Summary: The Tories criticism of the Labour manifesto as depending on a “Magic Money Tree” shows just how little they understand of basic economics. The austerity programme of George Osborne and the Tories has led to unremitting damage to our economy that people are now waking up to. The realisation that money can sensibly be borrowed to invest in the future of the economy is sound. It is this approach that underpins much of the appeal of the Labour election manifesto. It is the Tory lack of understanding of this is why they keep talking about it. However there is no doubt that they just don’t understand these arguments. Most economists are convinced that the Tories are simply wrong on this.

Many spending commitments in Labour’s election manifesto were dismissed by the Tories as depending on a “Magic Money Tree” to pay for all sorts of investments in the UK. This criticism show a remarkable ignorance of basic economics. Most Tories appear to be unaware that they have depended heavily in recent times on the same Magic Money Tree. They have used it over the last seven years to produce nearly £500 billion worth of new money to inject into the economy.

This program was led by the Bank of England and called “Quantitative Easing”. As the British recession advanced, worsened by the Tory austerity programme, spending and investment fell to a degree that there simply wasn’t enough money in circulation to support a strong, growing economy. Too much was being hoarded and spending needed to increase if the economy was ever to grow.

The idea was that if the Bank of England purchased assets from organisations such as pension funds and large companies, those organisations would reinvest it in the UK. In fact it was much less effective than intended because a great deal of that money ended up simply shoring up the balance sheets of the British banks to meet new regulations. Companies hoarded the money rather than use it for investment so again growth was not effectively stimulated.

Much of the apparent growth in the UK economy recently is not a consequence of quantitative easing. It is principally because individuals are allowing their outstanding credit card bills to increase. It is those increases that allow increased spending to make it look as if the economy is growing. Unfortunately all this extra borrowing has to be repaid by individuals. As soon as money becomes tighter there is likely to be a major drop in spending with damaging consequences for personal standards of living as well as for growth.

Labour’s spending plans are in two parts. One is to increase expenditure on things like social services, the NHS and education. Labour propose funding this by increasing taxation on the wealthy and on profitable corporations. The other part involves buying key assets such as the railways and the Royal Mail as well as raising money to invest in infrastructure projects ranging from simple road repairs right up to a nationwide housing programme (see: http://outsidethebubble.net/2016/09/27/a-fairer-deal-solving-the-housing-crisis/ ).

All these investments will produce a positive return. By borrowing and paying the remarkably low interest rates being charged at present on such borrowings, typically 1.5% on a 30-or 50-year loan, the boost to the economy and to our society would be substantially greater leading to a wise and effective investment. As the economy grows more rapidly, taxation receipts will increase.

This is exactly the same as many of us manage to buy a house. We borrow to provide a mortgage on the property. For most of us this is the only way we could afford to buy our own home. We pay interest on that mortgage and gradually pay back the loan. We end up owning a property, a good investment.

At the same time our day-to-day living expenses are balanced against our income from all sources. That is what we do with our personal finance and Labour is simply proposing doing that with the nation’s finance in exactly the same way.

The big mistake that the Tories, and particularly George Osborne made was to try to pay for things that were genuine investments out of taxation. They obsessively wanted to “balance the budget” because they felt that was the proper thing to do. Within the Eurozone it is an obsession particularly of the German Economics Minister, Wolfgang Schauble,  that pushed countries such as Greece, Ireland and Portugal to the brink of economic collapse and indeed nearly forced Greece out of the Eurozone altogether.

Economists quickly realised obsessive austerity was simply nonsense. Countries that are growing fastest now are the ones that have abandoned austerity if they ever tried to implement it. The UK is one of the last countries still pushing austerity. That is why our growth rates are so moribund. On average people in the UK are less well off in real terms than they were before the recession started nearly 10 years ago.

Fortunately the British public now understand just how inappropriate austerity is and have voted for a change. The change that Labour want to implement will rebalance substantially our economy by increasing taxation on the wealthy, both individuals and corporations, and then using that income to fund the NHS, social services, education, welfare and so many other areas.

Summary: We must stop conflating expenditure in one fiscal area with some notional corresponding source of income for the Treasury. We should simply agree what the country needs to spend in various areas and then manage our tax system so that each of us pays what is deemed to be a fair amount. No means tests. Simply an accepted assessment of what each and every individual and company can reasonably be asked to pay in taxation based on their income and wealth.

One of the mantras of the Tory manifesto and their policies for many years is that everything has to be paid for. Amber Rudd on the BBC Debate Last Night (31 May) accused Jeremy Corbyn of relying on a magic money tree to fund the Labour manifesto programme.

