from government spending and borrowing, rather than as resulting from bank spending and borrowing.

“The inheritance tax changes will lose the government over £2.5 billion in revenue between now and 2020.”

Fair point – the inheritance tax cuts were designed to appeal to the Conservative voter base, rather than for sound economic reasons. However, the five year timeline Corbyn quantifies this lost revenue with is misleading; £500 million pa is a relatively small amount in terms of the overall budget.

“Another choice was to cut corporation tax – already the lowest in the G7 at 20%. Lower too than the 25% in China, and half the 40% rate in the United States.”

Corporation tax is a difficult measure to get right. Primarily, a country’s corporation tax rate is a measure foreign firms use when assessing how attractive a country is as a place where you want to set up shop; lower corporation tax attracts more corporations, and the jobs and capital that comes with them.

The threat of a race to the bottom in carelessly cutting corporation tax is real. This cannot be understated – especially in light of George Osbourne’s recent pledge to cut corporation to below 15% in the light of the British exit from the EU, in an attempt to maintain continued investment in our economy; British corporation tax stood at 30% in 2007. [2] The IFS estimates that, adjusted for 2015-16 prices, cuts to corporation tax between the 2010 and 2016 budgets have cost £10.8 billion pa, whilst FullFact demonstrates that, in real terms, corporation tax revenues stood 21% lower in 2014-2015 than they did in 2007-2008. [3]

corptaxreal
These figures are in real terms (ie. adjusted for inflation) – corporation tax receipts in 2007-08 were £47bn at 2007-08 prices

But perspective is needed here. For one, the IFS report highlights that the bulk of this 21% real drop in corporation tax revenues since their 2008 peak must be attributed to declining corporate revenues, rather than corporation tax revenues – a consequence of the Great depression. Furthermore, corporation tax in 2014-2015 was 6% higher in real terms (17% higher absolutely) than in 2009-2010. [4]

£10.8bn pa is a lot of money, but it is only a small fraction of total GDP – which stood at £1,833,233 m in 2015 – and most of this loss is attributable ultimately to a depressed corporate sector rather than corporation tax cuts. [5] The question is whether the money that is lost directly from corporation tax cuts is significantly less than the extra money invested into the economy.

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As the above slideshow demonstrates, the indicators are clearly that increasing FDI is offsetting these losses. Less may be raised in tax revenues, but more will be invested by foreign investors. Furthermore, all corporations eligible for the tax reduction are likely to spend more, thus generating new jobs and higher wages; the official HMRC and HM Treasury 2013 ‘Analysis of the Dynamic Effects of Corporation Tax Reductions’ posits that reduced corporation tax enables increased investment, and thus higher output – leading to increased demand for labour. [6] Per the multiplier affect (spending circulates and generates spending elsewhere), generate capital in the wider economy.

Nevertheless, why cut Corporation tax at all, if it is “already the lowest in the G7 at 20%”? There are several reasons:

  1. Investors see markets such as China as “on the up” ie. growing markets where their investment will reap rich rewards in the future, so there is the need for markets like Britain to provide other reasons to attract investors – competition
  2. It allows us to consolidate our existing advantage in the financial sector – to stay ahead of the curve
  3. It may sway Chinese investors who saw a 5% difference between Chinese and UK corporation tax as insufficient to finally make the jump. The same logic applies to investors in other countries with marginally higher rates of corporation tax worldwide, or even investors in countries with lower rates of corporation tax (such as Ireland)

This is all very confusing, but one basic point should be very clear: higher corporation tax does not necessarily mean better economic performance, nor even necessarily higher corporation tax revenues in the long run – and vice versa.

An Economy That Works For All

“Our national infrastructure – energy, housing, transport, digital – is outdated, leaving the UK lagging behind other developed economies.

Modern housing, transport, digital and energy networks are the foundation stone of a modern economy, and we need to ensure they are among the best in the world.

The ‘rebalancing’ I have talked about here today means rebalancing away from finance towards the high-growth, sustainable sectors of the future. “

Corbyn highlights three salient points here:

  1. Our infrastructure is underdeveloped – especially when compared to that of other leading European economies
  2. There is a serious housing shortage in this country
  3. We are too reliant on finance; our economy would benefit from some diversification (a fact which has become even more apparent post-Brexit)

However, as with before, Corbyn struggles both to offer compelling solutions, or to offer credible methods to achieve such solutions when they are proposed.

“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 pro- jects: quantitative easing for people instead of banks. Richard Murphy has been one of many economists making that case.”

This suggestion shows Corbyn’s misunderstanding of how quantitative easing currently works in this country and, by extension, why it works in this country.  Currently, quantitative easing is conducted by the Bank of England primarily via the medium of government bonds (gilts), ie. the BofE invests the proceeds of the easing into these gilts. The BofE is free to sell these gilts back to the government, or indeed to private investors, at any time, meaning that they remain in control of inflation levels; keeping inflation as close to 2% as possible is the whole mandate for an independent BofE, to achieve price stability.

bofeQE

Conversely, people’s quantitative easing (PQE) by investment is a more troublesome proposal. The suggestion is instead to set up a National Investment Bank (NIB – more on that shortly), which has its own bonds. It sells these to the BofE, with the proceeds invested in real, concrete assets rather than liquid assets. There are some serious issues with this:

Firstly, disinvestment from a half-finished road or power plant is neither desirable nor feasible. In traditional QE, the government does not need to necessarily buy back, as these can just be sold to any buyer – but it is an option, as traditional QE works by increasing the cost on gilts and encouraging private investors to invest elsewhere, rather than by directly “giving the government money.” Why would private investors invest in incomplete infrastructure if there was a need to slow the rate of PQE?  In the case of PQE, the NIB cannot buy bonds back from the BofE without borrowing in such an occurrence as the funds would have been spent on the infrastructure investment – why not just finance government spending by borrowing if this is what you want to achieve?

