After months of waiting, we will finally learn who will succeed Ed Miliband as Labour Party leader this Saturday. With Jeremy Corbyn the bookmakers’ favourite to win, commentators have been discussing the influence that ‘Corbynomics’ could have over UK investments and the economy.
Pension plans
Mark Sands, writing for Fundweb, discusses Corbyn’s key promises, including “nationalisation of energy companies and railways as well as scrapping the Trident nuclear deterrent”. He goes on to highlight what Corbyn’s pension policy could mean for the world of financial services.
Sands notes that last week, Corbyn
made a case for flexible retirement in
The Telegraph. “We need a flexible pension age that allows people to work for as long as they want, while also recognising that for many people the nature of their work, their health, or a disability may not allow that,” Corbyn said.
£375bn
The amount the Bank of England has created since the 2008 economic crash
However, as Sands points out, Corbyn is yet to reveal a complete pensions policy.
Figures released from Hargreaves Lansdown show how reducing the state pension age could double the value of benefits received by some. Basing state pension on a flat rate of £155 per week, Hargreaves estimates that a person receiving their state pension from 60, as Corbyn implies, would cost £303,463.
In contrast, a legal retirement age of 70 would cost £150,260. Sands quotes Tom McPhail, Head of Pensions Research at Hargreaves, who says: “It turns out that if Corbyn wants to pay out the state pension at the age of 60 then it’s going to cost quite a lot of money.”
Fundweb opinion
Practical solutions The Telegraph’s Liam Halligan is another to question Corbyn’s economic policy. “Last autumn, I debated Jeremy Corbyn in front of a couple of hundred people at the University of Warwick,” writes Halligan, who argued against the aggressive redistribution of wealth, while Corbyn argued in favour of it.
During the debate, Corbyn relayed facts about the highest taxation after the war being over 90%, comparing this to “the very modest” current proposal of 50%, which was met by “thunderous applause”.
Halligan’s goal was "to convince students that 'a state that redistributes aggressively will become an overbearing state' that sinks into chronic mismanagement". To support his argument, Halligan referenced France, where President Hollande’s 75% tax rate has proved crippling, seeing only an average growth of 0.2% over the past five years.
Halligan’s argument is summarised in a similar tone to that of Sands: while big government sometimes sounds good, it inevitably becomes a source of instability and inequality. “The long-term answer is not angry and aggressive redistribution but proper banking reform," with a stable economic framework that allows for equal opportunities.
Like Sand, Halligan believes Corbyn will prove an expensive drain on the economy and is yet to reveal completed policies, offering “precisely nothing in terms of practical policy solutions”.
The Telegraph coverage
Correct the critics
Taking a different view, blogger Adnan Al-Daini, writing for the Huffington Post, suggests that Corbyn’s idea of ‘quantitative easing for people’ (PQE) could boost the economy and GDP.
Al-Daini describes Corbynomics as “the proposal that the Bank of England [BoE] be given permission to upgrade our economy and to invest in new, large-scale housing, energy, transport and digital projects”.
While critics are arguing that using the BoE to fund these projects will result in huge inflation, Al-Daini suggests we need to keep an open mind. “Only 3% of the money in circulation is in the form of coins and notes; the remaining 97% is created electronically by private banks every time they make a loan and by the BoE under its Quantitative Easing programme,” he explains. “So it is not the creation of money that causes inflation; it is the quantity of money we create, and how we use it.”
He adds: “If the injected money expands the economy, creates employment and develops skills, why should that be inflationary?”
The BoE has created £375bn since the 2008 economic crash, Al-Daini adds. This money went into banks and financial markets through the buying of existing government bonds. Positive Money (a not-for-profit campaign group)
calculated that only 8% of that money went into the economy, with the rest trapped in financial markets, benefiting the richest 5%.
PQE, on the other hand, will bypass the financial markets and private banks, with the money channelled, through a National Investment Bank, to areas of need, such as housing, Al-Daini argues. “This seems to me,” he concludes, “less risky to the economy than conventional quantitative easing.”