To say one thing for John McDonnell, he shows a refreshing preparedness to use a general election to lay out big ideas. While so many candidates for high office will retreat into platitudes rather than risk upsetting some target group of voters, the man who could be Chancellor of the Exchequer in three weeks’ time made a speech on Tuesday signalling what would amount to an even sharper change in Britain’s economic direction than that brought about by Mrs Thatcher’s first election victory in 1979. It is the most striking contribution to the election campaign — and one which the Conservatives need to challenge far better than they have done so far.
His plan to nationalise broadband shows he was quite serious when, in Who’s Who, he listed his hobby as ‘fermenting [sic] the overthrow of capitalism’. His political vision goes far further than the traditional Labour belief in big government — further, in fact, than any left-wing government of any European country. He plans to confiscate shareholdings without compensation: nothing if not radical. He wishes the government to pay for broadband because he likes the idea of state control. But why on earth should the middle-class be given free broadband in a country with a million pensioners in fuel poverty?
When ideology supplants common sense, we end up with documents like the Labour manifesto. The Tories ought to be ready with a counter-attack, making a basic defence of liberty, property and prosperity, and now have a decade of evidence to put in front of the nation. But years of talking about Brexit seems to have left them unable to talk of anything else. Why is it a bad idea for the government to nationalise transport, water and telecoms? Why is it a bad idea for
the state to impose diktats saying there should be a pay ratio of bosses to workers? Such ideas have superficial appeal. Yet the Tories struggle to persuade voters that these ideas lead to disaster.
Instead, the Conservatives have ended up copying rather than demolishing the Labour party’s worst ideas. Only last year, a Conservative government drafted legislation ordering companies to publish the pay gap between bosses and low-paid workers. This conceded the point that the government should interfere with companies: the only question is how far they do so. The 2017 Tory manifesto proposed price caps for energy companies. Price caps have failed wherever they have been tried, but when Tories forget this they pave the way for Corbynism.
There is no encouragement for business in McDonnell’s proposals, only threats. To him, private businesses are not the engine of the economy, which creates wealth and pays the taxes which fund public services; they are organisations ripe to be requisitioned by the state. He said this week that he would grant himself the powers to delist any company which failed to take ‘adequate’ steps towards decarbonisation. Given that Labour has committed itself to reaching net zero emissions well before 2050 — the date which the Committee on Climate Change believes to be the earliest that this could be achieved without serious damage to the economy — this poses an obvious threat to any business operating in an industry for which the technology does not yet exist to decarbonise.
His threat to seize 10 per cent of company stock and place it into a fund for the workers, paying them dividends of up to a maximum of £500 a year, is a chimera —what they gained in dividends they would lose many times over as McDonnell’s raid on shareholders depressed the value of private pensions. It is instead a raid by the government, who would take dividends of more than £500. The chilling effect on investment — especially foreign direct investment — would mean public services would end up with far less money overall. This would likely lead to further tax grabs, and the cycle of decline would continue.
Britain has an unusual reliance on the tax contribution of rich people. To look at the Sunday Times rich list is to marvel at how many have decided to settle here, run global companies here and pay tax here. The best-paid 1 per cent now contribute 29 per cent of all income tax collected. This statistic should warm the heart of the most ardent redistributionist: never has so much been paid by so few, to the benefit of so many. Crucially, this happened after George Osborne cut the top rate of tax. The last time that Labour let rip, with a top rate of tax going up to 80 per cent, the best-paid 1 per cent paid up a mere 11 per cent of income tax. Such points need to be made in this election campaign.
McDonnell is counting on continuing public anger at the bankers behind the financial crash of 2008/09. That anger is still there, to be sure, and his assertion that ‘no one needs or deserves’ to have wealth of a billion pounds will cut ice with many. But if the super-rich pay super-taxes — which they do — then it works for everyone. The best-paid in Britain already split their salary 50/50 with the government. The result is that the lower-paid have never been asked for a smaller part of the tax burden. The economy is not just stronger, but fairer and — environmentally — cleaner.
The Tories defeated the politics of envy once, in the 1980s, ushering in far more entrepreneurial attitudes. They must now win that argument all over again.