Because of this inability of the BofE to control the rate of QE, this proposal would diminish the BofE’s ability to control the level of inflation, and essentially force them to act in a way that would undermine their primary mandate. Indeed, the precedent that investing via QE would set could and probably would lead to an increasing presence of, and acceptance of, high levels of inflation – as Roger Bootle argues, ‘committing to the permanent injection of more liquidity implies acceptance of whatever inflation rate emerges.’ [7]

Besides the more mundane risk of unacceptably high levels of inflation (such as under the ERM in the Major years), there are also the more extraordinary risks of stagflation (especially post-Brexit) and even hyper-inflation if too much inflation is carelessly injected into the economy via PQE. Equally, PQE also encourages the financing of pet-projects, funded by the politically expedient act of injecting inflation rather than increasing borrowing or taxes. [8] To this end, Mark Carney, Governor of the BofE, has broken the BofE convention of neutrality to criticise the idea of PQE, saying that it could “imperil” Britain’s price stability, and highlights that these inflationary consequences would actually hurt the poor and elderly more than any other group – rather at odds with the idea of an “economy that works for all.” [9]

mark carney
Mark Carney – not a fan of “People’s Quantitative Easing”

Furthermore, whilst it is a brief footnote in the post-Brexit world, such a policy of PQE is actually in violation of a Article 123 of the Lisbon treaty. [10] This could still be problematic, however, if an early election is called, and should not be dismissed as entirely irrelevant.

Finally, it is worth remembering the views of Richard Murphy, the economist referenced here as the source of PQE. He believes that “PQE is a plan for downturns. In up turns you can sell bonds for the same Infrastrxuture [sic] investment goal.” [11] Why, then, is Corbyn proposing a measure its creator believes is only appropriate in a recessionary environment, at a time when our economy is still growing? Does he believe we will experience a downturn by 2020?

“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.”

Firstly, the £93 billion figure used here has been robustly challenged. One reason for this is that the paper it is derived from counts state spending on education and the NHS – state spending that Corbyn, and indeed any Labour candidate, would increase – alongside reliefs and subsidies granted to the corporate sector. [12]

Moreover, as The Economist has noted, measurably more money is invested in research and development resulting from tax credits offered to these corporations than is lost from granting these credits. [13]

Nevertheless, the observation that investing into infrastructure would help private sector supply chains stands true – so why not achieve this without simultaneously undermining the private sector? Funding this investment through borrowing, as proposed by Owen Smith, would be more credible than inventing figures, whilst also more effective than stripping the private sector.

“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.”

We’ve already discussed how and why a NIB that works via quantitative easing is a terrible idea – there’s no need to repeat this point. However, a more traditional ‘National Investment Bank’ independent of the Government but with a mandate (similar to the BofE) could still be a good long-term recommendation to help address the deficient investment and underdeveloped infrastructure in this country.

Nevertheless, this would be an expensive undertaking – more credible funding methods would be needed than those outlined here – it certainly could not be funded through Corbyn’s proposal to cut corporate subsidies and reliefs. Moreover, borrowing would be an inappropriate way to fund such a bank in the long-term.

Regardless, provisions for the kind of infrastructure investment that is being discussed here should have been made a long time ago, under New Labour – their significant investment in the NHS and education was admirable, but much of this money should have gone to improving our unacceptable infrastructure.

“To invest in infrastructure also requires a clear strategy in the construction, manufacturing, and engineering skills to build and maintain that new infrastructure so vital to sustainable economic growth.

So taking this approach, in the coming days this campaign will set out how we propose to invest in adult education and further education more generally to get the high skill, high pay, high productivity workforce we all want – building on our announcements already on university education”

Once more, there are no proposals of any substance relating to manufacturing – just hot air. In light of Brexit and the economic consequences thereof, it has become clear that Britain needs to refocus its economy into having a more prominent manufacturing element – but this is easier said then done.

uklabourproductivity
British productivity has been deficient for a while – a trend which has worsened since the crash

However, there are some promising signs regarding the promise of a “high productivity workforce.” Every political party promises massive boosts to productivity via technological innovation and education, yet this is rarely achieved outside of technology-based bubbles. Nevertheless, Corbyn’s focus on higher education, combined with the aforementioned investment in infrastructure, is probably a good place to start. A good specific policy here would be for Corbyn to promise to overturn Theresa May’s measures that mean international students have to return home upon graduation, as this policy will deprive the UK of educated and skilled members of the workforce – two traits essential in boosting productivity.

Taxation

“The biggest issue facing British politics right now is whether the top rate of tax should be 45% or 50%…

So I make this pledge: Labour must make the tax system more progressive:

Ensuring that those with the most pay the most, not just in monetary terms, but proportionally too.”

Let’s be clear: a more progressive tax system is beneficial to society as a whole, if not the stratified elite of said society. However, you need to take care that your measures to reform tax are not counter-intuitive – that they don’t actually harm rather than help the bulk of society in whose benefit they are being raised.

