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Labour's Shamifesto

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Labour's election manifesto contains 66 references to the word 'future.' Just two mentions of "achievements" and 4 references to the government's 'record.' This from a party in power for three consecutive terms? Just two achievements and only four items on the record to be proud of? Clearly, this is a party seeking to run from its past by trying to sell a rosy future. Somewhat like a snake oil salesman. And, like snake oil, there is very little original or appealing in this manifesto.

Labour's manifesto also dodges the elephant in the room: national debt. Not a single reference in the document to the national debt when the debt to GDP ratio is likely to rise to 200% over the next decade. And this is the largest issue facing the country. How is this to be reduced? What sacrifices are required? Where's the leadership?

Let's leave that aside for a moment and look at some of Labour's promises. They promise to halve the budget deficit over four years. Admittedly, this will be through tax increases, public spending cuts on "lower priority areas", and "strategies for growth that increase tax revenues." Promises not to raise the tax rate have to be taken with a pinch of salt given previous reneging on pledges of this variety and double digit fiscal deficits.

On VAT, the party has chosen its words very carefully: they promise "not to extend VAT to food, children's clothes, books, newspapers, and public transport fares." Meaning that other areas are fair game.

Since bankers are public enemy no.1, it is to be expected that Labour will take pot-shots. They promise tighter regulation for the banking sector, with "consequences for executive remuneration if (lending) targets are not met" in banks where the government has a stake. Gordon Brown's favourite hobby horse - international financial regulatory reform - also finds a few words.

Not surprisingly, CEO pay gets several mentions. Labour will give the FSA "additional powers" to "quash" pay where it is a source of risk and instability. This makes for good sound bytes, but how on earth is this to be done? When and how much compensation is a source of risk and instability? CEOs of public companies only make a fraction of what hedge fund managers and others in the financial sector earn, but it is strange that politicians are so fixated on them. Perhaps the public confusion about all rich "bankers" being subjected to tighter regulation is at the root of this obsession. After all, tapping into voters' cognitive dissonance is a skill perfected by good politicians. They know that the real fat cats are well beyond the pale of any regulations on pay and that these noises make little difference in practice.

Corporate governance also receives significant attention. But Labour's vision only serves to strengthen the impression that Britain is increasingly becoming unfriendly to business - particularly foreign enterprises. Specifically, the manifesto claims that "too many takeovers turn out to be neither good for the acquiring company or the firm being bought." What is the evidence for this claim? The market for corporate control is in fact a very good corporate governance tool. It penalises poor management and facilitates corrective action. Choking this vehicle through excessive regulation only rewards inefficient boards and ultimately punishes shareholders. Labour wants a "higher threshold of support - two thirds of shareholders - for securing a change of ownership." They also profess support for greater employee shareholding - again a goal of dubious utility from an efficiency perspective. Seen in the context of recent turmoil over Kraft's takeover of Cadburys, these promises reveal a protectionist turn in Britain. Such impulses are costly when Britain badly needs foreign investment.

The business part of Gordon Brown's manifesto has one good idea: a new UK Finance for Growth Fund bringing £4 billion in public money, primarily for SMEs. While government venture capitalism is fashionable in recessionary times, remember that the state has a poor record with choosing market winners. Selection biases and political capture might undermine this plan unless the Fund is privately managed.

In Labour's vision for the future, higher education would be a "great export business." What an idea! Perhaps Walmart can be persuaded to open a teaching shop. Labour has a terrible record with the university sector. A promise to do no harm would have sufficed. Let the academics decide if they want to become exporters.

Any futuristic document will contain a fair share of fiction. So, Labour declares that "there will be greater prosperity for every region of the UK economy." How? By giving regional ministers an enhanced role and a major devolution of power! In theory, this is again a good thing. But the trouble with decentralization in the UK is that it has primarily served as an excuse for self perpetuating lower level bureaucracies dreaming up every excuse to tax and spend. Once again, Labour is wedded to the idea that an expanding state is the answer to Britain's problems despite massive budget deficits and staggering debt.

There is a lot more in the 76 page document. Ranging from promises about more competition for energy companies, to more consumer friendly rules, to responsible lending policies, to bans on MPs from working for lobbying firms, to a right to recall for MPs not disciplined by Parliament, to a fully elected House of Lords, to high speed rail links. Significant promises on health care and criminal justice policy are also part of the manifesto.

These and other pledges are likely to fall on deaf ears. If the manifesto was supposed to energise Mr. Brown's campaign and show that his party has fresh ideas to address Britain's most pressing problems, it missed the target. Dodging the single largest issue - the debt - and offering tepid promises will not make people forget the past and buy into Mr. Brown's vision of a bright future. That requires more than a mere repetition of the word "future" 66 times.