A spending spree that doesn’t add up
THE recovery of the UK economy after the last three recessions has been achieved through growth in the private sector. Real, robust jobs have been created rather than artificial employment that relies on a bloated public sector under state control and manipulation. Having spent more than four decades in the accountancy profession, I have made an assessment of the likely scenario if Jeremy Corbyn and John McDonnell get their hands on the public purse. The first 12 to 18 months would be a honeymoon period. There would be massive spending on the NHS, social welfare, housing and infrastructure projects funded by increases in corporation tax and income tax. Before long, tax receipts would dry up due to a brain drain — the highest earners would emigrate or base their business activities outside the UK. There would be greatly reduced economic activity because entrepreneurs would be unwilling to put their capital at risk in view of the marginal returns to be achieved. It is well known that the higher the tax rate, the lower the tax take. By far the highest UK tax take is from basic-rate income tax and VAT. Hitting the highest earners with punitive tax rates gathers little or nothing in the way of meaningful taxation receipts. The effect will be that, as economic activity slows and stagnates, income from these two key taxes will substantially decrease as jobs are lost and personal spending declines. A Labour government would then embark on a policy of massive borrowing to fund the enormous public sector costs. The vast numbers of jobs lost, coupled with the hugely increased numbers of economic migrants resulting from
Labour’s open borders policy, would place even greater strain on the public purse as welfare payments start to skyrocket. The Government would be unable to maintain capital and interest payments on its borrowings and would begin to print money in order to do so. As a result of this artificial money supply, sterling would collapse and imports would become more costly. In order to protect the pound, the Government would put pressure on the Bank of England to raise interest rates to levels that have not been seen for decades. Inflation would start to rise as private and public sector employees demand pay rises because of higher prices and soaring mortgage interest payments. Under a Labour government in 1975, the rate of inflation hit 27 per cent. This would be nothing in comparison to the hyper-inflation rates under a Corbyn/McDonnell administration. Economic meltdown would ensue, with all of the catastrophic societal and financial effects that would follow. The UK’s economy would begin to resemble that of a country such as Venezuela, which today is suffering an inflation rate of an extraordinary 10 million per cent. Mass bankruptcies and loss of livelihoods would cause greater social unrest than we have ever seen. The prospect of a Corbyn government with a Momentum-driven financial agenda is too scary to contemplate.
dANiEL B. MYERS, Chigwell, Essex.