Want To Save Britain's Economy? Vote To Stay In Europe.

As each day passes the EU referendum draws ever closer, a referendum whose outcome will undoubtedly have huge impacts on both the economic and political landscape of the whole country for years to come. A huge part of the debate that’s raging is over the political repercussions of either outcome, much of which focusses on our political sovereignty and by extension the central issue of ‘regaining control’ of our borders. I’m not going to address the potential political outcomes (the endless rhetoric clouding politicians’ true intentions makes this nigh-on impossible anyway) but instead I will focus on the economic aspect of this debate. In doing this I will seek to answer one key question: which option should the people of the United Kingdom take to ensure economic prosperity going forward?

There is no precedent to the situation the UK finds itself in, therefore nobody can state empirically exactly what the outcomes of each choice are. The complexity of prediction is further hampered by the range of trade deals the UK has if it does choose to leave, but that’s not to say we can’t build models to predict at the very least the net effect of the outcomes – whether they are positive or negative. Economically, we can split the potential impacts of a ‘Brexit’ into the short and medium-to-long term, with different potential issues presenting themselves in different time frames.

Author’s Own Calculations using data sourced from ONS

Short term issues are already presenting themselves. The referendum is still a month off but the mere possibility that the UK could leave the EU is already having tangible economic repercussions. We saw a negative trend in GDP growth in the first quarter of this year, with growth falling 0.2% compared to final quarter of 2015, and UK industry has fallen into recession after two successive periods of negative growth in Q4 (the fourth quarter) of 2015 and the Q1 in 2016. Though it would be both naïve and plain wrong of me to attribute this growth slowdown completely to uncertainty, it is at least partly responsible. If seen in the results for the second quarter of the year, it does pose a question – if we’re seeing this kind of trend in an economy which is merely discussing the possibility of abandoning the status-quo, then what results will we see if the UK does actually vote to leave? Further slowdowns in growth, coupled with a very real possibility of contraction of the economy are the most obvious guesses.

The uncertainty goes further. We’re already starting to see markets pricing the risk to the economy, the most obvious of which is in the CDS spreads (Credit Default Swaps – essentially the cost of insuring UK debt against a default). The spread allows the cost to be compared to other economies and the Eurozone to see how the market is pricing the individual risk of default). In the 6 months to April 2014, costs have nearly trebled, nearly reaching the Eurozone level as a whole and overtaking both the US and Japanese cost. What does this mean? The markets see the country as a risky prospect, the problem with that is that businesses don’t invest in a risky economy.

Kierzenjowski et. Al (OECD)

The long term effects are perhaps more of a significant worry, however. One such effect is the predicted impact on Foreign Direct Investment (FDI) – investment by foreign investors in UK businesses or other entities. The scale of FDI in this country is huge, with FDI stock estimated to be over £1 trillion and roughly half coming from within the EU. Part of the appeal for non-EU investors is the UK’s access to the single market – access which we may or may not have if we choose to leave. EU membership has had a huge effect on the level of FDI – the Centre for Economic Performance estimates that membership has increased FDI by around 28%. 

But why does it matter? What impact will this have on our everyday lives? For a start, studies have found that (for varying reasons) FDI has (among others) the benefit of enhancing productivity . This would suggest a positive correlation between GDP and FDI levels and empirically we find that to be the case, especially in an economy with such a large service sector.

Based on a conservative model, if the UK were to leave the EU, we would expect to see a 3.4% reduction in real incomes, a loss even greater than the anticipated drop in trade and a figure which translates to £2200 per household – not small change.

Another issue I want to just briefly address is the supposed reduction in the contribution to the EU budget. The net contribution to the EU budget, once total public sector receipts have been applied, was £8.5billion in 2015- but it is a fallacy to think we will no longer have to contribute to any organisation should we leave the EU. There are thought to be four options for trade agreements – the Norwegian Model (joining the European Economic Area), the Swiss Model in which they negotiate individual treaties to take part in any initiatives, re-joining the Free Trade Association (FTA) or trading through the World Trade Organisation.

