Business view: Labour’s plan a ‘recipe for disaster’

PUBLISHED: 08:00 04 November 2018


The prime minister declared it is over, the chancellor has said it is coming to an end, and whilst this may sound like a circular argument, the only way to end austerity is to continue with it.

Austerity means living within our means. If the economy only delivers a certain amount of wealth and growth, we cannot spend more than we have in the long run, and if we do borrow more in the short term, this eventually has to be paid back. Anyone who has borrowed on one credit card to pay off another knows it’s a road to ruin.

In his latest budget, the chancellor decided to start spending again rather than tightening the belt further. It’s a temporary breather to alleviate the pain for those who have been struggling, but what he failed to do was put in place significant measures to drive the economy. Everything in any economy depends on business. Government spending can only be attained by the money it raises in tax or by borrowing, but the borrowing itself has to be paid back and so once again this falls on the taxpayer. Taxes are paid by people or businesses, but people can only pay if they have jobs so, once again, everything falls back on business’ shoulders. Without thriving businesses we cannot afford public services and if we want more and better public services we need businesses to succeed. The chancellor put in place some small measures but could have gone further.

Compare this to Labour’s strategy. They want to renationalise businesses that failed when previously in public ownership as they see them profitable in private ownership. John McDonnell says that by making profits these businesses are either ripping off consumers by charging too much or underpaying their staff. Profits are evil and exploitative as far as he and Corbyn are concerned. Nationalisation will cost £175billion yet they claim it will cost nothing. How foolish! McDonnell says that if we have to borrow to pay £175billion to acquire these businesses, the state will own businesses worth the same amount, so the effect is neutral. But business values are arrived at by totting up their future stream of profits. If you remove the profits, the businesses become valueless, meanwhile the borrowing remains unchanged and it becomes impossible to pay off the debt. Labour’s economic plan is a recipe for disaster and would lead to austerity like never seen before.

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