A 5% tax rise is not a credible way to increase tax revenues. Notably, in 2014, the IFS supported HMRC’s estimate that increasing top rate tax to 50% may net as little as £100 million pa more, with the potential to swing upwards or downwards of this total. [14] These statistics are contested and the debate continues, but when lost investment is taken into account, the net effect of such a tax increase could be negative.

laffercurve
The famous and oft-debated Laffer curve suggests that after tax reaches a certain level, any further increases will lead either to individuals working less, or evading and avoiding tax; the UK’s top rate tax is currently either at, or very close to, this point

A more extreme example of the dangers of arbitrary tax hikes for the wealthy comes from France, where top rate tax was increased from 50% to 75%. The tax raised 420 million Euros over two years, however earnings from the tax fell by 38.4% between the first and the second year in which it was collected. [15] This relatively unimpressive figure was not deemed a good trade-off for the anti-business image it generated; the government, struggling to attract foreign investment, quietly killed this tax off after just two years.

Perspective is of course needed here: The French tax increase failed, however it was an increase of 25%, whereas most members of the left are only discussing a 5% tax rise. Still, in combination with the unimpressive returns of top rate tax increases under New Labour, the conclusion is clear: increasing top rate tax past a certain point adds very little in the way of revenues.

Tax Justice

“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 is first-class economic quackery based upon hilariously flawed estimates – and an equally shameful misunderstanding (or perhaps deliberate misinterpretation) of said estimates:

To begin with, Richard Murphy’s (remember him?) estimates of a £120 billion total tax gap are well above the £38 billion total tax gap HMRC official estimates. [16] However, despite the huge gap between Murphy’s and HMRC’s estimates of the total tax gap, Corbyn and Murphy both propose to significantly increase HMRC’s funding. Why, then, do they not trust its estimates?

Moreover, Murphy himself conceded his (already excessive) £120 billion estimate relates to the total tax gap rather than collectable funds – only £20 billion of this, per his estimates, is actually collectable. [17] He tries to defend this by insisting that neither he nor Corbyn claimed that £120 billion was the actual collectable amount – but clearly Murphy is not familiar with the concept of lie by omission.

Corbyn’s document makes no mention of the fact that only 1/6 of this £120 billion can be raised, and very obviously implies that the full amount can be collected (read it yourself). At the most generous reading of this, the absence of this fact can be regarded as a reflection of Corbyn’s fundamentally weak grasp on economics – and thus not deliberate. At worst, it must be regarded as an indefensible lie of omission – and thus deliberate.

ed-miliband-sad-face_0
Poor Ed could never catch a break – especially with his shaky economic policies (plot twist: they just weren’t tough enough)

On this point, it is worth referring to other estimates by similar mainstream parties. Primarily, in 2015 the IFS criticised Ed Miliband for claiming that even £7.5 billion could be raised through combating tax avoidance, whilst the slightly more conservative Lib Dem (£7bn) and Conservative (£5bn) estimates were also criticised. [18]

“Therefore I am announcing today that my fairer tax policies will include:

• The introduction of a proper anti-avoidance rule into UK tax law.

• The aim of country-by-country reporting for multinational corporations.

• Reform of small business taxation to discourage avoidance and tackle tax evasion.

• Enforce proper regulation of companies in the UK to ensure that they file their accounts and tax returns and pay the taxes that they owe.

• Lastly, and most importantly, a reversal of the cuts to staff in HMRC and at Companies House, taking on more staff at both, to ensure that HMRC can collect the taxes the country so badly needs.”

Nevertheless, whilst the amount these measures will raise is nowhere near Corbyn’s laughable suggestion of £120billion, the measures themselves are (broadly) good – although rather vague. “Proper anti-avoidance rule” – what about these rules would differ them from current improper rules? Granted, this is not a manifesto – but Corbyn needs to iron this kind of stuff out before 2020 if people are going to take him seriously.

Most of these other measures, again, are theoretically good but conveniently vague – a trend you should have noticed throughout this document that cannot simply be excused in that it is not a full manifesto. Even as policy flavours, these are lacking.What kind of international cooperation? Who with? How will Corbyn ensure that other countries don’t dodge these measures, to create a haven for foreign investors? (eg. Switzerland)

The proposal to reverse HMRC cuts, however, is as specific as can be expected – and is a good suggestion. Corbyn rightly notes that the government has reversed prior cuts, but not by enough. Increasing funding to HMRC would likely not increase tax revenue by nearly as much as Corbyn believes, but, so long as the funding was used wisely and alongside improved measures to combat tax avoidance, it could make a real difference.


Concluding Remarks – How to Make Anti-Austerity Work

What seems to be underpinning this all is a complete lack of any clear vision; Corbyn has a few policy-shaped puzzle pieces, but no idea as to how these slot together to solve the problem of a broken economy. Corbynomics seemingly amounts to a bizarre collection of populist left-wing policies, shackled to a deficit-cutting, anti-borrowing backdrop. The policies don’t work, they don’t fit together, and they actively contradict this negative anti-borrowing backdrop.

Anti-austerity measures do work. Most of the basic areas Corbyn highlights are correct: we should invest more in infrastructure; our economy is too reliant on finance; our productivity is low. However, the actual policies deployed to target these measures unfortunately fall short. Corbynomics must thus be dismissed as fantastical solutions to real problems – but that doesn’t mean that we can’t devise real solutions.