I don’t have time to describe exactly what each one entails- it’s safe to say each comes with its own disadvantages- but I’m going to briefly describe how their contributions compare to ours. Norway are part of the European Economic Area; essentially this is just jargon for saying they are part of the single market but not full paid-up EU members. Compared to the UK, the net contributions are only 17% lower and come with disadvantages in the form of having no influence over EU decision making and potentially facing higher costs in trade.

The Swiss Model is significantly ‘cheaper’ than the Norwegian model- it’s estimated that the contribution to the EU budget is 60% lower than the UK’s contribution per capita. However there’s no guarantee of market access that the EU provides, and again, the UK is shut out of influencing key EU decisions.

Rejoining the European Free Trade (FTA) agreement is the third option and, though there is no obligation to contribute to the EU budget, increased non-tariff barriers between the UK and the EU are likely to arise, as well as greater restrictions on the free movement of people (it’s worth remembering that migration has been found to have a positive net effect on the economy).

The final option is to be governed by the World Trade Organisation. This would increase the cost of exporting for UK firms relative to the EU, there would be no right of access to EU markets and the same issue with free movement of people that was present in the FTA would also apply here.

The conclusion of all this? There are trade alternatives that the UK could choose to pursue but each one has its flaws. For some, this is the insignificant reduction of contributions to the EU budget, for others it’s the increased difficulty and cost of trading within Europe. There’s no straightforward alternative.

I said that I wasn’t going to talk about the political side of this argument but I feel I must say something brief in conclusion. Economically speaking, this decision appears to be a no-brainer – the net effect of being in the EU on the UK economy is positive. However, this debate is a wider discussion than just the economic consequences and I understand that the political landscape and ‘ever-closer union’ that the EU appears to be striving for is a potential cause for concern and there are countless other issues that will influence the way people vote. All this means that I think the decision over whether to leave the EU will come down to one key battle – nigh-on ensured Economic prosperity, or political sovereignty. Which will you choose?

'Brexit': Liberation or Suicide?

On Thursday the 23^rd of June, a referendum will be held on whether Britain should remain a part of the European Union. This referendum will not only be one of the most significant events in British history, but also in Europe - James Rosanwo examines the key knock on effects of a potential vote in favour of Britain's exit.

The result of this impending vote could shape the future of the United Kingdom, as Scotland and Northern Ireland are heavily invested in Britain’s membership of the EU and will no doubt bring their own membership of the UK into question. The departure of a heavyweight member would certainly have negative effects on it’s the European Union’s dwindling economic stability.

The referendum was called after Mr Cameron completed his supposed renegotiation of Britain’s stance in the EU at the European Summit in Brussels, where he claims he has won concessions on behalf of Great Britain. However, many doubt it may do little to sway the result of the referendum in his favour. Soon after the announcement, many government ministers stated their intention to either back Mr Cameron’s campaign to remain in the EU or do the opposite, with high profile MPs, the likes of justice secretary Michael Gove and London mayor Boris Johnson, boldly reinforcing their discontent with remaining an EU member, pledging their allegiance to the “out” campaign.

The question of Britain's membership of the EU has created
a rift between key figures in the Conservative Party.

At the start of the year, the chances of “Brexit” seemed unlikely. However, recent events such as the European migration crisis and the incessant euro decline, seems to have many Britons favouring an exit. Whether, however, this is a good enough reason to opt for total economic uncertainty instead is debatable.

Mr Cameron has confirmed that if the British people decide to leave the EU, the UK would apply for withdrawal under Article 50 of the Lisbon treaty. Article 50 states that the EU countries’ would negotiate a new agreement with the withdrawing nation over a period of 2 years. It also specifies that the withdrawing state cannot participate in these discussions, so in essence the terms of the deal are established only By the EU. Hence it will be a process that will most likely not be quick or pleasant; neither will it yield results that would be favourable to Britain. One thing guaranteed is that the EU will be desperate to show that a decision to leave will not have a painless outcome.

