John Stepek on the four key ways Jeremy Corbyn’s victory as Labour leader could affect Britain.
For a pithy summary of the acres of coverage that greeted the election of Jeremy Corbyn as leader of the Labour party this week, you couldn’t do much better than this headline from the satirical website, The Daily Mash: “Man who just got elected ‘definitely unelectable’”.
For all that they might abhor Corbyn’s politics, and would never have believed he could secure leadership of Britain’s second political party, the vast majority of commentators don’t see any risk of his policies ever actually being put into action. The biggest threat to the Tory party from Corbyn is that they might get complacent. If anything, markets and businesses should cheer as Labour and the left are knocked out of the running for at least a decade.
Is it that simple? As ever, it’s not. We’d agree that Corbyn is unlikely to become prime minister in his current incarnation. His appeal lies in his authenticity and commitment to the cause – a “kiss and tell” in the Daily Mail from his ex-wife, Professor Jane Chapman, reveals that he would often eat cold baked beans from a can because he couldn’t be bothered with the distraction of cooking, and that they named their pet cat after Harold Wilson.
That sort of thing appeals in a protest politician, but as William Hague writes from bitter experience in The Daily Telegraph, “subjects that bring respect to a campaigner attract ridicule and dismay” when “voiced by a potential prime minister”, whose job is to “focus on what is realistic and practical rather than praiseworthy but fanciful”.
But five years is a long, long time in politics – come 2020, he may not be in charge of Labour, or he may have morphed into a smoother operator. And Corbyn doesn’t have to become leader of the country to influence politics and the wider economy in ways that could impact on investors.
Last week, we looked at Corbyn’s rise as part of a wider global shift towards populism. Now that he’s secured leadership of the Labour party, here are four key issues – specific to the UK – that could affect your finances, for better or for worse.
1. Britain’s place in the world
Perhaps the biggest change is on Europe. Up until Corbyn’s election, everyone knew where they stood. Ukip and a big chunk of the Tory party want out of Europe. Labour, the LibDems, the SNP, and the rest of the Tory party want to stay in Europe. In short, the only people who wanted to leave Europe were on the right-wing of British politics. Now it’s not quite as clear cut. Sure, Corbyn’s shadow foreign secretary Hilary Benn has reaffirmed the party’s commitment to Europe, saying that Labour “will be campaigning and are campaigning for Britain to remain part of the European Union”.
However, Corbyn himself has a long history as a eurosceptic – appearing to see the EU, says Simon Jenkins in The Guardian, “as a capitalist conspiracy in the grip of a bankers’ ramp, set on grinding the continent’s working classes through austerity into penury”. He has argued that David Cameron should not have a “blank cheque” on his renegotiation plans.
In other words, if Cameron’s discussions with Europe result in a deal that Corbyn doesn’t like (one that perhaps allows Britain to opt out of certain labour laws, for example), then there’s no guarantee that he will line up behind the “stay” vote in the referendum.
This prospect has Britain’s europhiles rattled. Philip Stephens in the Financial Times frets that “an unholy alliance of far right and far left could yet see Britain cut itself off from its own continent”. Meanwhile, “the unspoken fear of Labour pro-Europeans is that the many tens of thousands of young people mobilised by Mr Corbyn’s leadership campaign could see a ‘No’ to Europe as the opportunity to destabilise the prime minister”.
Whether you’re in the “stay” or “leave” camp – we sway towards the latter, because we’re sceptical that Europe’s bureaucracy can ever be reformed by a single country – it’s fair to say that markets are likely to be more jittery about the eventual referendum outcome than perhaps they would have been, particularly if government infighting over the issue erupts into full-blown Tory civil war.
But while the European referendum has become a bigger source of potential instability, another referendum threat may actually fade with Corbyn’s victory – the chances of a second Scottish independence referendum. The SNP’s popularity has always been defined by what it’s against, rather than what the party is for. Its voice remains very much one of protest, even though it has held power in Scotland’s devolved parliament since 2007.
Labour standing with the Tories during the Scottish referendum in September was an absolute gift. It allowed the SNP to paint Labour as “red Tories” and the SNP as the only genuine party of protest. As a result, they took 56 out of 59 seats in the general election, despite Scotland as a whole voting “No” to leaving the UK. But that may have been a peak. You can accuse Corbyn of many things, but being a ‘red Tory’ is not one of them.
