Corbynomics

Matthew Lynn at The Telegraph reports:

Start to look at Mr Corbyn’s proposals in detail, however, and they make Ed Miliband seem like Margaret Thatcher. He inhabits a make-believe world, where money can be conjured out of thin air and every problem can be fixed with more state control.

Such as? Well, for starters Mr Corbyn wants to scrap university tuition fees. How will that be paid for? Apparently through a 7pc rise in National Insurance for anyone earning more than £50,000 a year or a 2pc rise in corporation tax. Among Corbynites, people earning £50,000 are considered the “rich”, or perhaps even the “super-rich”. And, in fairness, it is significantly more than the national average. But by anything other than the standards of the hair-shirt, vegetarian Left, it is a fairly modest wage – few people trying to support a family on £50,000 a year in the South East will feel they can spare 7pc of their income to subsidise students who will later go on to well-paid jobs.

So an extra 7% tax just to pay for one promise!

As for raising corporation tax, a constantly recurring theme of all Mr Corbyn’s economic proposals, it overlooks a couple of inconvenient facts. The first is that globally competitive corporate tax rates have helped to attract a lot of inward investment – pretty helpful for a country that runs one of the world’s biggest trade deficits, and needs lots of foreign money coming in to pay its bills.

The second is that as corporation tax has been lowered, receipts have been booming. In July, for example, corporation tax receipts rose 13pc, far ahead of economic growth, and with a faster rate of growth than any other single tax. If you put the rate up again, the revenues collected will go down – leaving a nasty black hole in the funding of those free university places.

Capital is now mobile. Hike up company tax too much, and the capital will happily move elsewhere.

Then there is his idea of a “People’s QE”. It sounds a bit like The X Factor – perhaps we could get Simon Cowell to chair the MPC live on TV and we could all text in to say how much cash we want the Bank of England to print this month. It turns out, however, that the idea is for the Bank to “be given a new mandate to upgrade our economy to invest in new large-scale housing, energy, transport and digital projects”.

Mark Carney might well feel he has enough to do already, what withcontrolling interest rates, inflation and regulating the City. But, heck, in a few spare hours on a Friday afternoon, he could just print a couple of hundred extra billion, and use the money to start building publicly-owned housing estates.

Never mind the inflation!