Many opposed to remaining in the EU still maintain that Britain is being hindered by Europe, believing that  as a country free from the EU it would have an open Economy that would continue to trade with Europe and the rest of the world. Many have offered the Swiss and Norwegian models as  potential solutions:

The Swiss Model: Britain would emulate Switzerland and would negotiate trade treaties sector by sector.

The Norwegian Model: Britain leaves the EU but joins the European Economic Area, giving it access to the single market, with the exception of financial services but exempting it from EU rules on agriculture, fisheries and home affairs.

In practice, however, these models would be very difficult to implement. At the bare minimum, the EU would only allow access to the single market in return for obedience to rules Eurosceptics are so eager to escape, meaning they would still most likely demand free movement of people and big payments to its budget before permitting access to the market. Nonetheless, to these “Brexit” campaigners these hardships would be worth it, if it meant regaining independence from Europe and British sovereignty. 

Yet again, this supposed liberation is not as advantageous as it seems. In essence, Britain would be trading a greater power for a lesser one; in exchange for their newfound independence it would be relinquishing its ability to have any real influence in global issues. What is even more alarming is the threat posed to the EU and the West as a whole. Both Britain and the European Union would be significantly weaker, and less of an ally as separate entities. The strength of the EU is crucial to the West’s duty of maintaining global stability, an ordeal which is becoming more and more challenging given the ever persistent issues involving Russia, Syria, and North Africa etc. There’s no surprise why Russia’s Prime Minister Vladimir Putin would have no objection to ‘Brexit’, whereas America’s president Barack Obama has already urged the British people to vote to remain in the European Union.  

Britain's exit from the EU could further empower the already
dominant Germany.

Germany’s dominance in the EU would also monumentally increase, making them even more of an influence not just in Europe but on a global scale. Britain, on the other hand, would be on the sidelines outside the EU, free from but still in fact constrained by many rules it would have no role in formulating. We would be an independent Britain, still dependent on Europe.

The immediate effect of a vote in favour of 'Brexit' could also be devastating in further ways. Prolonged uncertainty over the UK’s new relationship with the EU would discourage investment, particularly foreign direct investment given Britain’s status as the financial capital of the world and the effects of these fears are already being identified; for instance, the recent fall of the value of the pound.

Above all, one question remains: will Britons be enticed by the illusion of a sovereign and liberal Britain, or will they see reason in the idea that there will always be safety in numbers? One thing is certain however, If the UK separates from the European Union, the decline of the pound will be the least of their worries.

Pros & Cons #5: Britain's Patent Box

In recent decades, Britain has quite significantly lagged behind other developed nations in its level of innovation and, partly as a consequence, productivity. An active 'Patent Box' has been one of the British government's headline measures taken to try to stimulate the country's level of Research and Development. 

So, what is the Patent Box, and what are its pros and cons?

This graph (left) tells you a lot about Britain's need for more research and development activities. Showing the proportion of national income spent on Research and Development projects, it highlights Britain's lack of investment in innovation compared to the rest of the developed world. Not only is the British average expenditure less than the OECD average, but it has also remained worryingly stagnant compared to almost every other country- in fact, it has decreased in the past decade.

The aim of the Patent box is to address this: "to provide an additional incentive for companies to retain and commercialise existing patents and to develop new innovative patented products", according to the Government itself. 

The Patent box does this by granting a lower level of corporation tax (10%, as opposed to the usual 20%) to profits earned as a result of patented innovations. 

PRO: Incentivising Innovation

This is the headline pro, the main aim of the whole project. Data presented on the right highlights the fact that very few patent applications emerge from the UK, and a major reason for this is the high cost of patenting, something that only hits smaller innovators hard. A properly drafted patent application in the UK can cost up to £6,000, with no guarantee that it will be accepted- it's common that multiple applications must be made before the patent is accepted. And even this does not ensure the international security of the intellectual property- there are even greater costs that come as a result of trying to win a patent abroad. 

In Japan, on the other hand, the cost of a patent applications (including attorney and translation fees) comes to around 210,000 yen, just over £1300. So it's very likely that patent costs are a major reason for the gap in application numbers between the UK and countries like Japan.

