IT was Harold Wilson who said that a week is a long time in politics. A couple of months is, in that case, an eternity. And so it feels. At the beginning of August I had never heard the term Corbynomics and since then I have been credited with inventing it. That suggestion is not strictly true; I wrote not a word of Corbyn’s economic policy document, but many of the ideas included in it did first see the light of day on my blog. Let me explain some of them.
Perhaps of most interest to accountants is Jeremy Corbyn’s focus on the tax gap and the best use of tax allowances. Much attention has been given to the suggestion that Corbyn thinks he can recover £120bn from the tax gap and £93bn from reform of tax reliefs. Both suggestions are, for the record, complete nonsense. The best estimate of a recovery from the tax gap is £20bn a year – and that would take time to achieve. My estimate of the yield from a review of corporate tax breaks is lower, because those that could be eliminated might need to be given away again in different forms to stimulate alternative, new and desirable activity.
It is this last point that is key: the numbers involved in these suggestions are big, but their importance is in what they imply. Both are indicative of a key Corbyn policy, which is reviewing how existing mechanisms of economic policy work. So HMRC will be up for review, for example – something many in the profession have called for. Changes in the management of the tax gap and tax reliefs are indicators of possible outcomes of that process.
People’s Quantitative Easing, which is linked to a National Investment Bank, is another dimension of this. First, the underlying policy of investment in the economy rejects the austerity narrative that is, as Martin Wolf has said in the FT, a choice and not a necessity. Second, People’s QE, which would direct Bank of England-created money towards investment in new infrastructure such as social housing in the event of another downturn in the economy (which Jeremy Corbyn and I both think is coming), is a possible outcome of a review of the Bank of England mandate. When monetary policy has ceased to function – as it has now, with near zero interest rates for seven years – this is simply an exercise that is overdue to be undertaken.
The overall message, then, whether to HMRC on the tax gap, the Bank of England on People’s QE or to business with regard to corporate tax reliefs, is really that Corbyn is willing to ask big questions about the direction of the economy that have lain dormant for a long time, it seems. The implication is clear and was seemingly picked up by those voting for Corbyn over the summer. It is that the reality of Corbynomics is not just in the detail but is in a whole new way of looking at and seeing ways of doing business.
Institutions will be challenged. Assumptions will change to match new facts. And maybe Corbynomics is the precursor of something even more significant. The post-war consensus lasted for 35 years. The neoliberal era has done the same now. And maybe it’s not Corbynomics that is so radical. Maybe the tectonic plates of the economy are themselves shifting. The failure of the economy to return to what some would like to call ‘normal times’ is the surest indication of this. In that case, Corbynomics may not be the kick back to a past era as those searching for the neoliberal norm like to claim. Maybe it is instead the beginning of something new.
We could be at the start of very interesting times. Paul Mason calls it post-capitalism. Who knows? That may be his own wishful thinking. But “the times, they are a-changing” could be a line we all have to get used to. ?
Richard Murphy is a chartered accountant and a political economist