Last autumn, I debated Jeremy Corbyn in front of a couple of hundred people at the University of Warwick. “This House supports the aggressive redistribution of wealth” was the motion, with the Labour MP arguing in favour and me against.
Back then, Corbyn was a mere backbencher whose biggest claim to fame was his dogged record of voting against his party. Such are the vagaries of politics that, less than a year later, that same member for Islington North is odds-on to be Leader of HM Opposition after the vote of party supporters closes this Thursday.
That Warwick debate – so recent yet, in terms of Labour party politics, so long ago – was informative on Corbyn’s view of economics. Also telling was the behavior of the student audience as we both spoke, given the actual result once the post-debate vote was cast.
Supporting the motion, Corbyn went first. We may have been in a cavernous lecture hall in the Midlands but, in terms of speaking order at least, we were following Parliamentary convention. “I’m surprised it’s even necessary to debate this motion,” was Corbyn’s shrewd opening – which drew laughter, then prolonged applause. “It’s patently obvious there has to be some very aggressive redistribution, both in the UK and across the world,” he exclaimed, as the clapping continued.
“After the second world war, the highest rate of taxation was over 90pc,” Corbyn told his youthful audience. “Yet we now get squeals and squeals and squeals for the very modest proposal of suggesting the top tax rate should be 50pc”. Again, his argument – that a 50pc tax rate is “very modest” – drew whooping and thunderous applause.
Corbyn used scare tactics, as streetwise orators often do, accusing his opponents of secretly planning “brutal” policies. “I grew up with the certainty of the NHS – will the same be true for you?” he asked the rows of seated students. “Or will our NHS by then have been destroyed, privatized, sold-off?”
While urging his seemingly rapt audience to “open your eyes and mind, think what the world could be like”, Corbyn offered precisely nothing in terms of practical policy solutions. We were encouraged, though, to “aspire to a fairer distribution of wealth, not to inequality and unfairness”. He then concluded with a flourish, by calling, amid loud cheers, for “Warwick to show what it is made of and vote in support of this motion”.
Starting from a long way behind, and facing an effective debater, I began by making clear that “some degree” of redistribution is “obviously highly desirable”. At the same time, I took “serious issue” from the outset with “aggressive redistribution” – a statement that initially drew some hisses.
The reality is, I explained, that taxation policy presented and perceived as aggressive will, in a competitive world, sacrifice too much in terms of dulled business incentives and investment for the extra taxed raised – if, indeed, any extra is raised at all – while sowing the seeds of societal division.
I tried to convince students that “a state that redistributes aggressively will become an over-bearing state” that sinks into chronic mismanagement. Consider the early-1970s, I suggested, when Labour introduced its venal 83pc top rate of income tax, with an additional 15pc surcharge in some cases. The result was Britain’s “economic Suez” in 1976, when our government ended-up insolvent, going “cap-in-hand” for a bail-out to the International Monetary Fund.
I cited contemporary France, where President Hollande’s gallery-pleasing 75pc tax rate has proved a disaster, and where heavy state bureaucracy and taxation has seen growth average just 0.2pc over the last 5 years.
Calls for “aggressive redistribution” from Corbyn and others have gained traction in recent years, I acknowledged, due to widespread anger about the behavior of the UK’s banking sector. “I agree our banks share much of the blame for our economic crisis, but the long-term answer to that isn’t angry and aggressive redistribution,” I argued. “It’s proper banking reform, involving structural changes, that is yet to happen”.
While a civilized country needs “a sizeable state” to support those in genuine need, while providing certain services and public goods, it “isn’t at all civilized to live constantly beyond your means, running up budget deficits year after year and dumping the resulting spiraling debts on your children and grandchildren – in fact, it’s deeply immoral”.
When I explained that the UK’s national debt had ballooned from around £820bn in 2010, to over £1,500bn by last autumn – “and it’s the younger generation, people like you, that will end up paying” – I felt a connection with the audience for the first time. When I advocated a government that “does the adult thing, levels with voters and lives within its means, rather than making endless promises it can’t keep” I even got a few claps, from somewhere at the back of the hall.
Shifting to the global situation, I reminded students there is far less inequality between countries today than when I left Warwick as a freshly-minted economics graduate in 1991. “That’s not due to government redistribution – on the contrary, previously underdeveloped countries have been growing fast, with billions of people being lifted out of poverty, because previously oppressive governments across Asia, Eastern Europe and elsewhere, have let enterprise flourish by finally getting out of the way”.
I summarized by arguing that big government, while it sometimes sounds good, inevitably becomes a source of instability. If there’s too much inequality, the answer isn’t a bigger state – especially if the state is already almost half the economy and deeply, almost cripplingly indebted. The answer is a stable economic framework that allows businesses to invest and operate freely, within the law, while employing people fairly, so spreading opportunities and giving consumers the confidence to spend.
Students should be “worrying less about aggressive redistribution, which will end up being counter-productive,” I concluded, “than about vested interests that are too close to government and, too often, preventing genuine competition – which, in turn, drives down social mobility too”.
I respect Jeremy Corbyn – as I told him publicly when we, and our respective debating partners, locked horns at Warwick. It’s refreshing to meet a politician who’s unafraid to speak his mind. But his “aggressive redistribution” would deepen our debts and make an already hopelessly inefficient state even more inefficient. We’d also miss out every year on both domestic and foreign investment in the tens of billions of pounds.
Corbyn’s new policy – “people’s quantitative easing”, the transmogrification of an emergency bank liquidity measure into a money-printing free-for-all – is a dangerous nonsense. Having said that, QE as it currently stands – overused on a grotesque scale, to keep government borrowing costs artificially low, while pumping up share prices and flattering bank balance sheets – is also a dangerous nonsense.
The only difference is that we’re retaining the pretense, for now, that the government paper the Bank of England has bought will ultimately be repaid. Ending that, and monetizing deficit spending directly à la Corbyn, would send sovereign debt markets haywire – as anyone with even the remotest understanding of economics will instantly grasp.
When Corbyn spoke at Warwick, with his soaring rhetoric about state spending and decency, he was cheered to the rafters. When I spoke, about the power of markets, the realities of debt and the need to rebuild confidence by living within our means, the noises made by the audience were generally rather different.
Yet, when the debate was over, the jeering had finished and the votes were cast, the result, and by a pretty clear margin, was that my side won.