While the government wants to do little about patent costs, the proponents of the Patent box argue such smaller businesses will be helped out by the fact that their returns to innovation could be significantly increased by the new tax incentive. This higher profit possibility could give more encouragement to innovators to take greater risks with their inventions and commercialise them.

CON: Favours Larger Businesses?

However, there is an argument on the opposition side that the Patent box system is too 'complex' to be of great benefit to these small, independent innovators, and instead favours the larger firms with access to greater resources. While some financial barriers to entry may be lowered by the tax breaks granted by the box, it arguably also raises some more. 

In order to benefit from the Patent box, there are a number of compliance measures that have to be taken by businesses- most notably, they have to track and allocate R&D expenditures and subsequent patents through to their resulting income. This means that a company has to determine, document and prove how much of their profit is directly as a result of each of their patents. This is something that is far easier for massive businesses that will often have a whole department just for tax, than for small up and coming companies. The Institute for Fiscal Studies is a believer in this argument, arguing that "this [the Patent box] will lead to a significant increase in complexity and compliance burden... administratively burdensome and difficult in practice".

The iPhone 4 featured over 200 patents- the recipe for
a Patent box pickle indeed.

CON: Complexity

There is a further argument that while larger businesses may be in a better position to cope with the additional compliance costs brought by the Patent box, they will not be in an ideal position either. 

Larger businesses are more often than not holders of multiple patents, and in many cases these are commercialised in clusters, put into a single product. Take the iPhone, for example- the iPhone 4 from 2011 was crammed with over 200 patents, ranging from patents on the touchscreen technology, to the battery, to the then-new retina display. Now, Apple aren't beneficiaries of the patent box because their R&D does not take place in the UK- but if they could, how would they apportion their massive profits from the iPhone to each patent to present to the taxman? It would be impossible to objectively say that, for example, 10% of sales were purely down to the new battery patent they won for the phone.

And this issue is not just with phones, but essentially any product that requires more than a single patent- whether it is a car, a factory machine, the issue of apportioning responsibility for profits objectively to individual patents is a massive issue that is generated by the Patent box.

PRO: Attracting R&D to Britain
The Patent box phenomenon started in 2000, when it was introduced in Ireland. France followed in introducing the scheme in the next year, and since then, Belgium, Hungary, Luxembourg, Netherlands and Spain all adopted this approach to stimulating innovation- making the UK a relative newcomer, with our patent box opening in 2013.

With so many European countries having such a tax incentive in place, it was very important that the UK compete effectively with its neighbours, so that it didn't lose out from R&D activities moving away or not coming to Britain at all because of preferential tax rates. Therefore the Patent box, even if it doesn't make Britain more competitive than the rest of Europe, prevents the UK from lagging behind.

However, it's important to note that this might not be such a strong pro as it seems, considering recent developments in the OECD, whose excitingly titled 'Base Erosion and Profit Sharing' (BEPS) scheme intends to tame the level of migration of businesses due to tax reasons. A consequence of BEPS has been that most European patent boxes have now introduced 'Nexus' clauses that require beneficiaries to have performed all of their R&D in the country whose box they are using. So, to benefit from Britain's patent box, a company will have to do all of its work developing a patent in Britain. This reduces the likelihood of companies moving in the middle of their research projects just to benefit from tax cuts, and ensures that the host country granting the tax cut benefits from all of the positive externalities (consequences) of the research.

Nevertheless, it is still important that the UK's Patent box remains competitive, especially when it is considered that some companies will take tax breaks into account when they are planning to set out on their research.

CON: Better alternatives?
The tax cuts granted by Britain's Patent box system loses the government an estimated £740 million in annual tax revenues, so it's incredibly important that this huge cost is allocated to the scheme that is most effective in increasing Britain's innovative competitiveness.