Top rate tax is just a headline-grabber – increasing it wouldn’t raise any significant amount, and would easily be dodged. If fiscal measures were going to be taken, increasing the top rate tax on dividends – which is far lower than top rate income tax (38.1% vs 45%) – would be shrewd, as the discrepancy between the top rate income and dividend taxes currently allows top earners to cut their tax bill by dumping money into their company’s shares. Intriguingly, the government has already taken measures recently to try and close this gap, but there is still room to increase this tax. [19]

As well as top-rate dividend increases, road tax could also be increased for more expensive vehicles; you can’t dodge a tax on a car you need to get to work

Outside of looking at the rate of corporation tax, Corbyn could likewise look at what the IFS refers to as “corporation taxes” – a group of taxes including petroleum revenue tax, oil royalties, windfall tax on tobacco companies, the diverted profits tax, bank surcharge and the bank levy.

corptaxoffshore.png
The offshore corporation tax trend since 11/12 is not a progressive one

Following on from this, there is case specifically to reform offshore corporation tax  – if not in rates then in how it is collected – as seen above. Despite an increase in onshore corporation tax revenues in 2045-15 leading to a net increase in 2014-15 corporation tax revenues, offshore corporation tax revenues did fall.

If the goal is a more progressive tax system, then introducing more tax bands would be a laudable way to achieve this. The UK currently only has three tax bands:

  1. basic (20%)
  2. higher (40%)
  3. additional (45%).

The difference between the higher and additional rates are so low that they barely even qualify as separate tax bands, and thus Britain essentially only has two real tax bands, with a 20% gulf between the two.

Compare this to the US income tax system, where there are 7 different tax bands: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Reforming our tax system to account for the huge 20% gulf between our rates of basic and higher tax would be a progressive measure of taxation. It would not be a popular with the election-dominating middle classes, but Corbyn has thus far appeared unconcerned with such matters.

Likewise, Corbyn’s suggestions to increase the funding of HMRC and tighten up tax law are credible ways to boost tax revenues. Closing such loopholes are the kind of measures that would work, rather than the entirely-emotional suggestion to increase top rate income tax; the devil is in the detail.

The closest Corbynomics comes to a central thrust is the need to invest – even though this is a case that publications such as The Economist have been making for a long time. Furthermore, even here there doesn’t seem to be any real depth. Its not enough just to invest – investment must be made prudently, and with the long-term as well short-term implications assessed.

Investing in the right areas can resolve other issues. For example, investing in tidal power (and taking advantage of a natural advantage of the UK ie. its large coastline) could give the UK a competitive edge in this area, thus boosting manufacturing (Asia produces cheap, simple goods as Britain produces expensive, complex goods) and equally creating high-skill, productive jobs – whilst also reducing business costs by providing cheaper power (US manufacturing renaissance has been significantly facilitated by shale gas and reduced cost of power). Considering, too, that the pound is unlikely to ever return to its pre-Brexit strength – such measures would help redress our excessive trade deficit and take advantage of cheaper exports.

justintrudeau
Justin Trudeau could give Jeremy Corbyn a few pointers on how to fund infrastructure investment

 

Bizarre, too, is the demonstrably impossible budgeting Corbyn employs. A far more credible approach would be to employ a prudent short-term borrowing strategy, with these funds sensibly invested into infrastructure and other sustainable areas. Indeed, Owen Smith has put forward a £200 bn investment strategy funded in this way. Smith’s plan is probably too much, too soon. Borrowing, however, is currently cheap, and has effectively been utilised with some success by Canadian Prime Minister Justin Trudeau to invest in Canadian infrastructure – Labour politicians should take note.

As to why this all matters? The point of any Labour government is to help working people. For too long, the left has assumed this is all about expanding welfare and securing workers’ rights, with economic actions only considered in terms of tax hikes for the rich and transferring wealth from the private sector, whilst increasing borrowing finances increasing government spending – without due consideration of the consequences of this. Ultimately, we all comprise the economy, and we all suffer if it suffers.

Jeremy Corbyn understands that we don’t all suffer equally when this happens, and he is right to highlight it. Nevertheless, whilst he may have an idea of how to make our economy fairer, he does not have an idea of how to make our economy stronger. It is not a trade off; we can have both. We cannot and must not elect a government that cannot convert its good intentions into credible economic policies  – because a fair economy is worthless if that only means everybody is poorer together.

Conor and Sean Dunwoody


Additional Notes

  • Most of this article was written in early June – and thus pre-Brexit – with the last few additions and amendments made the week 01/08/16; back-tracking and u-turns are likely from the Corbyn office on some of these policies in the upcoming weeks of the Leadership contest (starting with the Cardiff hustings, today at 7PM)
  • Richard Murphy, despite defending Corbyn’s usage of his £120bn tax gap figure at the time, has subsequently expressed annoyance with how the Corbyn team misrepresented the figure (alongside the aforementioned broader attack on Corbynomics – both of which were attacks he made a while after we began writing this article).
  • All charts and graphs without a watermark taken from associated footnoted documents

[1] http://www.taxresearch.org.uk/Blog/2016/07/17/the-rise-and-fall-of-corbyns-economics/

[2] http://www.bbc.co.uk/news/business-36699642

[3] Institute for Fiscal Studies, ‘The changing composition of UK tax revenues,’ , (April, 2016), p. 18. ; https://fullfact.org/economy/corporation-tax-deficit-and-bedroom-tax/

[4] HMRC, ‘Corporation Tax Statistics,’ (May 2016), p. 9.

