Bad for Business? 5 Ways a Corbyn Government Could Change the UK Economy

by Tom Cutterham

3 August 2015

When they want to flash coded messages at corporate elites, Jeremy Corbyn’s Labour leadership opponents talk about building a party that can work with business. “You win when you support business as well as unions,” Tony Blair told party loyalists recently. “You don’t win from a traditional leftist position.” If the scaremongers are right, Corbyn is anti-business, plain and simple.

But what would a Corbyn government actually look like for British business? He laid out his economic platform the day before Blair’s remarks. What it shows is that, far from being on the back foot when it comes to economic policy, Corbyn’s supporters should feel confident in challenging the austerity-lite orthodoxy of the other candidates. He’s the only one who has the vision it will take to lead the country out from ten years of Tory economic mismanagement in 2020.

1. Vulture capitalists will lose out and move out.

George Osborne’s austerity policies have been great for a certain kind of business interest – those which take advantage of government spending cuts to swoop in and devour public sector infrastructure. That doesn’t just mean buying up privatised institutions like the Royal Mail on the cheap. It also includes taking over public services – like prisons, immigration centres, and even healthcare – for a profit. In the year leading up to April 2015, for example, nearly £4bn of NHS money went to profit-making corporations like Virgin Care. Meanwhile, betting shops and payday lenders exploit those already hardest-hit by recession and austerity.

For vulture capitalists, there’s always a way to profit from stripping the country’s social assets. Those companies and their powerful investors – often closely linked to the political and media elite – will lose out under a government that reverses austerity. Someone like Jeremy Corbyn gaining power is what keeps these people up at night. If it happened, they might leave and take their money with them. But they don’t necessarily represent all business. After all, if they did, why would we even want government to be business-friendly?

2. Rich corporations and rich individuals will have to pay their share.

As campaigns like UK Uncut have helped to publicise, corporate tax avoidance and evasion totally eclipses the right-wing bugbear of benefit fraud when it comes to money missing from the public purse. One estimate from last September put the amount for 2013-14 at just under £120bn. HM Revenue and Customs, which collects these taxes, has suffered its own cutbacks under the austerity regime. The result is utterly regressive corporation tax; only the biggest firms can put effort and expertise into not paying their taxes. Corbyn has pledged not only to make better tax avoidance rules, but just as importantly, to give HMRC the resources it needs to enforce them.

Avoidance and evasion aren’t the only issues, either. The government is ideologically committed to cutting taxes for the rich, even while increasing the regressive VAT, capping benefits for the poorest, and cutting services for everyone. In his most recent budget, George Osborne announced tax cuts for individuals earning over £40k and a £6.6bn cut in the tax on corporate profits. That’ll make corporation tax in Britain the lowest in the G20 – so low it breaks Japanese rules against tax havens. It’s safe to say a Corbyn government would have different priorities.

3. We’ll pull out of the austerity death-spiral.

Nobel Prize-winning economists have been saying it for a while now: austerity makes no sense as an economic policy. As one commentator put it back in 2011, austerity is “a cruise missile aimed at the heart of recovery. If everyone is being austere at the same time…the economy is bound to shrink.” In a recent NovaraWire article, James Meadway wrote that “the chances of the UK avoiding a financial crisis and recession over the next few years diminish with every day that passes.” Britain right now is in an economic death-spiral, and it’s the Tories’ austerity agenda that put us here.

Corbyn’s economic plans are centred on reversing that process of contraction. It’s corny but true: you have to spend money to make money. Undoing five years of cuts to public services is one thing, but Corbyn is proposing an even bigger programme of investment, perhaps on the basis of People’s Quantitative Easing. He’ll also raise the minimum wage to an actual living wage, putting more income in the pockets of those who really need it – and are most likely to spend it as customers of British businesses.

4. Set free the next generation of entrepreneurs.

One headline-grabber in the Corbyn programme has been bringing back free university, including the maintenance grant that will allow students to graduate debt-free. That will turn higher education back into what it should be: a public service, not a commodity.

Everyone agrees we need a highly-educated workforce to run a twenty-first century economy. But how much of the creativity and entrepreneurship in each crop of graduates is lost when they’re saddled with enormous debts right from the get-go? If we want dynamic, well-trained young people with the freedom to build and innovate, free education is where we have to start.

5. A National Investment Bank for high-tech infrastructure.

Even more important, though, are Corbyn’s plans for investment in housing, transport, energy, and digital infrastructure. Not only will those projects create jobs and get money flowing again, but they’ll also transform the environment for British business. George Osborne’s Northern Powerhouse has already “suffered a power failure,” as the Financial Times recently put it, after he went back on his pledge to electrify the Trans-Pennine railway. Corbyn, by contrast, offers “public investment in new publicly-owned infrastructure so that a future chancellor can deliver a sound economy, not just sound-bites.” Osborne never seriously cared about what happens outside the south-east. Corbyn may be a London MP, but only his policies will work for the country as a whole.

Instead of private trains on underfunded tracks, trying to squeeze out profits with fare hikes while siphoning public subsidies into dividends, we could have a railway system that works for all of us and not just for shareholders. We could do the same for energy and water, too. These changes won’t just affect families at home. They’re also crucial for businesses large and small. Connecting the country physically and digitally, and making sure we’re all supplied with the basic utilities we need: those are precisely the jobs government should be getting done. It should be preparing us to meet the challenges ahead – not scrapping renewable energy projects. And it should be building infrastructure for the future instead of selling it off.

Retaking collective control of our national infrastructure isn’t a socialist nostalgia-trip. In fact, it’s the only sensible approach to regaining prosperity. It’s how we create a modern and efficient environment for real, productive businesses to flourish.

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