Big hikes in corporation tax. A sweeping programme of nationalisation. Large increases in the minimum wages, a 20-1 cap on executive pay, and, just in case it gets lost in that blizzard of promises, hefty tax increases on anyone earning more than £80,000 a year. Even in a normal year, the leaked Labour party manifesto has more than enough in it to make anyone in business or industry feel just slightly nervous.
But hold on. This is hardly a normal time for the British economy. We know Jeremy Corbyn and John McDonnell would like to pretend it simply wasn’t happening, but 2017-22 will also see the most crucial, and in many ways scary, challenge the UK has faced since the first full bracing blast of Thatcherism in the early 1980s. We will be leaving the European Union, our main trading partner. And we will need to work out a slightly different economic model.
So try this thought experiment. You are sitting in your office in Taipei or Delaware contemplating your investments in the UK. You are already a bit worried about Britain leaving the EU and the Single Market, and all this talk of tariffs barriers and more forms to fill in. Then, on top of that, you are suddenly confronted with a government intent on raising your taxes, limiting the pay of your senior staff, increasing your wage costs, strengthening trade unions and confiscating your property. If you were already uminng and ahhing about whether to stay invested in Britain after 2019, that will surely tip you over the over the edge, and persuade you to get out.
True, it may not be the case that the UK goes for the ‘full Singapore’ after we leave the EU, as much as some of the more swivel-eyed Brexiteers might like that. We won’t necessarily become a drizzlier offshore island full of swaggering billionaires. But we will have to work out what our competitive advantage will be, and frame a convincing pitch about why global companies should base themselves in London or Manchester rather than Lyon or Madrid.
Some of that may have to do with language, the rule of law, skills, and infrastructure. Some of it will have to do with encouraging more domestic innovation, promoting entrepreneurs, turbo-charging manufacturing, and making sure that technology invented in the UK is also developed and exploited here. But let’s be realistic. A big part of the pitch will be about competitiveness. We will be the low-tax, light-regulation destination in Europe. If you are fine with high taxes, lots of rules, and strong unions, you can choose France or German or Belgium and get full access to the Single Market into the bargain. If you prefer to be left alone to run your business the way you and your customers like it, then the UK will be the destination of choice.
Of course, some people on the left may not approve of that, and that is fair enough. They don’t like free markets, and favour more state intervention and more regulation. But they surely need to come up with a credible alternative for how we can prosper after Brexit. Instead, Labour is doubling down on old-fashioned socialism – at precisely the moment when we need to be making ourselves more competitive, not less. In any normal time, its plans would almost certainly destroy wealth. But for the coming five years, they are even crazier than normal.