The Labour Party manifesto is not economically radical. It is moderate. Its perceived radicalism depends primarily on the extent of the Conservative tax cuts that Britain has experienced over the past seven years. Corbyn can only offer his 'tax and spend' proposals because the UK's higher rates of tax have been cut so drastically. The Tories, wittingly or not, have left room for vast increases in revenue. It is a point seldom mentioned, but Osborne has paved the way for Corbyn.
When the Tories came to power in 2010, the highest rate of income tax was 50%. They immediately lowered it to 45%. More importantly, the UK possessed a corporation tax rate of 28%, which the Tories cut over the proceeding seven years to 19% and will further reduce to 17% by 2020. Osborne claimed the reductions would prove attractive to businesses, making the UK more 'competitive'. It seems the Conservatives failed to realise, however, that at 28% corporation tax, the UK was already highly competitive among developed economies. The severity of the tax cuts was simply unnecessary.
Imagine we retained 28% corporation tax throughout the seven years. Would companies have shipped abroad? Would they not have come to the UK? I doubt lower taxes proved particularly beguiling, especially when considering the competition. Had companies opted for Berlin as opposed to London on 28%, for example, they would have had to pay an additional 2%. Moving across the Chanel to France would cost them an extra 5%. The US - hardly a bastion of communism - would have cost them at least an additional 10%. Indeed, the average corporation tax rate of the G7 economies in 2016 was over 30%.
It is also worth remembering that some of these economies offer greater state investment and better access than the UK. It is a point rarely appreciated, but the inexorable limitation of expenditure that comes with austerity can prove unattractive to businesses. Businesses want government spending in education and healthcare to make sure they have a talented and strong workforce. They seek funding for defences to enforce security. And, of course, they support investment in infrastructure to ensure their businesses can function smoothly. The UK could have kept a competitive tax rate of 28%, secured more revenue, and offered structural as well as economic incentives to businesses at home and abroad.
Simply put, Tory austerity has not worked. The price the government said we would have to pay - weaker public services, shoddy infrastructure, reductions to local authorities and so on - has not yielded adequate rewards. Austerity has not worked even by Conservative targets. The point of the reduction of expenditure, according to Osborne and David Cameron, was to eradicate the deficit entirely by 2015 and start paying back the debt. Seven years later, the Tories are still managing a hefty deficit and they have increased the debt excessively. It is clear that the UK has not reaped the supposed benefits of austerity, but has certainly suffered the cost.
According to the TUC, for example, wages in the UK have contracted since 2007. As our economy has grown, Statista reveal, real wages have suffered a -10.4% decrease - akin to that of Greece. The impressive increase in employment under the Tories, according to the Office for National Statistics, has been supplemented by under-employment. Public services are evidently struggling and our defences have been weakened. Home ownership has become harder than ever for the precariat, private landlords are charging unaffordable rents, and the levels of homelessness are rapidly rising. Child poverty has increased, waiting times in hospitals have increased, school sizes have increased. The cuts to benefit payments, perhaps the most brutal aspect of austerity, have led to cruel and shameful policies for the most vulnerable, such as the bedroom tax and strict work capability assessments.
The global financial crash played a large role in creating this mess, of course, but austerity has failed to clean it up. If the Tories remain in power, we will witness more of the same, which means further reductions in tax rates for high earners and businesses, and inadequate investment in public services, infrastructure and human capital.
Corbyn wants economic change and his manifesto reflects that desire. The Labour Party propose the reversal of the majority of Tory tax cuts and additional taxes for the richest 5%, which could yield up to £50bn. These tax increases will raise significant revenue for public services, defences and investment.
On top of the big-hitting tax and spend policies, Corbyn's manifesto also pledges, among other things, to introduce certain regulations and taxes on the financial sector, create a national investment bank, renationalise certain utility industries prone to monopolisation or oligopolisation, and increase investment in green energy.
The manifesto represents a shift towards an economy more inclined to state intervention and more willing to tackle the woes of inequality. It is no surprise that plenty of the world's foremost economists are supporting Corbyn - not necessarily politically, but economically. Mainstream economists regularly argue that a society that tackles inequality does not necessarily jeopardise economic growth. In fact, plenty of reputable and indeed Nobel prize winning economists believe, as Joseph Stiglitz writes in The Price of Inequality and Kate Pickett and Richard Wilkinson write in The Spirit Level, that greater overall prosperity depends on greater equality.
Corbyn's manifesto adopts mainstream economics. It calls for moderate and sensible change. Such change depends primarily on the reversal of the Conservatives' excessive tax reductions and the adoption of a level of taxation that will remain far lower than most G7 countries. Even economists not aligned with the left have called the Labour manifesto sensible. This is not unsurprising. Credible economists are seldom radical, but neither is the Labour Party's manifesto.