Labour’s Manifesto of Madness

When the Labour Party’s draft manifesto was leaked last week, I hoped I was having a bad dream; but today’s publication of the real thing has has left me incredulous.

My concern is not about the policies. Depending on your point of view, they may or may not be very desirable. My despair is due to the Labour Party’s apparent lack of any real understanding of economics and finance.

Labour’s plan involves raising and extra £48 billions each year to fund £48 billions of extra spending.

Even with the help of the treasury, government spending forecasts invariably under state actual costs. Forecasts from opposition parties are even less realistic. So, Labour’s programme will almost certainly exceed it’s projected £48 billions, by a considerable margin.

On the income side, it will be impossible to raise the additional £48 billions of extra tax revenue. It doesn’t matter who Labour tax, what they tax or how they tax, nothing will raise that additional amount. There is a limit to how much tax can be taken out of any economy; and there is a threshold, beyond which higher taxation rates deliver less tax. The UK economy is on or around that threshold now.

Should Messrs Corbyn and McDonnell find themselves in numbers 10 and 11 Downing Street on the 9th June, the spending programme will no doubt begin. However, it will take a while before it becomes apparent that the additional tax revenue isn’t being generated and that the costs are escalating. By this time, our economy will be in very serious trouble and the austerity strategies of the last few years will pale into insignificance, compared with what will be needed, when  the Corbyn bubble bursts.

None of this includes the uncosted plans for Labour’s nationalisation programme, which they plan to fund through extra borrowing. This would add significantly to the national debt, which is currently heading towards £2 trillions and incurring annual interest charges that already exceed the entire defence budget. This manifesto is economic madness.

Many people will, of course, see through it. But many others, and particularly more vulnerable people, won’t. They’ll believe it and believe that their lives will improve because of it. But when the bubble bursts, it’s these same people, who will pay the biggest price.

 

Are We Heading for a One Party State?

Parts of the media are paranoid about the UK becoming a one party state. They see the probability of a Conservative landslide as a pivotal moment, leading to the end of democracy as we know it. But is this just scaremongering?

Let’s take a look at what happened after other landslides since the end of the second world war.

In 1945 Attlee’s Labour Party secured a majority of 150 seats. By 1951, he was out of office and the Conservatives were in government.

In 1959, Macmillan’s Conservative’s won a 100 seat majority but were out of office by the end of 1964, when Wilson’s Labour party won the election with a very small majority.

In 1966, Wilson went to the country and won a 97 seat majority but was out of power by 1970, when Heath took the Conservatives to victory.

In 1983, Thatcher won a 144 seat majority.  She’d already been in power for four years; but received a huge boost from her handling of the Falklands crisis. Perhaps even more important, Labour, under Michael Foot, had vacated the centre ground and was moving the party towards the far left. The Conservatives went on to win in 1987 and 1992 but with increasingly smaller majorities. At the same time, Labour was gradually coming back to the centre ground under Neil Kinnock. But it was not until Tony Blair took over the leadership that, in the eyes of the British electorate, the Labour party became electable again. And in 1997, Blair achieved a victory of 178 seats; the biggest landslide since the second world war. He followed this up with a 166 majority in 2001.

Although Labour won again in 2005, their majority was down to 65 and their star was on the wain. In 2010, they were out of office. The Conservatives  have been in office since then, firstly in coalition with the Lib Dems, then on their own.

If the current opinion polls prove to be correct, it’s likely that Theresa May will win a substantial majority on the 8th June. But it’s difficult to see that this will be any different from the pattern we’ve seen over the last 70 years.

The Thatcher years were characterised by Labour vacating the centre ground and making the party unelectable. By the end of the Conservative years, John Major’s government was tired, out of touch and riddled by scandals. Tony Blair had brought Labour back to the centre ground and offered a refreshing alternative. Following their defeat, it was the Conservatives turn to vacate the centre ground, as they moved to the right. Blair kept Labour in the centre and in Government. But his party turned on him because of the Iraq war. Labour’s credibility started to wain and the Conservatives were moving back to the centre ground under David Cameron.

So where are we now?

Theresa May seems intent on holding the Conservatives in the centre ground, whilst Labour has moved to the left. Over the generations, the British public has been resolutely centrist. When the Conservatives move right, they don’t get elected and when Labour moves left, they don’t get elected.

However, the problem for some of the political zealots, of both left and right, is their perception of what is left and right. When the Conservatives were in opposition in the first few years of the century, their shift to the right was accompanied by an attempt to portray the Blair government as much further to the left than was actually the case. Similarly, today, Jeremy Corbyn’s supporters are trying to position the Conservatives as being much further to the right than is actually the case.

The real political battleground in this country is between centre left and centre right; between Social Democrats and One Nation Tories. The moment either the Conservatives or Labour moves outside that framework, they become unelectable and that’s what’s happening now. Labour has vacated the centre and the Conservatives remain within it. So the Conservatives are likely to win the election with a big majority.

However, one way or another the centre left will come back. It may be in the form of Labour itself or there may be a realignment of the centre left that excludes the more left wing elements of the current Labour party. In the short term, while this all unfolds, the Conservatives will have limited serious opposition but their star will gradually wain and the centre left will strengthen, resulting in a new centre left government, at some point in the future.

What’s happening now is  no different from the past. Far from seeing the beginnings of a one party state, we’re seeing the workings of a strong democratic process that has served this country well for many generations and will hopefully serve it well for many generations to come.

