Vote Muppet!

So today was the big reveal of the Labour Party manifesto – well, if you ignore the leaked one last it was anyway…

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…

6 responses to “Vote Muppet!

  1. I imagine that Corbyn would be actually horrified if Labour won.

  2. All very well but now in the interests of balance maybe you should tell us exactly why Labour cannot afford what they say they can and the Tories can?….HS2, Trident, corporation tax cuts etc…

    • No doubt they’ll be asked that question when they release their manifesto.

      My point here is that Labour’s plans are completely unrealistic. They want to spend hundreds of billions more than the Tories on top of stuff that the Tories are proposing PLUS HS2, Trident etc – although Corbyn’s a bit confused on that last one.

      As far as Corporation Tax is concerned, surprisingly the Corporation tax cuts have resulted in increased revenue as firms have come in and invested. Read John Redwood’s blog where he explains it more clearly. Ironically, increasing CT could force a retraction in investment resulting in less revenue, not more and fewer jobs.

      Ditto the increases in Income Tax. Why bother with a better job if you just pay more tax? Why live in the UK if you’re rich? Branson doesn’t for example.

      Labour’s plans simply will not work.

  3. Stonyground

    Wouldn’t the Eighty grand super tax threshold make it logical for anyone earning more than that to take a pay cut? There must be plenty of ways to achieve this, from shorter hours to the company spending the money on better facilities for the workforce instead.

    It certainly appears that Corby is deliberately being as red as he possibly can be because he knows that he hasn’t got a hope of being elected.

    • Doesn’t exactly give you much of an incentive to better yourself in life does it?
      I remember when I were a lad the top slice my Dad was paying was 90% or thereabouts and then they brought in the Investment Income Surcharge now revived under a different name! So that”s 90% from you, 12% employers NI from your boss and 15% IIS – totalling a staggering 117% effective top rate of tax.

      Back to the 70’s? Christ, I hope not. No wonder there was a brain drain…