WITH the Labour Party 17 percentage points behind in the opinion polls, it may not be worth analysing the tax and economic aspects of its manifesto. The belief that the party will lose is so widespread that you can get odds as high as 20/1 on a victory for the party; market indifference is such that its plans to nationalise the water industry have caused shares in the biggest provider, United Utilities, to fall just 1.6%. Still, the manifesto is such a mishmash of ideas that it is worth a look at the ideas of Jeremy Corbyn and John McDonnell (pictured), the shadow chancellor.

One eye-catching proposal is for a £250bn ($320bn) “National Transformation Fund”, spread over ten years, to invest in:

infrastructure—transport, energy systems, communications—scientific research and housing fit for the 21st century

There is an argument for borrowing to fund infrastructure. This depends on a couple of assumptions. The first is that the return on investment will be higher than the cost of capital; this is plausible when interest rates are so low. The caveat is that governments have a tendency to finance vanity projects (Concorde, for example) and to manage projects poorly, resulting in cost over-runs. The second assumption is that the economy is running below potential and needs a Keynesian boost; in such circumstances, government spending will not crowd out private sector investment. Here the case is mixed. Unemployment is 4.7%, lowish by historical standards (it hasn’t dropped below 4% since the early 1970s). On the other hand, wage pressures are still subdued indicating the labour market is not that tight. There are nearly 9m people aged between 16 and 64 who are “economically inactive”. Perhaps some of these people could be drawn into work (although this figure has been remarkably constant, neither rising above 10m nor falling below 7.5m in 45 years); many people will be caring for children, or elderly relatives, or in education and so on. If foreigners leave Britain because of Brexit, it may be difficult to find workers.

But this isn’t really a Keynesian plan in the full sense. Labour sees a distinction between the capital spending side of the budget (infrastructure) and the current spending. So the manifesto says:

Our manifesto is fully costed, with all current spending paid for out of taxation or redirected revenue streams. Our public services must rest on the foundation of sound finances. Labour will set the target of eliminating the government’s deficit on day-to-day spending within five years

The manifesto then lists a number of spending commitments—on schools, health care, higher public-sector pay, reversing some benefits cuts and abolishing university tuition fees—and matches them with around £49bn in higher taxes. The latter are largely redistributive: those earning over £80,000 will face a marginal rate of 45%, rising to 50% for those earning more than £123,000. The plans also include a levy (paid by companies) on excessive pay; measures to clamp down on tax evasion; a transaction tax on derivatives; VAT on private school fees; more money from capital gains tax and inheritance tax and so on. The biggest element (£19bn), however, would come from pushing up the tax on corporate profits to 26%.

Assume for the moment that the tax proposals do raise as much as Labour expect. So the stimulus to the economy would come from the £25bn a year of extra infrastructure and the extra boost to spending that may come from taking money from the rich (who save a chunk of their income) and giving it to the poor (who spend almost all their income). Let us say that high-earners save 10% of their income and low-earners none; transferring £50bn from the latter to the former would boost spending by £5bn. So the net stimulus might be £30bn, or around 1.5% of Britain’s GDP. But there is no analysis of why this is the right amount of stimulus, nor why is it a good combination in Keynesian terms to eliminate the current spending deficit while increasing capital spending. (And if the aim is immediate Keynesian stimulus, why spread it over 10 years? The economy may be operating above capacity in five years' time.)

And what will happen to growth in this scenario? Britain is facing a post-Brexit future in which businesses must decide whether they will have sufficient access to the single market to base themselves in Britain or, if they are international, whether they might want to move back to America (if Mr Trump ever unveils his tax cut) or to Asia. A business contemplating a Labour government will face the following outlook: a tax rate gradually rising to 26%, a higher tax on executive pay, higher tax rates for the company itself in high-earning industries like finance, and more restrictions on labour hiring policies (workers will get full rights from day one, no zero hours contracts, there will be “sectoral collective bargaining”, a higher minimum wage, and four extra public holidays).

It doesn’t sound like a very appealing offer for companies thinking about staying in, or coming to, Britain. Yes, as has been pointed out, Britain has the lowest corporate tax rate in the G7 but the direction is generally down; Britain will be moving against the tide at just the moment when its future is most in doubt. Think about a big American bank; it will have to pay the excess pay tax, its employees will be taxed more, it may be hit by the bank levy and its clients will be taxed via the “Robin Hood” tax on derivatives. That is a big incentive to move back to New York, or to Dublin for EU business. Some may say “good riddance” but the banks’ employees pay a lot of tax. The result is that the tax take will be a lot lower than Labour thinks (according to the IFS, Labour is aiming for the highest tax take in 70 years) and growth will be slower. It could be redistributing a smaller pie.

So the extra borrowing will be a lot more than the £25bn Labour suggests (this might make it more Keynesian, by accident). There are some spending proposals that are not funded, such as ending the cap on benefit payments. Then there are the nationalisations; these don’t add to the current deficit since they are using liabilities (bonds) to buy assets (the revenue streams of the water companies, Post Office and so on). But that still means you are asking the private sector to swap a claim on private sector profits (an equity) for a claim on government revenues (a bond) and to do so to the tune of many tens of billions of pounds. Whether there will be demand for these IOUs at the current yield is another matter. If yields do rise, then that ripples through the economy into mortgages, corporate borrowing costs and so on.

In short, the spending commitments may be a popular shopping list but Labour’s deficit in the polls indicates the public may have figured it out; it isn’t offering a coherent economic plan for post-Brexit Britain.