[5] https://www.ons.gov.uk/economy/grossdomesticproductgdp

[6] HMRC and HM Treasury, ‘An Analysis of the Dynamic Effects of Corporation Tax Reductions,‘ (2013), p. 25.

[7] https://www.theguardian.com/business/economics-blog/2015/sep/22/jeremy-corbyn-qe-for-the-people-jeopardises-bank-of-england-independence

[8] http://www.telegraph.co.uk/finance/economics/11862318/What-are-we-to-think-of-Jeremy-Corbyns-peoples-QE.html

[9] http://www.telegraph.co.uk/news/politics/Jeremy_Corbyn/11870215/Jeremy-Corbyns-policies-will-hurt-economy-Mark-Carney-suggests.html

[10] http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-viii-economic-and-monetary-policy/chapter-1-economic-policy/391-article-123.html

[11] http://www.taxresearch.org.uk/Blog/2015/09/15/yves-smith-nails-the-critics-of-peoples-qe/ (comments section, September 2015 reply to ‘paulc156’)

[12] http://www.economist.com/news/britain/21662588-what-do-economists-really-think-corbynomics-too-good-be-true

[13] Ibid.

[14] http://blogs.channel4.com/factcheck/factcheck-50p-top-rate-tax-bring/17601

[15] http://www.reuters.com/article/2014/12/23/us-france-supertax-idUSKBN0K11CC20141223

[16] http://www.cnbc.com/2015/08/18/peoples-qe-left-wing-leaders-plans-for-the-uk.html

[17] http://www.taxresearch.org.uk/Blog/2015/08/11/once-upon-a-time-the-times-was-the-paper-of-record-not-now/

[18] https://www.politicshome.com/news/uk/economy/news/63547/ifs-parties-just-making-numbers-tax-avoidance

[19] http://www.rossmartin.co.uk/directors/tax-efficient-remuneration/1591-summer-budget-2015-dividend-tax

 

 

Blairism, Protest Politics and the Moderate Path

tonyblair
A man as popular as an oozing haemorrhoid – and as persistent, too

http://blogs.new.spectator.co.uk/2015/12/in-defence-of-blairism-by-tony-blair/

“In defence of Blairism, by Tony Blair.” It is hardly surprising that, with a title like this, Tony Blair’s latest venture into political commentary features plenty of his trademark self-indulgent, self-pitying excuses. It is likewise not surprising that Blair has been reduced to writing his own history. After all, who will stick their professional reputation on the line in defence of this man, who bears joint responsibility for two disastrous wars and has become, albeit unfairly, blamed for the worst financial crisis in recent memory?

Nevertheless, I do believe that, beneath all of the hand-wringing and blame-dodging present in Blair’s latest treatise, there is an undeniable kernel of truth to what Blair is saying here that people will inevitably ignore because of who is writing it rather than what they are saying.

It pains me to admit it, but Tony Blair is right that this fixation with principles and ideals is damaging the Labour Party. It is obviously not the case that the principles themselves are the issue, and indeed a Labour with no principles would not be Labour at all. However, Blair is absolutely right to point out that principles should act as a guide for practical action, not as an ideological anchor that impedes progress and prevents debate; ideals should inform rather than dictate the policy of Labour.

And of course people will always say that there is no point in victory for the sake of victory, of becoming your enemy to defeat it. There is, of course, a certain truth to this – Labour always has and always must offer a better way than the Conservatives.

However, moving away from a traditional socialist position doesn’t doom Labour to simply offering a slightly different shade of blue, nor does it doom it to the timid, insipid, centrist-for-the-sake-of-centrist brand of politics offered by the likes of Andy Burnham and Yvette Cooper; Tony Blair is right to point out that New Labour was radically different from the Tories. For one, the minimum wage was a truly radical policy that only Labour could have introduced, with the Tories issuing dire warnings of mass unemployment should the National Minimum Wage Act go ahead. Furthermore, the Human Rights Act and Freedom of Information Act also show that within a moderate and realist party, you can still introduce powerful policies and offer a better way than the Tories; the current Conservative government has tried to undermine and repeal both acts

Moreover, whilst massive investment into the NHS and the education system may have failed to tackle the root problems both these systems face – the strain of an ageing population on the former and the anti-meritocratic nature of the latter – it did nevertheless improve upon the quality and availability of healthcare, as well as the GCSE pass rate.

newlaboureducationnewlabourgsce

These achievements cannot be forgotten, because they embody what Labour is truly about, and always has been about – helping people.

This cannot be achieved outside of government. As Blair highlights, the moral purpose of Labour is of little worth unless it can be applied practically. And as he also highlights, sometimes it takes more courage to compromise on ideals in the face of reality than it does to cling to them from the safety cushion that is protest, back-bench politics.

And the political wilderness of the backbenches, where protest reigns over governance and idealism over realism, is where Jeremy Corbyn has spent his entire political career. Even Michael Foot, the closest parallel to Corbyn in modern politics, had extensive experience in high-level politics when he became leader of the party.

