NOT A MONEY TREE — BUT A MAGIC FOREST THAT WOULD RUIN US
LABOUR wants to spend £400billion on a radical green agenda and investment splurge. It would spend an estimated £200billion nationalising rail, utilities and Royal Mail. And John McDonnell aims to seize 10 per cent of every firm with more than 250 staff and hand it to workers – at a cost of £300billion. The total is not far off £1trillion. Labour appears intent on financial suicide...
What is McDonnell proposing?
THE party will set up three huge funds to organise, manage and enforce its spending spree. First, there will be a social transformation Fund loaded with £150billion of borrowed money for schools, hospitals, care homes and council houses over five years. the second is a national transformation Fund – so far uncosted – to make sure the regions receive their share of the booty.
thirdly, a Green transformation Fund will invest in sustainable energy over the next decade. this is to include £60billion of funding to make every house greener through the use of insulation, solar and wind power and energy choices other than fossil fuels. the ambition of what these three funds aim to carry out is mind boggling, the bureaucracy looks like something out of the soviets’ ‘central committee’ rule book, and the cost is staggering. instead of borrowing £25billion a year the UK would double it to £55billion, forcing up national debt (which is currently falling) and destroying the hard-earned stability of the last decade.
the plan may look wonderful on paper. But the practicalities seem insurmountable. Building development plans could be caught up in the planning process for months and finding enough people to do the skilled building jobs required would be all but impossible. Work on crossrail in London began in 2009. A decade later it is still far from being delivered, precisely because of these capacity and technical constraints.
A charter for jobsworths
LABOUR plans to break up the treasury (actually one of Whitehall’s smallest departments) and devolve powers to the regions. it is planning to open ‘offices of government’ in every region to be staffed by civil servants
moved outside London. Their priorities will be set by a Sustainable Investment Board which will decide how much should be funnelled through something called Local Transformation Funds.
These will, in turn, report to an Executive Board, which will be accountable to a General Assembly. Labour has give us no costings for these trusts, boards, quangos and assemblies, or acknowledged civil servants may not want to be shifted out of Whitehall. There is no information on how governance problems and conflicts of interest – notorious at local government levels – will be avoided. The plan reads like a recipe for red tape and a charter for jobsworths.
Who’s going to pay for it?
NO specific tax policies have been released by Labour, although it has made plain it plans to soak billionaires, including Britain’s richest man Sir Jim Ratcliffe and the Duke of Westminster.
It also wants to impose higher income taxes on anyone earning more than £50,000 and to raise corporation taxes. But even so, it will have little chance of funding its spend, spend, spend proposals. This means much of what it plans to do will be on credit – the equivalent of payday lending for government.
McDonnell proposes some accounting tricks such as classifying assets in the hands of the National Transformation Fund as a benefit rather than a cost.
Its operations will be directly financed by issuing ten-year government bonds. But who would buy such bonds, unless mandated to do so by government, is left unsaid. This is important as government bonds in badly run economies, from Venezuela to Argentina, are regarded by markets as almost worthless. And McDonnell’s only fiscal rule is borrowing for investment will be excluded from fiscal targets – which essentially means the sky is the limit.
McDonnell hasn’t just discovered a magic money tree, but a whole money forest.