Corbynomics 1: the City’s best new friend?

Main source: article received from Prem Sikka, Professor of Accounting, University of Essex Business School

prem sikka 4In his latest article, Professor Sikka sets the scene: “There’s no doubt that Jeremy Corbyn’s election as the leader of the Labour Party has changed the direction of political debate in the UK. 

Previously, cuts to workers’ wages and reductions in public expenditure were on the menu of all the major political parties. No longer are these the key planks of Labour policy and there is now a clear dividing line between that party and the ruling Conservative Party”.

He points out that the Labour Party still seeks to reduce the UK’s financial deficit – but through economic growth and investment, particularly in manufacturing, which will increase tax revenues, employment, reduce poverty and demands on welfare.
richard murphy 3Sikka cites the work of Richard Murphy, tax researcher, chartered accountant and political economist whose latest course, Economics of the Real World at City University, aims to show a ‘considerable overlap’ between the ideas to be explored and the reason for Jeremy Corbyn adopting some of his thinking this summer. See also his brief ‘best new friend’ article for CITYA.M.

Among the policies advocated by Corbyn and shadow chancellor John McDonnell are:

  • investment in infrastructure,
  • the creation of a national investment bank,
  • renationalising the UK’s railways and energy companies,
  • clamping down on tax avoidance,
  • raising taxes on wealthy individuals and large corporations,
  • increasing the effectiveness of business regulation,
  • and giving more help to society’s vulnerable citizens.

Sikka continues that, though Corbyn’s platform has been branded “anti enterprise” by representatives of big business, in many ways it is pro-business: investment in transport, education, housing, healthcare and digital economy helps business. Higher wages and a general redistribution of wealth would increase the purchasing power of ordinary people and stimulate demand for products and services.

A clampdown on tax avoidance would benefit small and medium enterprises. Small businesses, employing more than 15m people in the UK, are often unable to compete with larger businesses, because multinational corporations can avoid corporate taxes by devising complex structures and shifting profits to tax havens, but smaller enterprises cannot do this and their effective tax rates have accelerated. Good additional measures include a small-business rate freeze, rent controls to stop local shops being priced out, an increase in spending on workforce training, and resources for digital infrastructure.

business 2 insight header

American economist Paul Krugman supports this thinking in many publications, including Business Insider and the NY Times. 

This ‘dynamic duo’ conclude:

Richard Murphy hopes that “a new Labour leader will reach out to academia and positively invite new ideas, research, thinking, dialogue and so policy formulation. Now is the time for this. The politicians and academics involved all have until 2020 to achieve a result. There is a desperate need for an economics of the real world that is quite deliberately intended to change not just measurement, but reality”.

And Prem Sikka adds that “The Corbyn-McDonnell agenda has broadened the space for political debate. This newly created space will empower others to speak about hitherto marginalised ideas and encourage debates about the kind of society that we all want to live in . . . Politicians have a choice. They can use their position to cement the status-quo, enabling those privileged by history to remain in the ascendancy, or they can entertain new ideas and side with more marginalised sections of society”.

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Posted on September 17, 2015, in Economy, Jeremy Corbyn, Labour Party, Watershed and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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