Due to university commitments in the Netherlands I have got to read Labour's manifesto later in the day than most people. I am now waiting for a plane so my comments are in haste.
First, re income tax: the proposed tax increase is fair. It will impact a little over 1 million people. Because of the suggested structure the estimated yield looks to be realistic if at the top end of the range. The tax will not be a disincentive: it may encourage more tax saving by spending on pensions at the £80,000 margin.
I have already said the corporation tax increase is wise. I think the yield estimate a little high, but plausible.
I am less of an enthusiast for financial transaction taxes of the type proposed than some, but the suggestion is effectively about closing gaping loopholes in existing law. I have no problem with that. Again, I think the yield estimate at the top end but possible.
In summary these increases make complete sense.
More than that, there will be capacity to pay them. Labour proposes to increase GDP by spending. When a government spends more when there is unemployment or underemployment the result is not inflation, it is growth. And that growth always creates the capacity to pay the tax that funds the growth. This is a fact. The only question is how to collect that tax from the economy. Labour has chosen to do so in progressive ways consistent with its plans to reshape society. This, as I explained in 2015, is precisely what The Joy of Tax is. No one can blame Labour for doing exactly what tax is meant to do and leaving most in the country better off as a result. The only question is why the Tories won't do the same.
They will, of course, claim that this is a suicide note from Labour. And they will say it will harm the economy. But neither is true. Government spending when the economy is stagnating at less than capacity is wholly rational. And if it increases the ratio of government spending to total economic activity than has been usual, so what? What we need is government spending on health, education, social care, education and so much more. We are clearly not wanting to spend more on what the private sector has to offer or we would be doing so. This manifesto does then, very clearly, deliver what the economy needs.
In that case is there a downside? None at all, I suggest, unless you 're in the top 3 pr 4 per cent of income earners or are a large company or bank. And let's be clear, these groups have the capacity to pay.
There isn't one obvious big idea in the Labour manifesto of the type I would like. At the same time there is one massive underlying theme of bringing to an end the neoliberal era. And that is good enough. I have had my differences with Jeremy Corbyn, but this is a good manifesto for the UK.
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Seems a good analysis. It does seem awful corporations who benefit from roads, rail and other tax payer funded things squirrel so much money away as the Panama papers showed. Labour will be unpopular because the very wealthy don’t want to be challenged.
‘And that growth always creates the capacity to pay the tax that funds the growth.’
Because I am a long time reader of your and other similar blogs I understand what that means. That the govt. debt taken on to spend on these programs will be paid back by the tax from the incomes generated by these programs. However I’m not sure if the average person will be able to understand this. People on this side of the economics fence really need to update their language if they want to win this fight.
I know…
I try….
[…] I have explained that current spending commitments can be paid for from tax revenues: the spend creates the capacity to pay. How is explained here and here. […]
I haven’t read Labour’s manifesto but surely the big idea is we invest in Britain with public spending and buy out public debt for example PFI with QE. Lastly a Labour government would end the years of public spending cuts and the privatization of the public sector,
Derek
“No one can blame Labour for doing exactly what tax is meant to do and leaving most in the country better off as a result. The only question is why the Tories won’t do the same.”
Because if they did, they wouldn’t be Tories.
As the late Gore Vidal declared: “It’s not enough to succeed: others must fail.”
I (Labour party member, not an economist) instinctively like a lot of what’s proposed, but surely saying that big companies have the CAPACITY to pay is beside the point, isn’t it? They also have the capacity to relocate to a more benign business environment, or to choose not to come here in the first place – particularly with all the uncertainties of Brexit. How would that help other smaller businesses relying on them, tax revenues and growth?
The reality is business does not move
They want the 65 million people in the UK
To work for them
And to sell to
So they only move profits – and that is getting harder
Don’t believe the ‘we’ll leave’ nonsense – only Brexit can do that, and the Tories delivered it
Indeed. Definitely a time to pull together. Family quarrels have no place when there is a war on.
There is an interest piece by Raoul Martinez on openDemocracy: https://www.opendemocracy.net/uk/raoul-martinez/politics-of-hate-predates-brexit-by-long-way
Good to read a positive reaction, after the mauling by the bbc!