And many argue that there are far more efficient schemes, most notably the existing system of R&D credits. R&D credits reward businesses for research activity in general (as opposed to exclusively commercialised patents), by excluding as much as 150% of research costs from end of year profits. This may sound like a bad thing, but it just means that research expenditure (and a bit more) will be excluded from taxation- ultimately decreasing tax expenses and increasing profits of the company. According to the IFS, R&D credits are preferable to the Patent box as they are "given in proportion to the amount of investment activity undertaken", as opposed to the Patent box which rewards only the profits derived from the group of patented, commercialised research.

£740m is a massive amount of money to sacrifice every year, so there are further alternatives to the Patent box that could have real, long lasting and crucially sustainable effects on the UK's level of innovation. Investment in human capital is arguably the most important of these alternatives- investment in the people of Britain, through avenues such as education, healthcare and general infrastructure.

Investing in education would have massive effects on the level of innovation in Britain. A better educated population would increase the level of innovative activity going on, and the multiplying benefits of a well educated society would mean an initial short term investment could bring far reaching long term benefits. However, that is the issue for some politicians- human capital investment in general often incurs large short term costs, for mostly long term benefits.

Conclusion
One thing that is clear, in this debate over the UK's Patent box, is that this is not simply a case of weighing the number of pros against the number of cons. It's quite evident that the number of cons outweigh the number of pros- but what is most important to consider here is whether the positive impacts of the Patent box outweigh the negative ones.

From our perspective, the negatives outweigh the positives. The Patent box seems a good idea in principle, but in application its shortfalls are exposed. Notable is the burden its complexity places on both small and large businesses, and the scheme's targeting of commercialised patents rather than other forms of innovation (such as copyrights, trademarks, or non-commercial patents), but in our view its most significant downside is the opportunity cost. £740m is a massive sum of money, and it is highly likely that the British government could achieve its aims of increasing innovation in the country by distributing this cost between an improved R&D credits system and further focus on investing in human capital.

Pros & Cons #4: The Minimum Wage

The Minimum Wage is something that has often been a focal point of the left vs right debate over economics and the government's role in managing its economy.

So let's have a look at both sides: both at those who say the minimum wage is an unnecessary, harmful form of government interference, and those who say it is necessary for the welfare of the working citizens of developed nations.

PRO: Worker Protection

Arguably the most significant reason for the existence of a minimum wage is the fact that it can prevent the abuse of workers desperate for employment by lean, restrictive employers. People desperate for a job can often be manipulated by employers into jobs in which the employee is strongly underpaid, often resulting in these people falling into poverty despite being employed. The minimum wage seeks to prevent such people falling into poverty, by giving them a wage that is calculated every few years to be supposedly enough to cover living costs for an individual and perhaps one or two dependents.

A study done by David Neumark and William Wascher of the American National Bureau for Economic Research (NBER) concludes that "over a one to two year period, minimum wages increase... the probability that poor families escape poverty" due to the increase in household income post-implementation of the minimum wage.

A higher minimum wage could reduce the need of
food banks like this.

Not only does escaping poverty help those fortunate enough to climb out, though. According to The Centre for American Progress, raising the minimum wage from $7.25 to $10.10 would reduce money spent on federal food stamps by $4.6bn a year, lifting off a great debt on the government.


CON: Shrinking Wages

However, Neumark and Wascher are careful to explain that their findings suggest separate stories for the poorest in society (who will benefit) and the rest- notably those just above the poverty line, who they claim would be harmed by a minimum wage.
An argument exists that the minimum wage could create a 'vortex' effect around the poverty line- while sucking the poorer up to and perhaps over the poverty line, it could simultaneously pull down those above the poverty line.

One could argue that despite the 'spirit' of the minimum wage, that is to raise the living standards of the poor, it could conversely provide a benchmark of acceptable pay for people who should be earning more. A company may reduce the pay it gives to employees to the minimum wage, reducing the income of those perhaps just above the poverty line and according to Neumark and Wascher, perhaps even dropping them below.


PRO: Productivity

Prominent psychologist Ivan Robertson summed this up very simply: "Improved psychological well-being (PWB) leads to a more productive and successful workplace". The link between income and this psychological well-being is further explored in a study by Princeton economists Daniel Kahneman and Angus Deaton- they conclude that, up to an income of $75k, "emotional wellbeing rises with log income". This means that, to an extent, money does often buy happiness- particularly when we're talking about those on the minimum wage, a figure far less that $75k.