By comparison, Tony Blair is the most electorally successful leader that Labour has ever had in its 115 year existence. Hate him all you like, but who knows? Perhaps the Labour leader with three general elections under his belt knows a bit about how to win them.

And this is the point that has to be made, because any leader who fails to win an election will ultimately be judged a failure. Unfortunately, for all his principles, the truth is that Jeremy Corbyn is simply not capable of leading an opposition to the Tories. Already, he is leading a capitulation to it. His brand of politics is simply too disparate with those of the electorate for Corbyn to ever lead Labour to an electoral victory. Last month’s ComRes poll puts Labour down two points, and although the Oldham by-election (a result that was never in doubt) has papered over the cracks, it will do nothing to solve the irrevocable disconnect between Corbyn’s ideas and those of the electorate.

Labour lost the last election for two simple reasons: people couldn’t see Ed Miliband as Prime Minister, and people didn’t trust Labour with the economy. How replacing Miliband with a well-meaning but ineffectual, life-long backbencher with poor dress sense and poorer leadership qualities will remedy the first of these problems is questionable. What is not up for debate, however, is that the naïve, anti-business economics of Corbyn and John McDonnell will not remedy this broken trust in economic matters.

“All of it is about applying values with an open mind; not boasting of our values as a way of avoiding the hard thinking the changing world insists upon.”

In such a circumstance, Labour will not win a general election. And through failing to make the compromises necessary to oust the Conservatives – who it must be remembered are also travelling on an increasingly worrying right-leaning trajectory – Labour will not be fighting for the people who need it, it will be abandoning them.

If there is one final point worth closing on, it is this: the principled opposition of the 1980s did not further the cause of left-wing politics, rather it crippled it. The “no compromise with the electorate” approach adopted by Michael Foot allowed Margaret Thatcher to dominate British politics for a wretched decade, and has left us with a country still living in her shadow.

Perhaps some of the changes Thatcher introduced were necessary. The World was moving towards a global economy; British industry was faltering; our economy was flagging. Had Labour properly engaged with these concerns, had properly respected the electorate and the realities of our democracy, perhaps they would have been able to offer their own solutions. Perhaps they would have been able to oversee necessary change without unnecessary cruelty.

What was not necessary, however, was the crippling of the trade unions; the antagonism of the North and of Scotland; the homophobic cruelty of section 28; the privatisation of our rails; the rampant deregulation of our financial sector facilitating the global financial crisis of 2007.

These were the consequences of the last time Labour chose principles over governance, with Labour’s inability to truly oppose the Conservatives in those Thatcher years felt now more than ever – look at how far the Tories have gone already in just the first year of majority government. 

Of course, Blair himself would defend and continue some of these Thatcherite policies – there is no doubt that lessons need to be learnt from the failures of New Labour. However, we cannot also forget the mistakes that preceded it, for repeating the mistakes of the 80s is not a vision of hope – it is a delusion. Labour needs to discover how to honour its past without becoming trapped in it, and therefore learn from both its successes and failures to thus truly embrace the modern era. The Britain Jeremy Corbyn envisions died in the 1980s; Labour cannot let its ghost haunt the party any longer.

Conor Dunwoody


Sources

ComRes poll – http://www.comres.co.uk/polls/independent-on-sunday-sunday-mirror-november-political-poll/

GCSE and A Level resultsCentre for Education and Employment Research, University of Buckingham/JQC

The War of the Roses

war of the roses

There is less than a month left until the victor of the Labour leadership contest is announced, and the media has been filled with pieces talking of Labour reaching a crossroads where they have to choose between head and heart, between opposition and governance. These pieces are as original in their content as they are useful in application, which is to say not at all. This hackneyed false-dichotomy of heart or head shows a complete misunderstanding of what this content is really about. To win once more, Labour needs to find a candidate who can speak from the both the head and from the heart, who can both lead a principled opposition whilst also presenting an electoral challenge to the Conservatives. To do anything less would be a betrayal of both the public Labour seeks to lead, and of the party members Labour claims to be led by.

This of course is a lot easier said then done, and requires a leader of both style and substance, the kind of leader from the ilk of Blair and Cameron. So far, none of the current crop come anywhere near – and this extends to socialist frontrunner Jeremy Corbyn.

Corbyn has certainly forged a strong emotional connection with the heart of the party – from the unionists to the progressive principles the party was founded upon – but leading the polls within the Labour party, skewed younger and more red than the rest of the country, is a somewhat flawed measure of determining appeal to the wider public.

In reality, outside of the left-wing bubble that is the Labour party membership, Corbyn simply is not viewed as presenting credible alternatives to the current Conservative policies, especially in the key area of the economy. Even within his own support base, Cobyn is perceived as far less likely to be a future Prime Minister than either Andy Burnham or Yvette Cooper: 43% of Labour members can see Andy Burnham as a future Prime Minister, compared to just 26% for Corbyn.

ispos mori poll2

This perception of Corbyn as so unelectable is down to more than just his brand of politics, with his political record simply inadequate for somebody running for this position. Though Corbyn has served as an MP for some 30years, he is a life-long back-bencher, always a voice for protest rather than of governance. Even in its overtly-socialist malaise of the Thatcher years, Labour was fronted by men who were more than just protestors – Michael Foot served in cabinet and as Leader of the Commons before he became leader of the party, whilst prominent socialist Tony Benn served both in cabinet and as Chairman of the Labour Party.