There is in fact a magic money tree and it created £435 billion since the financial crash. It was used for quantitative easing (QE). All that money went to the banks and not much of it provided a significant benefit to the wider UK economy. This source of funds (the Bank of England printing money)  can be used as a short-term stimulus to invest in a country such as the UK where investment has fallen grievously behind where it should be. If it is used excessively then it can be damaging to an economy by stoking inflation.

At some level it has to be true that expenditure needs to be balanced at least in the long term by income. What is not true is that the source of income has to be identified each and every time any new expenditure is identified.

The right-wing press justifies the “Dementia Tax” as being a way to make sure that the wealthy do not get away too lightly since they are generally assumed to have lots of money with which they can pay for care in their old age.

We shouldn’t be approaching a subject like this or any other aspect of our economy in this way. The government needs to set a comprehensive budget consisting of expenditure for all the things that it feels it is right and proper for government to provide (money for the NHS, social care, schools, managing immigration, prisons, police, in fact everything).

We do not need to worry about funding privatisation. Here government borrows money to purchase an asset just the way that a private individual would borrow money to purchase a home. The government will have to pay interest on that loan. At present those interest rates are very low indeed (1.5% for a 30 year loan) and so this is a good time to invest. That investment has to be good enough to fund the interest payable. At 1.5% very few of the organisations to be privatised could fail to generate at least that kind of net income.

Government then will look at all the potential sources of income (income tax, VAT, national insurance, corporation tax, asset taxes including taxation of housing, recovery of unpaid avoided and evaded tax, etc). The proportion of money to be extracted from each of these sources should be agreed to be as reasonable and proportionate as the general population feel is fair. The government must make sure it is balanced and does not provide a strong disincentive against growing the economy. Otherwise that is all it needs to do.

Finally the income and expenditure needs to balance approximately. On a year-to-year basis it probably won’t but over the longer term (the economic cycle) then it should be got close to being okay.

We can see how that works for the National Health Service. Rich and poor, everyone gets sick, anyone can suffer from dementia or cancer or disability. We all need looking after and the NHS is the system we use to look after everyone.

However a founding principle of the National Health Service has been that each and every one of us should be provided with satisfactory health services from cradle to grave. This is not an idle slogan. It is a principle that has provided an extraordinary underpinning of security in the lives of everyone in this country. There is absolutely no suggestion that were one to contract cancer that we would not be treated fully, and free of charge. However contracting dementia or finding oneself in need of social care is being treated utterly differently by the Tories.

Governments for many years have pledged to treat medical illnesses and mental illnesses in the same way but have significantly filled to do this. The cost of a proper mental health care system is not great particularly when compared to medical costs. In mental and social health care there are no exotic and expensive scanning machines, no complicated surgical procedures taking many hours with a large theatre staff. Most expenditure is made up of manpower to provide the care that we need, often given by relatively less well-paid people without a great amount of training.

The money to pay for this treatment must come from the various sources of taxation described above. The rich will not have it disproportionately easy nor the poor find it excessively generous. It will be proportionate to the ability to pay. In the same way providing treatment, care, benefits, every aspect of life that requires government involvement is managed in a way that is equitable and above all truly fair to all.

Summary: Brexit is going to happen and Labour are fully committed to that. The Tories claim that only they can deliver a good Brexit. However Brexit will happen in the context of whichever party governs our country. The Tory track record on delivering a fair and balanced society is dreadful. Their manifesto makes it clear they intend to continue much as they have in the past. The Labour manifesto emphasises fairness to all above everything else. Brexit negotiations managed by a party with that fairness as a priority will produce a Brexit deal that is much fairer to all than anything the Tories could possibly come up with. Labour need to address this head-on in the final week of this campaign.

Brexit is going to happen. Labour are fully committed to that. The Tories want the election conversation to be about Brexit while Labour wants to focus on Tory failings over seven years on a wide range of critical issues that have damaged our society greatly.

Labour need to address this and make the Brexit debate its own. Brexit is not something that will happen in isolation. It will reflect the priorities of the ruling government. If it is Tory it will be a Brexit that favours the few, if it is a Labour Brexit then it will try hard to be fair to all, the key message from Labour’s manifesto.

The Tories in seven years have damaged incredibly badly the NHS, our schools, the care of the elderly, social services, our police and security services, the prisons, removed access to the law for many and cut benefits in a very damaging way. Their manifesto claims that this will all be put right after the election. Does anybody really believe they are going to change? Many of their manifesto commitments have been very lukewarm and non-specific. None are costed and Tory ministers now seldom give interviews about their policies.

Jeremy Hunt has said this morning (31 May) that we need a good Brexit to provide continuing growth in order to fund further investment into the NHS. Unfortunately the track record of Theresa May’s government is dreadful. In the last quarter British growth was exactly 1/6 of the growth in the US, a country that has not been burdened by the cult of austerity.  British growth is now the lowest of the G7 nations.

