A troubling vision: Why Corbyn’s economic policy proposals are wrong

The increasingly acrimonious Labour leadership debate is very much a battle over personalities rather than policies. Yet Jeremy Corbyn’s recently published “Economy in 2020” represents perhaps the clearest statement of political intent. He should be congratulated for going this far to spell out his economic vision. The problem is this vision is deeply flawed.

Corbyn is right in his critique of Tory policies and the recent budget. But he’s wrong on the deficit and borrowing. His insistence that “we should borrow to invest in our future prosperity” crashes in the face of economic reality and plays right into the hands of Conservative propaganda. Whilst comparing Greece to UK is not necessarily appropriate, it is worth considering the fate of the Syriza-led country – that great Borrower of Europe currently being ripped apart by corporate creditors and international financial institutions. The Greek experience gives a whole different meaning to Keynes’s refrain that in the long run we’re all dead. Indeed.

Cutting the deficit, healthy public finances, running a budget surplus, fiscal responsibility, and prudence – these are not Tory ideological dictums but sound economic strategies that had served Labour well in the past. Embracing these goals and persuading Britain that we can be trusted on economy is a key to winning power.

Corbyn’s again right to argue that Tory policies are failing to secure growth and cut the deficit. But his solutions amount to nothing more than the usual set of state capitalist prescriptions – from state-led capital infrastructure projects to state-ran National Investment Bank. Surprisingly there is no mention of Five Year Plans… Private sector involvement is reduced to providing the “supply chain” to the Great State. Corbyn’s right to focus on the scandal of £93 billion of annual tax relief dished out to the corporate sector. Yet his proposal for dealing with it amounts to a “Let’s spend it all” bonanza.

Corbyn is again right to identify tax evasion and avoidance as key challenges facing our economy. But tackling this problem is not a magic bullet solution to all problems – and that is an impression one gets from Corbyn’s analysis. Leaving aside the highly debateable figures cited in the policy brief (all from just a single source), the highly simplistic prescriptions Corbyn offers are highly problematic, ignoring as they do the globalised nature of the modern capitalist system.

Even more worryingly the documents goes on to muddle together different segments of the taxation system, setting out measures against major corporate tax avoidance/evasion and calling for reform “of small business taxation to discourage avoidance and tackle tax evasion”. Smearing SMEs is hardly going to endear them to Corbyn-led Labour Party, especially given there is no evidence of small businesses evading or avoiding taxes. In fact SMEs pay proportionately more tax than larger businesses. Corbyn’s one-size-fits-all approach is a major departure from Labour’s 2015 Small Businesses Plan which called for lower corporation tax for SMEs and a cut to Business Rates.

Perhaps what’s most disappointing about “Economy in 2020” is what’s not in it. Start-ups, social enterprises, cooperatives, mutuals are not even mentioned. Apart from one begrudging acknowledgement of the role of “often innovative and creative individuals” in wealth-creation the document has nothing positive to say about business. Yes, the economy needs to be rebalanced, austerity has to be challenged, and tax justice requires uncompromising war on evasion and avoidance. But for these goals to be achieved a prospective Labour government must re-embrace prudence; show how it will champion small businesses and offer a positive message to budding entrepreneurs, and demonstrate how state intervention in the market

Murad Gassanly is a Labour councillor