Accountants’ verdict: Labour manifesto ‘good for the UK’. . . UKIP/Tory verdict: a black hole
Richard Murphy writes “As I have predicted the question “how will you pay for it?” is being asked of Labour”. He refers readers to his earlier explanations of how current spending commitments can be paid for from tax revenues: the spend creates the capacity to pay – made here and here. He continues: “The only real question is how Labour will pay for nationalisation” and cites precedents:
- How were the banks were bailed out?
- How was £435 billion was found for QE?
Answer: “Neither, directly, cost the taxpayer a penny. The money was created to achieve both out of thin air”. Murphy advises that renationalisation could also be done in the same way: “Issue bonds for fair value. Make them redeemable in not less than thirty years, and maybe longer. Make the interest rate the very low ones on offer now. In net terms these are likely to be negative throughout that thirty year period. And what is the net cost of renationalisation? Next to nothing. Or less. Problem solved”.
Mike Parr comments on the same website – as others have pointed out – that there is no need to pay anything for the train operating companies, merely do not renew the /operating licences as they lapse, but no doubt there will be other expenses and a need for investment.
- and provides help for the disadvantaged.
“The necessary condition for building a successful economy is that people must have sufficient purchasing power as without that they cannot buy goods and services”.
Sikka notes that due to wage freezes, low national minimum wage, never-ending austerity programmes and zero-hours contracts, people’s purchasing power has been severely eroded. Between 2007 and 2015, the real wages of UK employees fell by over 10 per cent, almost the largest fall among major industrialised nations.
In a comparatively rich country, 40% of the working-age population has less than £100 in savings. Millions rely on food banks to secure their next meal. The poor become victims of the payday loan industry and end up paying exorbitant interest rates. Personal debt now stands at record £1.529 trillion and ordinary person’s ability to stimulate economic demand and investment is severely eroded. Under successive government wealth has percolated up, leaving a few crumbs for many
In recent years, Sikka points out, public investment has been sidelined, adding that the Labour Party is now making a decisive break and offering the key to rebuilding: redistribution of income/wealth, decent wages and state intervention in the economy.
The Labour manifesto promises:
- an annual stimulus of £48.6 billion, current expenditure: investment in education, the NHS, social care, the police, firefighters and border guards
- to abolish all tuition fees and relieve the debt burden on many young people
- to protect the real value of state pensions
- to restore Housing Benefit for under 21s
- to abolish bedroom tax and employment tribunal fees
- to lift the one per cent cap on the wages of public sector workers.
Expenditure will be matched by revenues of £48.6 billion – not achieved by a rise in VAT, income tax or National Insurance contributions for 95% cent of workers. Measures include:
Reversal of recent corporation tax cuts, raising £19.4 billion.
£6.4 billion from increases in income tax for the top 5% of taxpayers, lowering the threshold for the 45p additional rate to £80,000 of income and reintroducing the 50p rate on earnings above £123,000.
£.13 billion raised from a levy on companies (not individuals) paying out megabucks to few.
A 2.5% levy on earnings above £330,000 and 5% on those above £500,000.
A Robin Hood tax on speculative transactions, raising £5.6 billion and another £6.5 billion will be raised from various measures to eliminate tax avoidance opportunities.
VAT on private school fees will raise £1.6 billion.
A novel feature of the manifesto is unprecedented transparency. Each pledge of expenditure and revenue-raising is carefully costed and shown line by line in the manifesto. Each line is then supported by further background papers.
In addition to the above, Labour has a programme of investment in social infrastructure and nationalisation of key industries, such as railways, gas, water, electricity and Royal Mail. This will be over a period of time. Contrary to the propaganda, some of this has little cost – see earlier comments and Sikka’s article: Corbyn promises a Britain ‘for the many, not the few’ at manifesto launch.
Richard Murphy, yesterday: “I have had my differences with Jeremy Corbyn, but this is a good manifesto for the UK . . .
In summary these increases make complete sense. Labour proposes to increase GDP by Government spending on health, education, social care, education and the result will be growth, creating the capacity to pay the tax that funds the growth
The downside? None at all for most people, Murphy suggests – only for those in the top 3 or 4% of income earners or are a large company or bank: “And let’s be clear, these groups have the capacity to pay”.
The one massive underlying theme is that of bringing to an end the neoliberal era. And that – Murphy says – is good enough.