The prospects for future NHS funding under the Tories look pretty grim. It is clear from the way their manifesto was written that they intend austerity to continue and probably intensify.

Theresa May claims she has a plan for Brexit but she refuses to reveal any of it. She will not say what her negotiating priorities might be. The European Union has produced some fairly uncontentious ideas about starting points for the discussion which she has described as being aggressive. They are not. She simply hopes no one has looked at them!

Brexit needs to be approached in an adult and intelligent way. With a Labour government showing the rest of Europe how countries can be run successfully by rebalancing the economy in a way that is fair to all we should expect a lot of interest in what we are doing and the way we are doing it. The dynamic of the government will set the dynamic of the Brexit negotiations and therefore critical to the success of Brexit.

Brexit is going to happen. Labour are fully committed to that. It is far too important to leave to Theresa May who has a dreadful track record of simply not getting things done (see: http://outsidethebubble.net/2017/05/30/theresa-may-exposed-as-a-fraud/ ). And it won’t just be her. Can you really imagine our Foreign Secretary, Boris Johnson, coming up with a Brexit fair for all? Brexit is something that Labour can only make a much better job of delivering a Brexit fair to all in this country. Labour need to attack Theresa May’s capacity to deliver the best Brexit for all.

Summary: Theresa May wants us to believe she is the only one who can deliver a successful Brexit deal. When we look at her track record it is clear that she is utterly unsuited to this. She has a dreadful reputation amongst colleagues as being very hard to work with and completely unable to demonstrate the flexibility that one needs when carrying out any of these negotiations. Her track record as Home Secretary is awful yet she has managed to airbrush so much of that out of existence. But we must make sure that track record is exposed. It is clear that she is a fraud, totally unsuitable for carrying out successful Brexit negotiations.

Theresa May is trying to move the election conversation back onto Brexit because she claims to be the only one who can deliver the best for the UK. Unfortunately, all the evidence suggests she has little chance of succeeding. Her track record as Home Secretary for six years is appalling. Remarkably little was achieved and she managed to deflect blame onto others when things went wrong as they did so often.

Dealing with the EU on Brexit is going to be challenging. Theresa May believes she can simply “make a deal”, a phrase reminiscent of Donald Trump. The EU are treating the negotiations as a chess game with a kaleidoscope of complex and interconnected moves. They can now be sure that if they come across something that they simply cannot accept that she will cave in just as she has done on the Dementia Tax, increasing self-employed national insurance and many other things.

An article in the Daily Telegraph (see: https://order-order.com/2016/07/02/read-full-article-pulled-telegraph-pressure-may-campaign/) was pulled almost at once following pressure from her campaign office but it is remarkably revealing about her approach to power and responsibility. Her reputation amongst Cabinet colleagues is dreadful. In committee she is arrogant and rude and very short on either strong negotiation skills or the ability to win allies. Absolutely the wrong combination to negotiate with the 27 nations of EU, the majority of whom want this all to go well.

The best known failure for Theresa May is her complete inability to make the slightest mark on the immigration numbers over seven years. Those years have had a consistent target of bringing immigration below 100,000. Again she has written this into the Tory manifesto.

Many other failures have been glossed over while Theresa’s reputation has been burnished. The protection of our borders is laughable. Not only are small airfields completely un-regulated and un-controlled. The UK has three vessels patrolling 7700 miles of coastline. Italy has only 4700 miles of coastline but it does have 600 vessels.

Then there was the collapse of the eBorders IT system (cost about £1 billion), her failure to establish exit checks on all the country’s airports and ports (due by March 2015). Nothing much was done in protecting girls from ethnic minorities from FGM and forced marriages. The list of disasters that happened under her watch just goes on and on. Incredibly she has managed to sail past the wreckage of so many initiatives that foundered through her inattention.

This is a manifesto that has not been created in consultation with members of Cabinet, or other Tory politicians with a good ear for what will go down with the voters. There is an extraordinary arrogance in writing this yourself with a couple of close advisers.

And then simply putting virtually not one single number in the manifesto (apart from the Dementia Tax limit) is completely stupid particularly as Tory strategy in fighting Labour is to say “nothing has been costed”. Indeed on the Jeremy Paxman show on Channel 4 on 29 May the audience heckled and jeered her when she said the Labour sums don’t add up. The Tory sums add up just because there aren’t any, not one.

The only thing that does not add up is her ability to carry out sensible Brexit negotiations. She has been described by a cabinet colleague as secretive, rigid, controlling and even vengeful to an extent that colleagues from both parties dreaded meeting with her about anything. That is completely not who should be leading our Brexit negotiations and it is this fraud that she is trying to perpetrate that must be resisted in the run-up to June 8.