Article / 26 September 2016 at 12:52 GMT

UK's Labour to offer a programme of state intervention

Managing Partner / Spotlight Group
United Kingdom
  • It is hard to take shadow chancellor John McDonnell seriously
  • Same old left-wing agenda of state spending and intervention to be offered
  • It will be music to the trade unions; a chance to call the tune
  • Enterprise is wild, it cannot be herded and directed

 Born Free! No matter what the Left says, enterprise will not be corralled and contained. Photo: iStock

By Stephen Pope

The past weekend saw the left-wing politician, Jeremy Corbyn re-elected as leader of the UK Labour Party with 61.8% of the vote. He has secured a larger mandate than he won twelve months ago and so the more moderate members of the UK opposition party will have a choice.

Keep quiet and tow the party line... speak out and run the risk of deselection... or leave the party.
At a time when Corbyn speaks of a more compassionate, caring less confrontational approach to politics it is appropriate to consider what his shadow chancellor, John McDonnell, has been saying.

McDonnell’s outspoken thoughts

When standing for the Labour leadership in 2010 he caused outrage during a broadcast of the BBC Radio 4 show Any Questions. When asked what he would do if he could travel back in time to make the world a better place he said would go back to the 1980s and kill Margaret Thatcher.
He later described this as a joke.

Writing in a column in Labour Briefing magazine in 2012 he said:

“...In the first week of a Labour government, democratic control of the major economic decisions would be restored by ending the Bank of England’s control over interest rates and bringing the nationalised and subsidised banks under direct control to force them to lend and invest their resources to modernise our economy and put people back to work. ...”

His “Who's Who” entry states his pastime as " ...generally fermenting the overthrow of capitalism. ..."

He later described this as a joke. 

In 2012 he proposed a 60% income tax on those earning more than £100,000.
During the debate on the Autumn Statement in 2015 in the House of Commons he chose to jokingly brandish a copy of the Little Red Book of the Chinese communist leader Mao Zedong during his response. 

One has to question whether it was wise to quote from a communist leader who has been blamed for the famine that cost up to 45 million lives in China during the Great Leap Forward.
In 2013 he welcomed the financial crash that wrecked Britain’s economy and insisted he was a Marxist, who had dreamed of such a day.

He later described this as a joke.

• I suggest that given his statements are often seen by Mr McDonnell as being a joke, that the UK electorate treat him and his policies as a joke.

Sadly, it goes beyond being a comedy as he has openly supported IRA terrorists who he says should be "...honoured..." for taking part in their "...armed struggle...". "...It was the bombs and bullets and sacrifice made by the likes of Bobby Sands that brought Britain to the negotiating table." ...

Yesterday, on “Peston on Sunday” he refused to apologise for suggesting that former Conservative minister Esther McVey should be “...lynched...”. It followed Mr McDonnell’s refusal to back down over his 2014 claims that Esther McVey was a “...stain on humanity...”.

He said he had sometimes “...gone too far...” in criticism of opponents but insisted it was better to be honest about his views.

• Quite frankly, if Mr Corbyn really wants decent politics, he should fire his Shadow Chancellor now.

What will Mr McDonnell say next?

At midday John McDonnell will make his keynote speech to the Labour Party Conference in Liverpool as to what a new Labour Government would do with regard the economy.

Point 1:

He will outline that the UK would borrow in the short term for long-term investment to ensure the prosperity of the future.

Economic Flaw #1:

By borrowing in the short term such debt has to be redeemed or rolled over with a high frequency and so the cost of capital is subject to the slings and arrows of the market. At the same time such initial borrowing is going into long-term projects. This sounds like a rerun of the borrow and lend model that crippled Northern Rock, except McDonnell wants it on the sovereign scale.

Point 2: 

He also suggests that state intervention through a National Investment Bank will catalyse investment from the private sector and, ultimately, higher tax returns.

Economic Flaw # 2:

Private sector money will not flow into a state sponsored programme unless it can attain a pumped up return on its investment. It is not so long ago that the Blair/Brown idea of Public Private Initiatives was exposed as seeing contracts awarded to the private firm with the lowest bid only for service costs later to be ramped up so as to claw back capital that was lost in the foundation years of the project.

Of course, the Labour Party of Blair and Brown was moderate compared to that of Corbyn/McDonnell. One can be sure that on any state sponsored programme a large concession would be grated to the trade unions. The threat of strike action over even the most minor issue would be enough to keep private capital wary. In the end, tax receipts would fall.

Point 3:

McDonnell will say that Labour will not stand by and let industries such as steel flounder.

Economic Flaw # 3:

But why sink endless resources into an industry where the UK cannot compete unless the state financed plants produce state subsidised output. Are Labour then going to force other areas of industry to acquire this new UK steel so as to make their products. 

The burden of uncompetitiveness will be either passed down the value chain resulting in falling sales or else the tax payer will be presented with a massive bill for financing the multitude of subsidies.

Point 4:

He will also promise to work with wealth creators and entrepreneurs. Really, this from a man who apparently dreams of overthrowing capitalism ad entrepreneurial spirit. Oh yes, silly me, he was only joking.

Economic Flaw 4:

Wealth creators do not to be guided by government. All they require is a sensible framework of economic management and realistic legislation that prevents exploitation and consumer welfare from being harmed.

It does not have to be shown the land of opportunity. It finds its own opportunity.

Point 5:

He claims that the tide has turned around the world against unfettered globalisation.

Economic Flaw 5:

Now that the UK has voted to leave the European Union it has to embrace the global economy. Therefore, if we expect UK Plc to be able to sell its goods and services to the rest of the world, then we have to be open for trade as well.

There can be no erection of a high tariff wall. That will simply see restrictions of a similar nature be imposed on UK exports. This is the moment when the UK has to be at one with globalisation, not hanker after a time of Lancashire textiles, Sheffield steel and massive waves of nationalisation.

In truth, the free market is not always orderly. It is like a series of earthquakes where the landscape is periodically altered and the contour lines are set afresh. Only free enterprise can adjust to meet the challenges and demands of new and disruptive markets.

The national government has its place and its role to play, but that is not as the ringmaster controlling the free market lions. 

Like lions, markets are unpredictable and sometimes irrational. Labour and McDonnell may soon find that they can bite.

Maybe the lion would respond by saying when he bit, he was only joking.

– Edited by Clare MacCarthy 

Stephen Pope is managing partner at Spotlight Ideas

27 September
Krunil48 Krunil48
Good article and quite unbelievable, waving around a communist manifesto in the houses of parliment. Even if the man believes these philosophies, politically idiotic.
27 September
Stephen Pope Stephen Pope
It is incredible that certain politicians see the world through the red tinted optics of 19 70's socialism.

Endless programmes and projects that waste money all funded through soaring debt and tax policies based on envy.

Yesterday the Shadow Defence Minister had his speech edited without his knowledge because it was insufficiently left wing.

It would be comical if it were not so tragic.
27 September
Krunil48 Krunil48
The funny thing is, I was just about to say that Corbyn and McDonnell reminded me of Laural and Hardy, therefore both comic and tragic.


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