CAMPAIGN PROMISES, and a dose of reality
As my regular readers know, most off my essays are forays into challenging their
economic issues. They reflect my own attempts to gain an understanding of
underlying principles.
But there's a lot riding on the coming election, perhaps more than most of us
realise, so here are some personal reflections that are only tangentially
economic".
The Greens have ambitious and virtuous policies, yet some voters remain
circumspect when beholding the immense sweep of their programmes, and their
proclaimed urgency. Few of the uninitiated are sufficiently qualified to reason,
objectively, on the fears that motivate their agenda - beyond such palpably
obvious phenomena as the horrific levels of plastic waste. Consequently many
people facing the coming election have prioritized what they consider to be the
immediate threats.
The Lib-Dems have strayed a long way from their founding roots. I remember
many stalwarts in the old Liberal Party, and their principles, and gave them my
unreserved support. But the current leaders have lost their bearings. And any
claim to be " democratic" is farcical in the face of their sworn determination to
reverse the democratic referendum result. Their doorstep canvasser's
predictable words yesterday were: "Ah, but we know so much more now about
what will happen ifwe leave the EU, that we deserve a new vote.
Beyond some mumbling about job-protection, he wasn't able to answer my
follow-up question: "Do you really know what will actually happen when we leave
the. EU?"
The Conservatives
Their doorstop campaigning has been relatively low-key, and their manifesto is
suitably anodyne. TV presenters, festooned by the usual cosy circle of smug
know-alls, are at pains to tell us that they invited the Conservative Party to
supply a panel member, but were told "no one is available" It seems that at
last they are seeing sense! They have learnt that when no one is listening, there's
no point in adding to the clamour.
As for policy, apart from Boris Johnson's unequivocal determination to get out of
Europe, there is little that's groundbreaking, novel or particularly controversial,
and they have clearly decided not to compete in a spending war with other
parties. Although Boris tends to keep his position on things that matter under
wraps, he has been explicit in his belief that only a solid economic base can
provide the assurance we all want of the continuation of the NHS, and an ability
to provide for genuine social needs. He has also made environmental issues a
central pillar of his policy proposals. Margaret Thatcher similarly eluded the lazy convenience of political labels
until, out of sheer national necessity, she embraced the economics of production
and supply. She could see, as did President Reagan, that only by abandoning the
idiocy of Keynesian demand management policies -and the strife that always
accompanies them - could the economy be salvaged
We don't know the extent of Boris's real grasp of economics, but there are
hopeful signs - such as his emphasis on civil freedoms, free markets and free
trade, and he clearly knows how to be persuasive when it most matters, such as
when negotiating with EU Commissioners.
The Labour Party
Labour's manifesto intentions, by contrast with the others, are commendably
transparent, although the consequences of actually carrying them out may be
less obvious - especially to younger voters.
They fully concede that their spending promises would massively inflate the
nation's debt, or would require taxes to be raised per person by a sum equivalent
to an average month's pay. Their own costing of these promises shows they have
abandoned their "fiscal responsibility rules", doubling their 2017 manifesto
pledges with an annual borrowing commitment of £55 billion - excluding the
cost of the party's signature nationalisation plans
On the latter point we should remind ourselves that uncompensated
nationalisation is de facto confiscation
Labour's "free-for-all"
Labour's linguistic fare abounds with the word "free" - whether TV licences
bus passes or winter fuel payments. Economic law requires that goods and
services provided by people cannot be "free", but have to be paid for. So
Labour's "free" is a euphemism for "out of taxes borne by people who work"
although the canvasser on your doorstep is unlikely to put it that way.
Taxes
Capital "gains" for tax purposes are not real gains; capital gains tax is
effectively a tax on inflation. The Labour Party has, however, promised to
increase the rate of capital gains tax so that it equates to the taxpayer's
marginal rate of income tax - which could in many cases represent an
increase from 10 or 20 per cent to 50 per cent. On inheritance tax, they will
do away with the main residence exemption, meaning the IHT exempt
allowance will fall to £325,000. Their proposed tax on holiday homes will be
equivalent to 200 per cent of the home's prevailing council tax
As the Institute of Fiscal Studies' Director, Paul Johnson, has pointed out, despite
Labour's claim that most "ordinary" people will not be affected by their tax
changes, people of "average income" will indeed suffer higher tax burdens.
Labour's claim is based on their intention to raise the rate of corporation tax to
26 per cent from its current 19%. The essence of Labour's tax plan is to target companies rather than people:
companies, being profit-seeking, are fair game as tax targets, so the thinking
goes. But this glosses over the fact that companies collectively constitute the
single largest employers of people in the country, and their post-tax
undistributed profits constitute the savings that pay for research and investment
in the Britain's world. companies will have to endure pensions. the most Under Labour's proposed tax
in new technology, returns to investors, and
punitive corporate
regime
system
Their proposed wealth" tax may appeal to people who are simply anti-rich" on
principle yet any tax on assets is a brutal bludgeon; when there is no related
cash flow it is essentially confiscatory.
Last week, the Labour Party voted in favour of new policies that would add VAT
to private school fees, restrict pupils' access to higher education and redistribute
their endowments, investments and properties to schools in the state sector. Both
Jeremy Corbyn and Karl Marx, incidentally, attended private schools.
The new corporate governance
Labour's manifesto says companies would be required to have one-third of
their boards composed of elected "worker-directors" sitting alongside
directors appointed by shareholders. "A third of those boards will be workers
themselves" John McDonnell told BBC Radio 4's Today programme -the
implication being that the other two-thirds of board members are not
"workers"!
He continued: "Within that company they'll have trade union rights restored,
and sectoral collective bargaining to protect their wages. On the supervisory
boards of those companies, or on the unitary board, whichever the company
opts for, there will be consumers represented as well. This is the point I'm
making: we're democratising our economy.
He also wants to lift restrictions on trade unions imposed in the 1980s, bring
back secondary picketing and national collective bargaining for wages
"because we're democratising the way these corporations work and are
[making them] more accountable.
It all sounds pretty rottweilerish to me. How about you?
Conclusion
Does a coherent, workable economic philosophy underpin Labour's plans?
For example, do you detect any planned waste elimination? Any trimming of
unnecessary government jobs funded by taxes?
No. Labour plans to give all public sector workers a 5 per cent pay rise - as well
as a 4-day working week.
This strikes me as pure vote-catching posturing. How would it be paid for? I'll telyou. Implementation of Labour's manifesto willbe paid for by many long
years of austerity - real austerity -the like of which will give that word a host of
meanings that today's younger voters cannot even imagine. But will never forget.