Letter to Santa Claus

A prominent member of the Labour Party has stated, off the record, that the contents of the party’s leaked manifesto is like a letter to Santa Claus. Whoever that Labour Party member is, I’d like to applaud his or her honesty.

I live in South Devon and, in our locality, we have a slurry tanker that collects slurry from farms, septic tanks etc.. On the side of the vehicle, in very bold writing, is the following message, “This Vehicle is Full of Political Promises”.

Irrespective of their political allegiances, many people in this country are absolutely and utterly fed up with political parties making promises that there is never any serious possibility of them keeping. All of the main parties do it; and all it does is to alienate them from the electorate, as our local slurry tanker very effectively demonstrates.

I’m picking on Labour here, not because I’m trying to make a party political point but because they have launched a manifesto, which is quite simply undeliverable. If it was a document outlining a range of aspirations and ideas it would be fine. Indeed, many of the aspirations are very desirable. But it isn’t. It is a list of promises that Labour is committing to deliver if it is elected. Many people will understand that most of these promises cannot be delivered and, for these people, Labour is undermining its own credibility and increasing the disconnect between the political bubble and the electorate. Many others, and particularly the more vulnerable in our society, may believe the promises. But if Labour is elected, these people will feel cheated and let down when the promises are not delivered.

So how can I be so certain that these promises are undeliverable?

The answer is not rocket science. If Labour was to initiate a programme to deliver these promises, a very substantial increase in government spending would be needed. This would require a very substantial increase in the amount of money the government raised through taxation. “Great”, some people will then say, “let’s raise taxes”. But it’s not that simple.

The first problem is that when taxes are increased, the behavior patterns, of those people and organisation that are affected, change; often in ways that are not anticipated. As a result, the amount of additional tax revenue collected is invariably substantially less than that shown in the official projections.

The second problem is that there is an optimum level of tax that an economy can withstand and still continue to grow. Forget who pays what tax. Forget what products and services are or are not taxed. And forget what rates of tax apply. But consider the total amount of tax extracted from the whole economy. There is a tipping point and, if a government goes beyond that tipping point and tries to extract more tax than the economy can withstand, it undermines the growth of that economy and puts it into recession. As the economy shrinks, the total amount of tax generated then falls.

The UK economy is at that tipping point now. Based on the current size of our economy, it is virtually impossible to extract significantly more tax; and if we try to do so, the economy will almost certainly shrink and the amount of tax collected by the exchequer will fall, putting at risk existing funding for the NHS, education, welfare, defence etc..

Managing the economy of a modern Western democracy is incredibly difficult. The challenge faced by the government of the day is to raise the optimum amount of tax that will enable it to get as close as possible to meeting the aspirations of the electorate. But part of this must also be about managing the expectations of the electorate. If the electorate has unrealistic demands it will be demoralised, divided and treat its politicians with contempt. If its demands are more realistic it will be energised, united and treat is politicians with respect.

Sadly, managing the electorate’s expectations is something at which today’s cohort of politicians is not good; and this manifesto from Labour just makes matters worse. It is self-indulgent and will benefit no one. I just hope that there are more politicians in all of the main political parties with the honesty and integrity of the unnamed Labour candidate, who described the Labour manifesto as being like a letter to Santa Claus.

 

Should the Railways be Renationalised?

Frankly, I don’t care who owns the railways. My concern is whether they are run efficiently and provide a good, reliable service, at a fair price. Furthermore, I suspect most people, other than the ideologues, will agree. The apparent popularity of renationalising the railways is almost certainly because many people feel that they’re not getting a good reliable service at a fair price. But will renationalisation solve their problem? Personally,  I doubt it very much.

I’m old enough to remember “British Rail”. To say, “it was absolutely dreadful” would be a huge understatement. It suffered from very serious under investment in track, rolling stock and technology. All to often, trains were old, uncomfortable, cramped, dirty and unreliable. The Beaching cuts in the 1960’s, which occurred under both Conservative and Labour governments, decimated the network, leaving many communities isolated.

I’m the last person to suggest that today’s railway service is a beacon of success. Substantial improvements are undoubtedly needed. However, since privatisation, investment in the railways has increased massively. The network is carrying more than double the numbers of people it was carrying when it was privatised in the mid 1990s; and reported satisfaction levels have also been increasing over the same period. A significant amount of recent disruption has been caused by strike action, orchestrated by the rail unions. And it’s fair to question whether this is part of a strategy, by the ideologues, to create dissatisfaction, thus furthering the cause of renationalisation.

During the post war years, in addition to the nationalisation of the railways, a number of other core industries, such as steel, coal and shipbuilding were also nationalised by both the Attlee government in the late 1940s and the Wilson government in the 1960s. There is not one example of a successful outcome. At the very best, none of those industries was saved by nationalisation and at the worst, nationalisation could be deemed to have accelerated their demise.

The fundamental problem is that governments are absolutely hopeless at running large, complex commercial enterprises; and this applies to both Labour and Conservative administrations. They don’t have the skills and they are constantly prioritising political outcomes rather than meeting customer needs. Furthermore, investment decisions have to take their place in the queue alongside health, education, welfare etc.. Invariably they tend to draw the short straw.

The role of government should be to provide a robust and effective regulatory framework, within which privatised rail operators focus on providing the levels of service that the rail user requires.

Renationalisation of the railways is a road to nowhere and a distraction from the strategies that are needed to ensure the rail companies deliver the service we all need.