What Corbyn Stands For and Why He Spooks Markets
(Bloomberg) -- Jeremy Corbyn is a controversial leader even in his own party. The man seeking to dethrone Boris Johnson as U.K. prime minister has been criticized for failing to tackle racism in the Labour Party and for moving it too far to the left. He has also won support for radical plans to combat climate change and a raft of populist policies, some a throwback to 1970s-style socialism, including re-nationalizing key industries and hiking taxes on corporations and the wealthy. While polls suggest Labour may struggle to win the Dec. 12 election, nobody’s ruling out 70-year-old Corbyn becoming the oldest first-time prime minister.
1. What are Corbyn’s main policies?
Industries including rail, water, energy production and the mail would be brought under public control. Vote-pleasers include free broadband for everyone, slashing rail fares by a third and making university tuition fees free. Labour would also lift the minimum wage to 10 pounds ($13) an hour, hand more power to renters, strengthen unions and bring in a four-day week within 10 years, with no reduction in wages. There’ll be more money for schools and public-sector workers and a 6 billion-pound boost for the National Health Service. Any income tax rises, Labour says, would affect only the roughly top 5% of individual earners.
2. How will Labour treat business?
It will seek to tax multinational corporations based on the proportion of their sales, workforce and operations in the U.K. Corbyn plans to give workers as much as 10% ownership of their companies by requiring large corporations to set up investment funds for employees. He promises to “go after the tax dodgers, the bad bosses and the big polluters,” proposing a windfall tax on oil companies that would be used to tackle climate change. In the run-up to the election, Labour singled out five companies it accused of exploiting employees, including Amazon, Sports Direct and Uber. Labour also shocked markets by saying it would nationalize the broadband unit at BT Group Plc.
3. What about the financial industry?
Banks are a target. Labour’s economic spokesman John McDonnell has prepared policies designed to curb their power and redistribute wealth. They include expanding the financial transactions tax, restricting bankers’ bonuses and delisting companies from the London Stock Exchange if they aren’t doing enough to tackle climate change. Corbyn is considering moving part of the Treasury to the north of England and part of the Bank of England to Birmingham in central England.
4. Is Corbyn anti-Brexit?
While Corbyn’s position isn’t always clear, Labour’s policy is to negotiate a new exit deal with the European Union within three months of the election and put that agreement to a referendum within six months. The party would only then decide whether to back that deal, or recommend remaining in the EU. Corbyn has campaigned heavily against Johnson’s Brexit deal, saying it would be economically damaging to the U.K., see parts of the National Health Service sold off to the U.S., and put a border down the Irish Sea, effectively splitting off Northern Ireland from the rest of the U.K. He’s promised to seek an agreement that would keep the U.K. in close regulatory alignment with the EU, while guaranteeing rights and protections.
5. Why is Corbyn divisive?
A row over antisemitism in the Labour Party prompted the U.K.’s chief rabbi to say Corbyn is unfit for high office and that a “new poison -- sanctioned from the very top -- has taken root” in Labour. Corbyn eventually apologized and said he had dealt with the problem. Politically, Labour has for decades aimed for the center ground, talking about wealth creation as well as public spending, but the shift to the left is not simply about taxation and spending. Corbyn’s foreign-policy position is far outside the consensus of post-war British politics; he’s a critic of NATO, viewing it as a “danger to world peace.” A month before the election, Corbyn’s own deputy quit and a former Labour member of Parliament publicly urged the country to vote Conservative.
6. What would Corbyn’s program cost?
Labour is planning an extra 83 billion pounds ($108 billion) of day-to-day spending -- on top of the additional tens of billions of pounds that the party is proposing to plow into infrastructure projects over five years. That points to spending rising to its highest since the 1970s under Labour, with the tax burden climbing well above levels sustained since World War II. In theory, the commitments should be neutral for borrowing as they are fully covered by higher taxes on companies and top earners, including hikes in capital gains tax. The Institute for Fiscal Studies expressed “serious doubt about whether that is genuinely credible.” Former BOE policy maker Danny Blanchflower and more than 160 other economists and academics backed Labour’s election promises as the best way to help the U.K. economy.
7. How could Corbyn become PM?
The 2017 election saw Corbyn shrug off criticism of his views and pick up votes where they mattered with an array of crowd-pleasing policies -- tactics that are in play again. The gardening enthusiast lifted Labour’s vote by 9.5 percentage points to 40% in 2017, pulling the party within 2.4 percentage points of the ruling Conservative Party and denying Theresa May a majority in Parliament. He became something of a celebrity with the young, receiving a rapturous reception from Glastonbury festival-goers. Two years on, oddsmakers rate his chances of commanding a Labour majority a long shot, but he’s in a strong position to lead a minority government should the Tories fall short of a majority.
8. Why’s that?
To retain power and win a majority, Johnson needs to prevail in northern and central England districts, many of which are Labour strongholds that the Tories have never won. In a so-called hung parliament, Corbyn would have more potential allies among smaller parties than the Conservatives. The Scottish National Party has said it would never work to keep Johnson in office but could help Corbyn in exchange for a referendum on independence for Scotland. The Liberal Democrats have ruled out supporting a Corbyn government, but party leader Jo Swinson is an opponent of Britain exiting the EU and would struggle to back the Tories.
9. What would happen to his agenda in a minority government?
That’s impossible to say, but it’s likely that some of his policies would be watered down. The Liberal Democrats, which may hold the balance of power, are significantly more pro-business than the Labour Party.
10. Should the establishment be afraid?
That’s what Corbyn asserts. “The system is working just fine for them,” he said on the campaign trail. “It’s rigged in their favor. If the bankers, billionaires and the establishment thought we represented politics as usual, that we could be bought off, that nothing was really going to change, they wouldn’t attack us so ferociously. Why bother? But they know we mean what we say. They know we will deliver our plans, which is why they want to stop us being elected.”
The Reference Shelf
- Why the election is seen as a referendum on Corbyn, and a Businessweek article on how the poll is about capitalism itself.
- Labour’s antisemitism “poison.”
- Quicktakes on tactical voting in the U.K. and the election.
- Labour rounds on Amazon, Uber and others.
- What the parties are promising.
- It’s all about the NHS, not Brexit.
- Labour’s manifesto, plus a Bloomberg summary.
- The City is gambling on a Corbyn defeat.
- Corbyn’s Labour is a mess -- but can still win power.
©2019 Bloomberg L.P.