A LABOUR election win would spark a run on the pound in a “sudden and dramatic reaction” on the markets, experts have warned.
Leading economists say the party’s plans – which suggest splurging 83billion on extra day-to-day spending- “would not inspire market confidence”.
Jeremy Corbyn’s spending splurge would have a ‘sudden and dramatic reaction’ on the markets if Labour is elected, experts have warned
Jeremy Corbyn’s proposed spending spree works out at 28 to every 1 the Tories will spend daily.
Among his proposals are policies to increase the health budget by more than four per cent and to also freeze state pension age.
Unveilinghis partys manifesto last week, the Labour boss also pledged to blow 1trillion over five years on nationalisations and a range of freebies.
‘CAPITAL FLIGHT’
His tax assaultincludes a second homes tax, reversing inheritance tax cuts, a transaction tax on bankers, VAT on private schools and a windfall tax on oil companies.
But new research from the Centre for Economics and Business Research (Cebr) shows Corbyn’s proposed spending spree could cause a “capital flight and a falling pound” should Labour be elected.
Cebr founder Douglas McWilliams told The Telegraph “even their maths must have tired near the end because there is a final 5bn of additional revenue attributable to ‘multiplier effects’”.
He added: “If elected, it is likely that there could be capital flight and a falling pound.”
Mark Littlewood, director general of the Institute of Economic Affairs, added that the research “stands to reason”.
He said: “Capital is now incredibly mobile and billions can leave the country at the touch of a button. We might end up with some attempt to bring back exchange controls of some sort.
“Markets seem to be expecting a Tory win. If we do get a surprise Labour victory, it’s unlikely that much of this risk is ‘priced in’ in the way it would be if people thought a Labour victory was a 50pc chance. So, if Labour do win on December 12 there could be a sudden and dramatic reaction.”
‘FALLING POUND’
And Ruth Lea, an economic adviser at Arbuthnot Banking Group, agreed.
She told the Telegraph it was likely that “people will just pull their money out, that there’ll just be a cash flight”.
She explained: “Wouldn’t you? Everybody I talk to who has any assets, they’d get their money out of the country as quick as they could.
“There’s no doubt the Labour party would have to consider bringing in exchange controls.”
Corbyn called his blueprint for Britain the most radical and ambitious in decades.
He is offering free university tuition, free social care, free childcare for all two to four-year-olds, a public sector pay rise of five per cent, a four-day week and freezing the state pension age at 66.
The TUC welcomed his manifesto but CBI director-general Carolyn Fairbairn said: Labours default instinct for state control will drag our economy down.
Boris Johnson said until Brexit was done, none of this carries any economic credibility whatever.