Furthermore, both Foot and Benn clearly projected authority as compelling orators and strong personalities. Whilst nobody can doubt that Corbyn is genuine in his ideas, he lacks the gravitas to convince the public he has the strength of character to push his ideas through parliament, or the diplomatic nous to go toe-to-toe with Putin.

This goes beyond just Corbyn’s ability to lead, too, and into whether he even really is the kind of character who wants to lead; he has shown no desire to hold any position of responsibility in his long political career, and moreover only gained the necessary nominations from MPs to enter the contest as he argued he was only there to “widen the debate.”

Yet despite the fact that seemingly none of the MPs who nominated Corbyn want him to lead the party, and despite the fact the man himself entered the race with no intention of leading the party, it is Jeremy Corbyn who is currently topping the polls, not Andy Burnham or Yvette Cooper. People can see Burnham or Cooper as a future PM, but they do not especially want them as PM. Credibility is nothing without connectability, and many in the Labour party seem perfectly prepared to remain in opposition if that is what it takes for the party to reconnect with its roots.

The Blairite candidate Liz Kendall has been leading the “anyone-but-Corbyn” charge, however her own campaign poses little threat to Corbyn. Indeed, that Kendall has joined the likes of Blair and Brown in condemning Corbyn has probably done just as much to help his cause as hurt it; within Labour, her ideas are seen as a betrayal of everything that the party stands for, so the fact she opposes Corbyn just further polarises Labour loyalists away from her Blairite rhetoric and towards Corbyn’s camp.

Kendall doesn’t fare much better in terms of support from the wider public, with her attempts to christen herself as “the candidate the Tories fear” backfiring in the face of opinion polls showing the public neither particularly like her, not perceive her as prime ministerial; a recent Ispos Mori poll showed just 16% of the public perceive Kendall as prime ministerial, which actually puts her below Corbyn and 11% below Burnham. Despite an endorsement from party darling David Miliband, Kendall still only has a paltry 8% share of first preference votes per the latest YouGov poll. A more recent poll by Survation puts Kendall at a somewhat more favourable 12%, whilst a YouGov/London Evening Standard poll puts her support at 6%-12%, depending on how the question was phrased. The most damning indictment of Kendall’s irrelevance, however, is that the most recent YouGov/Times poll did not even bother to ask respondents about their support for Kendall.

ispos mori poll

Yvette Cooper has too many factors against her to really establish any kind of connection, either with her party or with the wider electorate. Some of this comes down to how she is perceived as being close to the dark side of both New Labour and Miliband’s Labour. Obviously, her marriage to Ed Balls strongly connects her to the economically unpopular positioning of Miliband’s Labour. Furthermore, Cooper is connected to the fiscal irresponsibility of New Labour through her role as Chief Secretary to the Treasury from 2008-2010 which, when combined with her outright refusal to concede any sort of overspend during the New Labour years, will lead to the public perceiving her as lacking economic credibility; ironic, considering Cooper’s repeated claims that she is the most credible candidate.

However, this doesn’t account for Cooper’s failure to connect with such large swathes of the party. The reason for this does not lie in any past misdemeanours, but in the failings of the present; Cooper has run a weak and incredibly vague campaign that offers nothing to the party. Compare this to her competitors: Corbyn has offered mass reindustrialisation and nationalisation; Burnham devolution, public rails and universal care for mental health; Kendall has offered to cut back on Labour’s welfare spending and forge much closer ties with businesses, small and large.

Cooper has offered nothing substantial, failing thus far to even launch a manifesto as Corbyn and Burnham have. The most “radical” (in her own words) policy she has offered is universal free child care. Whilst admirable, such a policy is hardly the sign of a greater vision, and is in all honestly probably a calculated move by her campaign team to push Yvette’s ability to connect with the female vote. Indeed, Cooper has frequently tried to play up the gender card this debate; when asked in first televised debate what qualities she shared with Nicola Sturgeon that would make her a good leader, her only response was to say that she was a woman and stress the need for Labour to finally elect a female leader. She has even gone as far as to accuse Burnham’s supporters of sexism over a headline that maliciously misquoted Burnham-supporter Lord Falconer.

Combine this with late calls for Burnham to pull out for “failing to offer an alternative to Corbyn” (whilst herself not publishing a manifesto) and making grubby deals with Kendall to minimise Corbyn’s share of second and third preference votes, and it is unsurprising that so many within the Labour movement prefer the more positive campaign of Corbyn.

This blandness is certainly calculated, as a means to get a high amount of second preference votes and maintaining an appeal to voters across the party. However, this same blandness is what created the vacuum of ideas necessary for an idealist like Corbyn to thrive in. Trying to sell herself as a safe pair of hands and as a woman who can provide a new and more inclusive face to Labour simply was never going to be enough when she has been so bereft of anything resembling a vision, for the party or the country, in this campaign. Cooper may share her broadly centrist position with Blair, but she lacks any kind of overaching vision.

None of the rivals to Corbyn have been great in this regard, but Cooper has been the worst of all – Burnham has his ideas of a widespread devolution of power widening the scope of politics, whilst Kendall has a somewhat-muddled but undeniably consistent focus on forging an economically prosperous Britain built upon meritocratic principles. Conversely, Cooper’s platform is incredibly negative, with another of her driving soundbytes being the need to “not lurch left or right” – the kind of wretchedly insipid rhetoric that instantly draws unfavourable comparisons to the disastrous “look left, look right and cross” 2015 election campaign of the Lib Dems. Politicians like Tony Blair succeeded because their ideas were too nuanced to be defined as simply left or right; politicians like Nick Clegg failed because their ideas were too confused to be defined as anything.

