This morning there’s a wave of commentary from the City about the Labour Party and its new commitment to abolishing PFI – and presumably PPP as well (?). The overall tone is one of calm reflection with a veneer of “Don’t Panic”. There’s the usual soothing observation that one needs to look at the policy specifics – “In reality, it won’t be as bad as you think” – and a more obvious caution that Labour is a long way from power. Most investors seem to have bought this logic with the share price of many of the infrastructure funds barely moving.
My message is rather different. Be scared, very scared about Labour under Corbyn – and the very real possibility of him becoming the next PM.
Rachel Sylvester has, as usual, an excellent piece in the Times which exposes the generational divide between the happy-clappy Momentum generation and the old Hard Left warriors. As a good old fashioned Liberal (with strong Blairite tendencies) I recognise many of the Momentum squad. In times past they might have been out on the pavement working in movement politics for the old Liberal Party. Theirs is essentially a positive (though ultimately fruitless) form of politics all about enabling, and moving towards a fairer Britain. Sadly it has decided to get behind someone who is every bit the old Cold war Warrior – for the wrong side.
Let us be very clear about what has happened in the Labour Party. It has turned from a moderate social democratic party into a vanguard for pseudo-Marxist class war, aided by a hard core of trade union activists with barely a mandate between them. Its leader is happier backing the West’s enemies rather than standing up for liberal democracy. Corbyn is lauded as a nice man, a decent man, a principled man. His deep, past association with terrorist outfits such as the IRA are ignored in the headlong rush to forget history.
Perhaps of more concern is the evident truth that much of domestic politics probably bores him. He’s a man of international politics, of liberation struggles, of friends and comrades. I can half sympathise with that feeling – I’m probably much more interested in international politics myself, only that I tend to back the opposing side. For Corbyn, the argument peddled by the Right that his policies are all about Magic Money trees is somewhat beside the point. He is all about solidarities and mutual bonds, about feeling and empathy and decades-long struggle. To fight him on costings is to miss the point. He is in very simple terms, and I hesitate to say this, an enemy of The West. His Marxist fellow travellers hate everything about liberal capitalist democracy. In the meantime, he’s happy to leave the boring domestic policy stuff to his henchman, the shadow chancellor. John McDonnell is in effect the real domestic leader behind the scenes. He is also a class war insurrectionist who doesn’t believe in parliamentary politics. I almost gagged with laughter when I heard this openly Marxist politician say that he embodied a broad church of Labour beliefs that took in Tawney through to Marx. Tawney, really??. Tawney believed passionately in parliamentary democracy – McDonnell regards it as an impediment to his glorious vision of an iPad enabled socialist future with the worker’s vanguard in the front line.
Even worse many perfectly sensible people seem to be taken in by the lovable old rogue image descending on McDonnell. He’s mellowed with age. He’d be the bureaucrat who got stuff done. He used to run the GLCs finance and budget committee. In reality, he is the wolf in sheep’s clothing. a committed Marxist who has spent his entire life waiting for this glorious moment. The Long March (respect to Mao) is nearly at an end and he is at the gates of power.
Sadly the inept and pathetic Conservative Party is about to deliver the keys to power to this appalling crowd of usurpers. I’ve never been one for Tory politics though I’ve long respected characters such as Ken Clarke and John Major. But my caution has turned into abject horror by the dreadful behaviour of the governing party in first breaking the system by sponsoring Brexit, then not having a realistic, thought through plan about what to do about it, and finally by making Corbyn look sensible! I’d like to think that the excellent Vince Cable offers a real alternative but if I’m brutally honest I’d have to say that he has zero chance of making the impact that is needed. Smart man, good policies, wrong party.
The horrible choice facing us all in the next election will be between an optimistic, hopeful vision offered by Labour (riddled with evasions, untruths and straight porkies) and a glum, inward-looking, nationalistic vision offered by the Tories. Who can blame ordinary voters – disinterested in policies and ideologies- for backing the more optimistic vision?
And once in power be under no illusion about what comes next. The Hard Left will slowly transform their populist policies into a vanguard for socialist transformation. They’ve spent decades getting this far. They are not about to ditch The Project for the policies of pragmatism.
