Labour’s plans for Britain would leave the country poorer, the government closer to bankruptcy and certainly less well able to cope with the possible headwinds of Brexit, writes Alec Marsh
With its proposed new taxes on higher incomes and financial transactions – all worth an extra £48.6 billion in taxes a year – Jeremy Corbyn’s Labour party manifesto has reached new levels of financial illiteracy and plumbed new depths into the Boschian politics of envy.
By proposing that those earning £80,000 or more (aka ‘the rich’ as the other ‘Marx Brother’ John McDonnell, the shadow Chancellor, put it the other day) will pay a new rate of 45p in the pound of income tax, Labour is putting itself at loggerheads with professionals, business people and wealth creators the length and breadth of Britain. And by raising that rate to 50p in the pound for incomes over £123,000, it would further put Britain at loggerheads with the fiscal tide of world politics.
Indeed, when coupled with its proposal to raise corporation tax to 26 per cent – which it says will raise £19.4 billion a year –Labour might as well hang a ‘closed for business’ sign in the window of UK plc. Or better still, hoist the red flag with hammer and sickle over 10 Downing Street.
Forget that Labour has also proposed what it proscriptively describes as an ‘excessive pay levy’ on incomes over £333,000. Who is Mr Corbyn to decide what is ‘excessive’. It might be a lot, but that word alone reveals the narrow judgement at the heart of this time-warp Labour party.
Of course there is a strong and appropriate sentiment that those with the broadest shoulders in society should carry the heaviest burden. The challenge is that the richest members of society already do this: the top one per cent of income tax payers account for 28 per cent of income tax.
Like much else of the financially and fiscally illiterate programme that Labour is promulgating, the tax rises will do more harm than good. Before you can say ‘Laffer curve’ the money will start to vanish. The Adam Smith Institute points out that if you left corporation tax where it is, that the income from it would rise anyway. Whereas by increasing it, Labour could well see it fall, as the Institute of Fiscal Studies has pointed out, ‘as companies invest less and change behaviour in other ways.’
Not only that, by proposing to raise the minimum wage to £10 an hour by 2020, regardless of economic conditions, Labour could also harm those it is aiming to help, according to the IFS. Furthermore, the pledge to eradicate student tuition fees will cost £13 billion a year over the short term, according to the IFS, forcing government borrowing up. Such a move would also make education free for the rich as well as the poor, and leave the poor paying for it, too.
Of all the oddest and most damaging proposals in this digest of unreconstructed balminess, is the financial transaction tax – what Labour laughably and spuriously refers to as the ‘Robin Hood tax’. This proposal would raise some £5 billion from the City, but would in all likelihood merely see transactions go elsewhere. Even the mayor of London Sadiq Khan has described such a move a ‘madness’. At Spear’s we couldn’t agree more.
We can only hope that the voters of Britain agree and treat this time-warp manifesto with the contempt it deserves. By holding itself up as an enemy of wealth, a Labour government implementing these proposals would leave all Britons, and not just the richer ones, substantially worse off.
Alec Marsh is editor of Spear’s