Labour's election chief has said the policies contained in the party’s leaked manifesto could well be subject to change.
Yet whatever tweaks are made between now and the official publication date, the direction of travel is indisputable. Labour’s manifesto will be packed full of massive new spending commitments and anti-competitive measures, which would bring lasting damage to the UK’s economic credibility.
1970s nationalisation is now firmly back on the cards. The rail and energy industries must be put back into public ownership at the earliest opportunity, according to the document.
These industries do indeed face problems. Costs for consumers have risen from a rail industry that lacks significant on-track competition, and the electricity market has suffered from a series of damaging government interventions. The fundamental issue in both of these industries, however, is a lack of competition. Jeremy Corbyn’s perverse answer to this is to stamp out competition altogether.
Then there is the proposed creation of a “Ministry of Labour”. Corbyn’s aides have previously said a Labour government would introduce a “French-style” framework of union rights, and now it would seem that Labour has every intention of pursuing this. A new 20 point plan on workers’ rights and a proposal to hike the minimum wage to £10 an hour will be in the manifesto. So, while President Macron attempts to reform labour laws that have been blamed for France’s stubbornly high unemployment rate, a Corbyn government would be seeking to impose the very same damaging legislation onto the UK.
Labour’s manifesto will also promise a vast amount of new current spending commitments. The NHS will be guaranteed an extra £6bn a year, as will the schools budget. There will be no tuition fees. Welfare spending on the working age population will go up. The cap on public sector pay rises will be scrapped. The triple lock on pensions will remain in place and increases to the state pension age will be “reviewed”. And so the list goes on.
Making all of these commitments would be irresponsible even if the UK was living within its means. But, of course, it isn’t. Britain is still running a substantial budget deficit.
Read more: Do we really want more public spending?
But the way Labour plans to pay for this spending splurge – by hiking taxes on corporations and high earning individuals – would potentially be even more damaging than the pledges themselves.
The government’s decision to cut the corporation tax rate from 28 per cent in 2010 down to 19 per cent, with further cuts planned down to 17 per cent by 2020-21, has been extraordinarily successful. As part of a range of measures to boost competitiveness, these cuts have helped promote robust economic growth and higher profitability for companies. This has yielded a huge windfall for the Treasury, which has seen onshore corporation tax receipts increase by 44 per cent since 2011-12. While many of our OECD competitors are slashing rates, Corbyn’s proposed hike in corporation tax would damage the UK’s competitiveness and could very well lead to a drop in revenues for the Treasury.
There are, of course, similar concerns about plans to raise income taxes on high earning individuals. The top 1 per cent of earners now pay 28 per cent of all income tax receipts, which is, incidentally, up by five percentage points since 2010. It is widely accepted these individuals are the most responsive to tax changes. If Labour’s plans encourage even a few thousand of them to move overseas, it would cause significant harm to the UK’s tax base, which has become increasingly reliant on their contributions.
There are other ill-thought through measures, of course. A ban on fracking, for example, will hit the growth prospects of the north of England, and the huge £250bn of new borrowing for infrastructure would no doubt lead to massive waste – just as many large-scale infrastructure programmes have done in China.
The good news is that the chances of all this happening are very slim, with Betfair’s latest odds putting the likelihood of a Labour majority at a mere 2 per cent. But with a host of political surprises in the past few years, let us hope that this irresponsible manifesto focuses voters’ minds and ensures that these dreadful ideas are consigned to the scrap heap of history.