You don't win elections by defining yourselves against what you are not
You rarely win votes solely by defining yourselves against what you are not – positivity is needed also

As for Andy Burnham, the early frontrunner? His early indecision and refusal to think big allowed Jeremy Corbyn to seize the momentum, forcing Burnham onto the back-foot throughout the campaign. He has spoken so frequently of Labour as being “scared of its own shadow,” but has himself only gained the courage to announce sweeping policies like renationalising the rail after the surge in Corbyn support, and consequently Burnham has forced himself to play the part of reactionary rather than progressive as a result of this earlier non-committal stance.

Furthermore, Burnham has also created an image of himself within the party’s memberbase as inconsistent and weak, lacking the moral strength to oppose the austerity of the Conservatives. He has not always possessed the courage to follow through with his convictions in the same way that Corbyn has, most notably seen as he criticised the Conservative welfare bill, but refused to vote against it. Indeed, he has been nicknamed “flip-flop Andy” by some in the party.

I still, however, genuinely believe Burnham to be the best choice for Labour, and the only choice if they are to have any real hope of challenging the Conservatives in 2020. Yes, his campaign has had its flaws, but Burnham himself still possess the image and presence of a man who could one day become Prime Minister, with polls consistently demonstrating this. For one, the aforementioned Ispos Mori poll showed 27% of the public see him as a future Prime Minister, over 10% ahead of Kendall and Corbyn, and also comfortably ahead of Cooper. A more recent ComRes poll shows that he is the candidate perceived as most able to improve Labour’s electability (Corybn is unsurprisingly seen as the least).

There are numerous reasons for this; he’s an experienced politician who has served in cabinet, but is not closely associated enough to either New Labour or Miliband to suffer from association with their mistakes. Indeed, he has been able to turn this association into a strength, by using his position in the treasury to argue he knows Labour overspent. On that note, his ability to even admit there was an overspend already sets him apart from Cooper and Corbyn, and puts him as a prime contender to try and shed the perception of irresponsible, borrow-happy Labour

However, if anything can be learnt from the overwhelming success of the media smear campaign against Ed Miliband in the run-up to 2015, it is that the British electorate is extremely fickle. More important than Burnham’s track record or policies is his actual image. Sure, he talks more in soundbytes than English, but look at how the other candidates tried to show their human side on the recent debate on Victoria Derbyshire: Cooper is a career-politician straight out of Oxford, who admits she has “no hobbies” besides being a mum. Kendall likes running. Corbyn enjoy lobbying for human rights and cycling. Cycling. Comparatively, Burnham has a strong image as the MP for the constituency where he grew up, can relate his former position as Sports Minister to his love of football, and a ready smile.

Does this mean I believe Burnham is the perfect candidate, with the perfect campaign? No – far from it. However, I believe he is the only candidate who can reconnect with the public whilst also keeping the party onside – both at elite and grassroots levels – and the only candidate who can only truly offer the British public an alternative to the Conservatives in 2020, because as well as enjoying endorsements from major figures on the political landscape (Neil Kinnock, David Blunkett and Lord Falconer, as well as the Mirror), he has managed to offer a positive vision for the party and the country, without resorting to the negativity of Cooper and whilst staying true to Labour’s core values in a way Kendall has not.

If there is one point worth closing on, it is this: the principled opposition of the 1980s did not further the cause of left-wing politics, rather it crippled it. Standing back and allowing Thatcher to dominate has left us with a country still living in her shadow.

The crippling of the trade unions; the antagonism of the North and of Scotland; the rampant deregulation of our financial sector facilitating the global financial crisis of 2007; the privatisation of our rails. These were the consequences last time Labour chose principles over governance, the inability of Labour to truly oppose the Conservatives in those Thatcher years is being felt now more than ever. Repeating the mistakes of the 80s is not a vision of hope – it is a delusion. Labour needs somebody who can honour its past without becoming trapped in it, who can learn from both the successes and failures and thus truly bring Labour into the modern era. The Britain Jeremy Corbyn envisions died in the 1980s; Labour cannot let its ghost haunt the party any longer.

Conor Dunwoody


Sources

Ispos Mori “Future Prime Ministers?” poll: https://www.ipsos-mori.com/researchpublications/researcharchive/3602/Burnham-leads-the-pack-but-all-Labour-hopefuls-have-work-to-do.aspx

YouGov/Times poll (17th-21st July): https://yougov.co.uk/news/2015/07/22/comment-corbyn-ahead-labours-leadership-contest/

YouGov/Times poll (6th-10th August): http://d25d2506sfb94s.cloudfront.net/cumulus_uploads/document/umiuxdpotn/Results-for-EveningStandard-London-LabourLeader-150812.pdf

YouGov/London Evening Standard poll: http://d25d2506sfb94s.cloudfront.net/cumulus_uploads/document/umiuxdpotn/Results-for-EveningStandard-London-LabourLeader-150812.pdf

ComRes poll: http://www.independent.co.uk/news/uk/politics/jeremy-corbyn-would-reduce-labours-chances-of-winning-the-next-election-poll-reveals-10457458.html