Labour’s dilemmas and how to resolve some of them

I have mentioned Russ in Cheshire before. He has proved to be an interesting if unconventional twitterer. What follows is no more than the truth and yet practically every media outlet treats Labour’s tax proposals as rampant Marxists stealing all of our income. Really?

Labour’s tax plan only affects people earning more than 3 average salaries And it only takes away 5% of their 4th average salary. Their first 3 average salaries are unaffected. If you can’t figure out how to cope on the wages of 3 people, you probably don’t deserve to earn it.

Quite so….

If I calculate broadly correctly when you earn £80,000 per year, you get £4,583 in your bank account after tax every month. Whereas Labour’s income tax plans would result in you getting £4,561 instead.

I’m afraid anyone complaining is, I have to suggest, protesting too much…

Just consider these ONS derived statistics:

In 1970:

The average yearly wage: £1,204
The average house price: £4,690
The average house cost 3.89 x the average yearly salary.

In 2019:

The average yearly wage: £26,208
The average house price: £234,853
The average house costs 8.96 x the average yearly salary.

And this is not even taking into account the median wage – which is a fairer yardstick – because it is the point where half of the population earn less than it – and half earn more. With a few CEOs on a squillion or more the average is going to be distinctly favourable to the status quo.

So a bit of extra tax in order to damp down inflation – well actually, since people on £80,000 I doubt spend over much of it (I suggest much goes to some form of savings) they probably don’t even need to damp down inflation. But Labour will probably need either to create money by just spending it or, more conventionally, issue government bonds (in return for shares) if they need to nationalise.

But Labour, should they gain power (entirely up in the air, it would seem to me at the moment) would need to have priorities because of the disaster that is the current government.

So I’d suggest they should be careful with government nationalisation – Labour are in any case broadly in favour of the co-operative model.

With so much to do so quickly, Labour should start by having a ‘rigorous buyer’ system in place before any form of nationalisation – in order to ensure the companies are on their mettle, rather than hollowed out.

True, that might mean the government will eventually pay a bit more – but when the government has its own bank that creates the money it is paying in does it really matter?

And if industry gets worried – well, Corbyn certainly isn’t everlasting.

Whereas Brexit, could well be.

Comments

  1. Richard Bond -

    Peter

    I generally enjoy your articles, but this one is a bit of a mish-mash. The first point about extra tax on the top 5% is fine, but bears little or no relation to the headline or the rest.

    The second point is on nationalisation and you’ve identified how it can be paid for without reference to tax. I recognise that not everybody likes the idea of nationalisation, but where Labour are proposing it, it is because of market failures. All their proposals also have huge majority backing according to opinion polls.

    When the markets fail, eg. are not sufficiently competitive (water) or do not provide customer service (broadband) or have become more expensive after nationalisation (rail), then there are no dilemmas and thus no need to resolve them. We could debate where markets haven’t failed and the priority order of re-nationalisation, and I do think there’ll be some caution about exactly how to do it. But these plans have been finalised within the party for years now and are comparatively quick wins compared to eg, improvements in education or health.

    As for Corbyn not being everlasting, the shadow cabinet is full of young, intelligent, energetic people who are committed to these policies and they will be very hard to displace once JC retires.

    Only if Labour does very badly in this election will the policies as well as the personnel be ditched. According to opinion polls JC’s brand has been sufficiently damaged by propaganda and Brexit to give people pause, but the policies remain attractive.

    Otherwise, keep up the good work and thought provoking articles.

    1. Peter May -

      Oh well…Thanks!
      I just thought that nationalisation is a bit of a performance entailing lots of opposition but if the government showed who was boss it could avoid it in the early stages of its administration.

      There seems to be much opposition to Corbyn – but much less to McDonnell for example. It may simply be the fact that McDonnell is not the leader – so is ‘fine’ but my point was to suggest that Corbyn personally will not be leader for a prolonged period – but implicit in your reply is that probably the objection to Corbyn in particular, rather than Labour in general is probably an excuse (like today’s resurgence of the anti- semitism lie). On reflection I think you’re right.

      Agreed, too that it should probably have been two posts!

      1. Richard Bond -

        Sorry Peter. Please ignore the first sentence. Looks like I need an editor more than you!

        Apologies also if I misinterpreted. I’d seen a couple of articles/comments from you that suggested an aversion to nationalisation in general (although only broadband springs immediately to mind).

        If they can form a government, Labour will have to be vigorous from the off in all their policies to maintain their credibility.

  2. Peter May -

    No need to apologise, I agree the post does not read too well – and all thinking needs to be challenged.
    I hope Labour might form an administration so they have then to decide how priorities are formed – I would suggest that pressurising the objective, rather than the systemic and difficult nationalisation should be their priority.
    They will have an awful lot to do!

  3. A. Pessimist -

    I think this is agreeing with you Peter, but worth clarifying – any post-Corbyn leader who tries to continue his policy proposals will be attacked in the same way – it’s not the person, it’s the policies they want to stop. The only thing personal about it is the weapons they will create and use – AS has been perfect against Corbyn; they will find something else to use against the next leader unless that person compromises and becomes acceptable to them.

    Also, please could you explain what you mean by “a rigorous buyer system”?

  4. Peter May -

    Agreed.
    Will do a blog in due course about rigorous buying!

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