He might not win over Conservative voters, but he does have a very good chance of winning back disillusioned traditional Labour voters. And presented with competition from a genuinely “hard left” party that is in a far better position to point out uncomfortable truths – such as the drop in both health and education spending in Scotland relative to England under its ostensibly anti-austerity government – the SNP will have to be much clearer about exactly where it stands. That can’t help but divide the nationalist vote.
2. More industrial unrest
As the Financial Times notes, Britain hardly has a problem with industrial action – 788,000 days were lost to strike action last year compared to a typical three to six million during the 1980s. That could change. The Conservatives are trying to push through a trade union bill that will make calling strike action harder. Backbench Tory MP David Davis (who “agrees with most of the trade union bill”) has noted that requiring pickets to give their names to the police is draconian. But other elements – such as having public-sector workers pay union dues by direct debit rather than automatically out of salary – seem fair.
In any case, the combination of a Tory government on the attack against the unions and the election of a Labour candidate who is genuinely happy to declare that “trade unions are an essential and valuable part of modern Britain” will boost union confidence. For example, Unite leader Len McCluskey has “backed law-breaking and calls for a general strike”, reports Sky News. It won’t necessarily win votes for Corbyn, but even if there is little public support, you can expect more disruption on this front.
3. No more property as a ‘sure thing’
As Merryn notes on MoneyWeek.com, one thing that Corbyn and Chancellor George Osborne most definitely have in common is that they have buy-to-let investors in their sights. If anything lies at the heart of the popular discontent that has aided Corbyn’s meteoric rise, it’s the sense that a large chunk of the population is entirely unable to get on the property ladder, and that a smaller group is benefiting from this.
The chancellor has already started removing tax breaks on buy-to-let landlords, who – rightly or wrongly – are an incredibly easy political target (David Cameron highlighted what he called a “merry-go-round” of rents being driven up by housing benefit at Corbyn’s inaugural session at Prime Minister’s Questions this week, for example). This won’t stop here. Indeed, Corbyn provides exactly the political cover that Osborne needs to go a lot further with what would otherwise be seen as a very ‘unTory’ policy to follow.
4. The banks
The chancellor has probably picked a bad time to start “going easy” on the banking sector, and that may not survive attacks from Corbyn and his shadow chancellor John McDonnell. As Iain Martin puts it on CapX.co, the banks “are still hated”. And plenty of opportunities for reform have been missed too. You don’t have to be a radical leftist – far from it – to argue that the banks should have been broken up and simplified. It’s a view respected FT columnist John Kay and many others have put forward.
However, notes Martin, under the cover of that “popular-sounding policy” they’ll “introduce all manner of mad ideas, against profit and private enterprise, into Britain’s national conversation”. Again, these ideas may not stick – but the chancellor is a pragmatist. It’s yet another reason why we’d be wary of investing in the UK banking sector, and would rather focus on alternatives and challenger banks – for want of a better word, the “good” bits of the banking sector.
Corbyn’s Cabinet – who’s who?
John McDonnell: shadow chancellor
The controversial, hard-left MP for Hayes and Harlington is a close ally of Corbyn. He has twice tried to stand for Labour leadership, but failed to secure backing from fellow MPs in 2007, and stepped aside during the 2010 contest. If put in charge of Britain’s coffers he would aim to “tackle the deficit by halting tax cuts to the very rich and to corporations, by making sure they pay their taxes”, rather than taxing “middle- and low-income earners who didn’t cause the economic crisis”.
He also supports tighter regulation of the banks, and the introduction of a financial transactions tax. According to The Daily Telegraph, his Who’s Who entry lists his life’s purpose as to “foment the overthrow of capitalism”.
Hilary Benn: shadow foreign secretary
Son of party hero Tony Benn, Hilary retains the post of shadow foreign secretary. Since becoming MP for Central Leeds in 1999, Benn has served as secretary of state for international development and for environment, food and rural affairs. During 2009’s expenses scandal, Benn was praised for his remarkably small expenses bill, the 15th most modest of all MPs. Benn is a firm supporter of the EU, and has stated that Corbyn’s Labour would “stay to fight for a better EU in all circumstances”.
Andy Burnham: shadow home secretary
Andy Burnham, heavily beaten by Corbyn in last week’s leadership election, will serve as shadow home secretary. Burnham was many Labour delegates’ first choice for leader, and Corbyn may hope that his presence in the Cabinet will help unify the party.