If I were them I’d engineer crisis after crisis. Establish fake enemies such as the Mainstream Media, The City Big Wigs. I’d polarise and deliberately look to encourage divisions. I’d borrow a series of ideas from the Trump playbook – cast internal enemies, class enemies. Probably my first target would be the mandarins. They’ll obstruct the Labour radicals, partly because their job is to obstruct all politicians. But this time they’ll be targeted as the enablers of the old order. My next tactic would be to take down the independence of the Bank of England and properly anchor it to a new set of economic priorities. With both the Mandarins and Central Bankers there are already legions of critics and enemies who’ll willingly align with the assault. “Tame the Treasury”. “Stop inflation fetishising”.
The next step will be to try and take as much power away from challenger representative institutions as possible – borrowing here from the Venezuela playbook. The House of Lords can be relied on to act as a brake. So, it’ll be ‘reformed’ – at long last. Recalcitrant Labour MPs (of which they’ll be plenty) will also be dragooned into line by threatening displays of street politics in their constituencies. “Stick with the party line, or we’ll deselect you”.
An incoming Labour government will not prove to be a slightly more left-wing social democratic government. It’ll turn into a vanguard movement, designed to fundamentally alter the basis of power in the UK. The old Blairite right-wing Labour awkward squad warned about this a few years ago, and they were spot on then. My guess is that even the leftish SNP will end up running a mile from a coalition deal with these folks.
Along the way, we investors will be hit hard by four principal mechanisms.
The first is that new ways of taxing ‘wealth’ will be devised. In principle, like quite a few Labour policies (capping credit card rates for instance), I have no objection to this. We do need to find a way of taxing wealth more efficiently and intelligently if only to properly balance the books and pay for essential public services. But the options favoured by the Left will be far more draconian. My guess is that we’d see CGT levels vastly increased, dividend taxes ratcheted upwards and taxes on all property over £500,000.
Next up the Hard Left will have no truck with the outsized power and influence of The City. They’ve always despised our shift in comparative advantage away from industry (easier to unionise) towards services and financial services in particular. They’ll slowly erode our competitive advantage and ramp up an already invasive regulatory oversight. Robin hood taxes and transaction taxes will be combined with sweeping regulatory changes to nobble the City and its chums in the Home Counties.
We’ll also see the growth of expropriation. The policy of nationalising essential services – daft in the extreme – will extend to pension pots. These’ll be seen by a Labour government as a honeypot to use for all their vanity projects. If right-wing nationalist governments in Eastern Europe can use pensions as a funding mechanism, be assured a left-wing Labour one in the UK will. welcome the new dawn of confiscation and expropriation.
Last but by no means least foreign capital will flee our shores. It’s already happening with the non doms but under Labour you should expect the sell-off to continue. London is rightly regarded as a safe haven. Under Labour that’ll be turned upside down. This will destroy the premium ratings for many equities and cause a flood of money out of the UK funds markets. I’ll leave what might happen to interest rates and the FX rate to your own imagination.
So, put simply, read their lips. This is Red Labour party, dominated by hardcore Marxists who still believe everything they have said for decades. This is not a sensible social democratic party anymore, even though there are still many sensible social democrats left. I read Caroline Flint’s (a Labour MP) perceptive piece about the idiocy of a centre party in Labour List – and largely agreed. The struggle facing any Macron like movement in the UK is indeed formidable. But I also think that sensible moderate Labour MPs should realise that the game is OVER. You have lost your party. It’s gone. It’s a proper socialist party led by Marxists.
The populist ideas in the last manifesto are just the START. Much, much worse is to come if they are elected into power. History teaches us that parliamentary liberal democracy simply cannot survive having Marxists in power. They believe in an entirely different worldview. Anyone looking for the next great systemic crisis should start by looking at the impact of a future Red Labour party government. This could be the Black Swan we’ve all been waiting for.
Be afraid, very afraid. Start internationally diversifying now and make sure you have safe assets in real safe havens such as the EU and the US. Winter is coming…