Back to the Jeremy Corbyn Future

With the latest revelations from the Labour Party conference, we now know what their policies are likely to be if elected. These include

  • Nationalisation of the railways and utilities (including National Grid).
  • Scrapping all Private Finance Initiative (PFI) deals by buying out the owners with Government debt.
  • Rent controls in the private housing sector.
  • Reform of leaseholds.
  • Workers in the gig economy will get full employment rights.
  • The NHS will get more money.
  • Student loan debts will be written off (at least it’s an “ambition”).

Now some of these policies are not totally daft (the last four for example), even if the cost is probably unaffordable at tens of billions of pounds. But for those of my readers who do not remember the times when we had rent controls, and nationalised industries back in the 1960s and 70s, let me remind you.

Rent controls meant that rents stayed low, but private rented housing pretty well disappeared as a result over the years from 1950 to 1960. Nobody would invest in rented housing when they could get better returns on other investments. Or it promoted the spread of Rachmanism where landlords would allow properties to run down and then use aggressive tactics to remove sitting tenants. In other words, a great example of the usual “unintended consequences” of economically illiterate policies.

The control of industries by politicians and civil servants created hopelessly inefficient industries like the nationalised railways, the car industry and the coal industry which should have been shrunk in size well before Mrs Thatcher took steps to do so.

There would of course be an enormous flight of capital from the UK if these policies were implemented, and it seems the shadow chancellor is already anticipating a run on the pound. What he could do about it other than get the IMF to bail us out is not clear. To remind my younger readers, this is exactly what happened back in 1976 under Prime Minister James Callaghan when the IMF enforced massive cuts in the UK’s budget deficit as a condition of a large loan (the UK had been living beyond its means for some years, and building up large debts, very much like recent years under another socialist government who invented PFI deals to enable them to borrow money without putting it on the Government balance sheet – but the interest payable has now caught up with us). Would a new socialist Government simply default on the contracts or borrow even more money to get out of the PFI deals? Either way it looks a grim financial future for UK Plc.

The last Labour Government made a big mistake when they nationalised a small UK bank called Northern Rock – we just passed the year anniversary of that event. That proved disastrous when other banks such as Bradford & Bingley, RBS, HBOS, et al, who were dependent on short term money market lending needed liquidity. Nobody was keen to lend to UK institutions so British banks and the UK economy were some of the hardest hit worldwide by the events of 2008/9.

As for renationalising the railways, they may get more subsidies from the Government now than they did when they were last nationalised, but ridership has increased, new tracks are being laid, and services improved. The problem was surely the nature of the privatisation and the fact that all railways are horribly inefficient and an inflexible means of moving goods and people around. Old technology, beloved by users who do not have to face up to paying the real cost of the service.

So the policies of Mr Corbyn and his colleagues may be exhilarating for LabourParty supporters, but no I don’t want to go back to a future set in the 1960s. Been there, done that, and no thanks.

But if the Conservatives wish to win the next election, they certainly need to look at tackling employment law to bring it up to date for the gig economy, to tackle the problem of funding education and relieve students of the enormous debts they are now incurring, to deal with the problem of insufficient housing in the South-East (and associated over-population which is the cause) which is leading to demands for rent controls, and tackle the thorny question of funding the NHS. Yes we need some new ideas, not old policies recycled Mr Corbyn.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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