Combining the two conclusions of Robertson, Kahneman and Deaton, it appears that the minimum wage's effect of increasing the wages and thus living standards of those below it can indeed have the effect of increasing productivity in the workplace. Wage is ultimately a great contributor to job satisfaction- and the higher the job satisfaction, the higher the likelihood of an employee being enthusiastic in their work, being present when needed and ultimately being more loyal to the employer.


(?): Lost Jobs

The reason why there's a question mark on this one is because this is perhaps one of the most contentious points in the whole minimum wage debate.

Some argue a minimum wage forces businesses to spend more on staff, meaning many will have to reduce staff numbers to keep the wage expenditure from increasing too much. This means fewer jobs, and consequently higher unemployment.

Their historically low pay has left fast food workers
among the most sensitive to any minimum wage regulation.

According to the American Enterprise Institute, this was the case in Seattle in the first half of this year- during which an increase in the minimum wage to $11 was said by many to have been responsible for the post-recession record loss of 1,300 restaurant jobs in the area. Author of the report Mark Perry highlights in particular how 1,000 of these jobs were lost in May alone, following the minimum wage increase in April- "the largest one month job decline since a 1300 drop in January 2009, during the Great Recession".


On the other hand, there is much evidence to suggest the minimum wage has little impact on unemployment levels generally. A famous study by David Card and Alan Krueger from 1990 compared restaurant employment in neighbouring states New Jersey (where the minimum wage was set to rise) and Pennsylvania (where the minimum wage was unmoved). "We find no evidence that the rise in New Jersey's minimum wage reduced employment at fast-food restaurants in the state", the study concluded.

A study in the British Journal of Industrial Relations set out to test the results found by Card and Krueger in 2009, and concluded the same- that they saw "little or no evidence of a negative association between minimum wages and employment".


CON: Price Inflation

Card and Krueger's findings that minimum wages had little effect on employment, however, did not absolve the minimum wage of any negative impact. In fact, upon investigation they concluded that "much of the burden of the minimum-wage rise was passed on to consumers", when restaurants would increase their prices to compensate for higher wage spending.

The idea of price inflation following minimum wage implementation arguably discredits the notion that the minimum wage causes unemployment. Theoretically, it would seem more likely for a restaurant to not risk all the potential issues that come with a shortage of staff, but instead retain staff (on the new minimum wage or above) and instead make the customers pay for the new burden.

Many businesses have laid the blame for price increases on minimum wage increases. One high profile example was Mexican food chain Chipotle, who, following a minimum wage increase in San Francisco, raised the price of their menu on average by 10%. Here in the UK, following the announcement of a new 'living wage' of £7.20 last month, Whitbread (the group including brands such as Costa Coffee and Premier Inn) announced they would be raising prices as a result of the supposedly "substantial cost increase" of operating as a business under the new minimum wage.

One could argue that such price inflations are simply selfish acts of protest by these businesses against minimum wage regulations that increase their expenses. It probably often is the case- but whether it is a selfish or 'necessary for survival' move, either way prices do increase for us as consumers.

Franklin D. Roosevelt championed the minimum
wage in an economically struggling USA.

PRO: Economic Stimulation

The minimum wage could have positive effects for the national economy, firstly in the form of stimulating consumer spending. A study by the Chicago Federal Reserve Bank examined 23 years of household spending statistics, concluding that for every dollar the minimum wage increased, the average worker received an extra $2800 for consumer spending. The 2009 study noted that spending on cars in particular increased as a result of increasing the minimum wage.

President Franklin Roosevelt was a huge proponent of the minimum wage for this reason- he famously stated "the best customer of American Industry is the well-paid worker", during his push to enact the federal minimum wage in the USA in 1938, during a recession following the Great Depression.


The Minimum Wage- Help or Hindrance? Put your opinions in the comments below! 

What Is Corbynomics?

