Now let’s forget all the rash promises in the manifesto and concentrate on the meat of the matter : How are they going to pay for it all? Well, of course, we know the answer to that one. They’re not going to pay for it. You’re going to pay for it.
Those of you who read this blog regularly may remember that I’m a retired Chartered Accountant, so I understand creative accounting but I have to say that Fantasy Corbynomics exceeds any notion I may have had about accounting even in my most creative moments.
Here’s a simple example. You go out and spend £20,000 buying a new car. How much has this cost you and how much cash did you use? Well according to Labour, it’s cost you nothing because the value of the asset you now own means that it’s cost neutral. So how much cash did you get through? Well, none because Labour tell you this is capital expenditure and was funded by borrowing so it doesn’t come out of your revenue budget.
These are the arguments they use for their nationalisation and infrastructure spending plans. They say that renationalising loads of stuff is cost neutral because you still have the assets and that the cash used was raised by borrowing by issuing gilts so they’ve not used any cash either.
This is, of course, patent nonsense. If you buy a new car, it’s true you still have the car but it’s also true you ain’t got the money any more because you spent it. The fact that you borrowed the money to buy it still means that eventually you’ll have to pay it back so you can’t ignore the outflow.
Labour says that apart from it’s ridiculous tax and spend plans, it will borrow £250 billion. Let that sink in for a moment : that’s £250,000,000,000 or a quarter of a trillion pounds.
Let’s assume they raise that money at an optimistic 1.5%. The interest on that borrowing alone would cost £3.75 billion per annum. Where’s that going to come from? Well, out of your taxes or rolled into the borrowing.
The simple fact is that Labour’s plans simply aren’t feasible. They cost too much and there’s no money to pay for it. It’s a fantasy and if they try to do it then they’ll bankrupt this country.
And at the end of the day, they know it – but they’ll never admit it…