Curious to know what is the one obvious idea you like to have seen?
Regards
Daphne
To promote government savings for investment
As in Kiwi bank in New Zealand?
Unfamiliar
Did you suggest this to J M?
I will pass it on…
I didn’t
Carol Wilcox of the Labour Land Campaign has pointed out:
Page 86:
Labour government will give local government extra funding next year.
We will initiate a review into reforming council tax and business rates and consider new options, such as a land value tax, to ensure local government has sustainable funding for the long term.
Page 60
We will keep the Land Registry in public hands, where it belongs, and make ownership of land more transparent.
Great stuff!
I’ve been listening to radio 4 today without hearing a positive statement about this manifesto, so thanks for lifting my spirits.
I was in the Netherlands and so avoided the inevitable nonsense
It also meant I missed commenting for the BBC though….
So Professor, ‘they’ arranged for you to be out of the country?!
i have to say I can only laugh at that
I chose to go to do some work with colleagues
If you think that was oart of a master plan that’s bizarre
Yes – I too think that this a good manifesto but I am not sure that it has gone far enough in creating new money in the right areas of the economy along the lines of the ideas discussed here and elsewhere. But it is a start and for once Labour is putting clear red water between it and the neo-lib Tories. I have to say I would vote for this.
“When a government spends more when there is unemployment or underemployment the result is not inflation, it is growth. And that growth always creates the capacity to pay the tax that funds the growth. This is a fact.”
I’m not sure this is a fact acutally. if it was, why did the last recession happen, when the labour government of the time were running a huge deficit? Why do any recessions happen for that matter, if what you say is true? If what you are saying is a fact then government spending would always end up with an ever increasing virtuous cirlce of grwth – but this isn’t the case in the real world. I also don’t think that the UK is suffering from a massive unemployement problem – after all it’s at the lowest it’s been for years.
Maybe you didn’t notice that the banks failed?
I suggest you go to Specsavers
I also suggest you ntocie that they did a great job of addressing the damage – all of which was undone by Osborne
I’m not sure you understand what actually caused the recession. If you’ve got the stomach for it I suggest doing some reading around Credit Rating organisations issuing out top grades to CDOs that were full of terrible debt that was never getting paid back. You can’t blame labour for that.
Thanks Richard, I agree that that it’s a good
manifesto in the area of the economy and tax justice and provides a clear alternative vision to neoliberalism but what about Brexit? It seems to be calling for an end to single market membership and freedom of movement. Won’t that have disastrous implications for the economy and won’t it make it very difficult/impossible to realise much of this manifesto and be forced down an even more extreme neoliberal route under WTO rules. Corbyn thinks we can have a viable social democratic alternative in one country. Is that really viable?
The manifesto accepts the reality of what Brexit means
And of course a country can be social democratic in isolation. Why ever not? I find the alternative idea baffling. Why do you think there is only neoliberalism now? History has not ended, let me assure you
Thanks Richard,
Surely there is a link between what kind of Brexit we have and the ability of any future government to pursue a radical social-democratic agenda. The manifesto seems to be calling for a hard Brexit – would not a Norwegian style deal which maintains membership of the single market and some kind of renegotiated ‘freedom of movement’ (there appears to be wiggle room in the EU rules on this) be a better approach for Labour?
I think it is more flexible than you suggest
But realistic as to likelihood
I can’t see a deal, and I doubt Labour does
Thanks!
[…] Richard Murphy of Tax Research UK first response was this post, titled “Labour has delivered a good manifesto for the UK“ […]
Much to like in this manifesto. It’s mostly grounded and sensible with lots of good suggestions and policy initiatives.
Problem we had yesterday was that the discussion was centred around cost, so the detail wasn’t as exposed as it might have been. This is a good platform for the party to campaign upon with several areas that will prove very popular to the great majority of the electorate.
So, the product is pretty sound but do we have the time to really get the key messages out and the personnel to sell it?
To the last, I doubt it
[…] can be paid for from tax revenues: the spend creates the capacity to pay — made here and here. He continues: “The only real question is how Labour will pay for nationalisation” and cites […]