Have Jeremy Corbyn’s dreams of the aggressive redistribution of wealth been outdone already?
“This house supports the aggressive redistribution of wealth” – given the reputation of the new Labour leader, you will not be surprised that this was the title of a debate which Mr Corbyn argued for at the University of Warwick last year when you could have got 200/1 on him even being nominated, let alone winning the leadership. Equally, given the past reputation of students, you might be surprised to hear that the motion was lost.
What nobody seems to have picked up, however, is that Mr Corbyn is, in some ways, a bit late, as over the past few years the UK has already witnessed the most aggressive redistribution of wealth in modern times. It is quite amazing that the massive transfer of wealth that has resulted from quantitative easing has passed off with so little protest from those worst-affected.
The reality is that countless billions of pounds have been transferred from the ‘haves’ to the ‘have nots’ over the past few years. Whether it is the right policy or not is not the issue, it is just the simple reality of what has happened as a direct result of government policy.
Consider for a moment a retired couple who have saved diligently and have a pot of, say, £100,000 to provide for some extra comforts in their later years, and compare their situation to a young couple who have taken out, say, a £100,000 mortgage.
Based on their life’s experience over umpteen years, the older couple would have reasonably expected around 5 per cent income from their accumulated savings – say, £5,000 a year. Equally, based on past experience, the young couple could have expected to pay perhaps £7,000 to £10,000 interest for their mortgage.
In reality, what has happened is that virtually zero interest rates have been held artificially low by QE – otherwise known as ‘printing money’. This has meant that the older couple’s hoped-for £5,000 interest has gone almost directly to subsidise the young couple’s mortgage costs by a similar amount. At the same time, long-term limited but continuing inflation has reduced both the value of the accumulated capital and the amount of real debt for the two couples for the significant benefit of one and the serious disadvantage of the other.
It is not for me to say which is right and which is wrong, but what I can say is that this has clearly led to the biggest and most aggressive redistribution of wealth in modern history, which means that Mr Corbyn might have already missed his chance.
Ken Davy is chairman of SimplyBiz Group