With the results of the UK Labour Party Leadership Elections set to be announced this Saturday, it's time to take a look at the economic policies of one of the candidates considered the frontrunner, and also the furthest to the left, by many- Jeremy Corbyn.

The Islington MP's economic proposals have made such an impact that they have come under the new title of 'Corbynomics'. Though, admittedly, adding 'nomics' to the names of his rivals would lack the front page appeal of this title (especially 'Burnhamnomics', or would it be 'Burnhamomics'?), it is undoubtedly the unique nature of Corbyn's policies in the leadership race that has brought them a name to come under.

So, what are Corbyn's policies, and are they credible? Here are 4 of his policies that are making the headlines.

An End to Austerity

"You just cannot cut your way to prosperity so Britain needs a publicly-led expansion and reconstruction of the economy, with a big rise in investment levels."

Corbyn is a strong opponent to David Cameron and
George Osborne's policy of austerity.

One of the most appealing policies to his supporters on the left, Jeremy Corbyn has pledged to bring an end to the money-saving spending cuts that have been enforced in recent years by the Conservatives.

This means that a government under Corbyn would end spending cuts on public services such as the NHS, the education system and transport- in fact, he would be likely to increase spending on these as demand increases due to a growing and ageing population.

Corbyn would also reverse one of the most controversial austerity tactics, that is the privatisation of public services. He has pledged to renationalise the railway system, and also prevent the further privatisation of the National Health Service.


Reducing Foreign Military Presence

Jeremy Corbyn believes Britain should learn lessons from
an intervention in Iraq seen by many to have failed.

"Thousands more deaths in Iraq ... will set off a spiral of conflict, of hate, of misery, of desperation that will fuel the wars, the conflict, the terrorism, the depression and the misery of future generations." (2003)

However, the only cut that Corbyn proposes is with regards to the military. He is a fervent anti-war activist, something highlighted by his strong criticism of past actions such as Tony Blair's move to invade Iraq, and current proposals like those to militarily become involved in Syria. So, a Britain under Jeremy Corbyn would reduce its military presence in areas like the Middle East, thus saving a considerable amount of money.

Furthermore, as a believer in non-proliferation of nuclear weapons, Corbyn would close down Britain's nuclear weaponry facility Trident, located in Scotland. This would not only save money, but also be a welcome move, considering a significant proportion of Scots are against the facilities themselves. However, some worry that such military contraction would endanger Britain, in what many see as an increasingly threatening world.


'Quantitative Easing for the People'

"QE for people instead of banks"

Banks would no longer benefit from government QE
programmes under Corbyn.

Quantitative Easing is nothing new in government policy, but the manner in which Jeremy Corbyn seeks to implement the divisive policy highlights the new direction in which he seeks to take Britain.

Put simply, in the current system of QE, the Bank of England creates new money that is inserted into the accounts of national banks, with the aim of encouraging these banks to lend more openly and thus stimulate spending in the economy.

Corbyn wishes for the Bank of England to continue creating new money, but proposes that the finances created should not go to the private banks, but a state-owned 'National Investment Bank', that will "head a multi-billion pound programme of infrastructure upgrades and support for high-tech and innovative industries".


National Education Service

Tuition fees have been a source of discontent for many
of Britain's young people. Under Corbyn they would not exist.

"To become a high skill, high pay, high productivity nation we need to invest in education throughout peoples' working lives - that is the path to prosperity for all." 

A significant part of Corbyn's anti-austerity programme would be the increasing of government spending on education. There has been much uproar in the past decade over university tuition fees, first introduced by Labour's own Tony Blair, and increased to as much as £9,000 a year under David Cameron.

Not only would Jeremy Corbyn abolish these tuition fees, but he has also proposed the reintroduction of university grants, which have just been replaced by loans.

Free university forms a major part of Corbyn's 'National Education Service' proposal. This system would see the government increase spending on education (funded by tax increases, government military spending cuts and the economic productivity boost the Corbyn camp believe their policies will bring), in order to make education accessible to all, providing universally free childcare right up to free university.