Many of its claims collapse as soon as one looks at them a little closer. Take the proposition that “the direct tax and benefit measures introduced since 1997 mean that in 2010-11, households will be £1,450 a year better off on average.” This is deeply misleading: as the respected, independent Institute for Fiscal Studies has pointed out, households will in fact be £170 worse off as a result of tax and benefit changes. The reason for this breathtaking discrepancy: Labour only looked at income tax and national insurance, while the IFS took account of all tax and benefits changes.
Another, even more absurd claim is that “we have done all we can to keep mortgage rates low – at 0.5 per cent during this recession compared to 15 per cent in the 1990s.” Base rates are indeed at 0.5 per cent but they are hardly synonymous with mortgage rates, which are much higher on average. It beggars belief that Labour can conflate the two in this way. In any case, interest rates at 0.5 per cent are a disastrous admission of failure, not something to be proud of.
Leaving the dodgy assertions to a side, there are many other worrying developments in the Labour manifesto. I will focus on two related proposals which will further damage the UK’s competitiveness.
The manifesto proposes extending the public interest test to takeovers of infrastructure and utility companies; some M&A would thus be ruled against the national interest and blocked. This is a nakedly protectionist measure, one manifestation of the so-called “Cadbury law” to block foreign firms from buying into UK Plc and to make all hostile takeovers harder. Slowly but surely, in this area as in all others, the Labour Party is adopting a continental style, dirigiste approach, with bureaucrats empowered to micromanage the allocation of capital, rig markets in favour of incumbents and second guess real owners.
But far worse is the call for “a culture of long-term commitment to sustainable company growth, requiring a super-majority of two-thirds of shareholders in corporate takeovers”, an astonishing development which would devastate property rights. At the moment, one needs 50 per cent plus one vote to buy a company; increasing this would dramatically increase the power of the minority and destroy that of the majority. A shareholder with a 33 per cent stake would effectively be in control.
The claim that the current system is short-termist and not committed to corporate growth is not backed up by any facts, figures or analysis. It was sad to see Cadbury bought up by Kraft but it got what it deserved after years of under-performance and weak management. Cadbury itself based its growth on buying dozens of foreign firms, including iconic ones such as Chocolat Poulain in France. The whole thing stinks of rank hypocrisy; it is populist politics of the worst kind.
This manifesto, with its commitment to the 50p tax, an oversized government and no strategy to cut the deficit represents the final rupture with New Labour, which accepted the basics of the market economy and capitalism.?All in all, a grim day for British politics.