Yesterday the BBC’s Andrew Neil interviewed Jeremy Corbyn. A link to the interview is here.
Starting at 21:52 the discussion goes as follows:
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Neil: And as part of the investing in the future you plan to borrow a lot to do that. How much will you borrow?
Corbyn: What we will do, is for the public ownership elements there’ll be an exchange for, erm, bonds for shares in it.
Neil: But what is a bond?
Corbyn: A government – a government bond.
Neil: Yes, it’s a debt instrument. It’s borrowing.
Corbyn: Well, it’s a bond – it’s a government bond which would be serviced by the income from that service, but in addition we would have control of it. Take –
Neil: But you would still have to borrow. Bonds are borrowing. You would borrow.
Corbyn: Take the water industry, for example, which has been a method of siphoning off profits out of this country to offshore companies that made a lot of money at the same time leaving us with expensive water and in some cases very bad levels of pollution.
Neil: You would need to borrow – I understand the case but you would need to borrow to buy the utilities.
Corbyn: No, it’s not a – it’s a swap of the shares for a government bond.
Neil: But if you’re issuing bonds, Mr Corbyn, you’re issuing government debt. You are borrowing.
Corbyn: Issuing bonds that we own which would be paid for by the profits from the industries, so instead of the profits –
Neil: But you’ve said you would cut the water utilities’ profits. That means you wouldn’t have the money to pay for the bonds.
Corbyn: Andrew, instead of the profits being siphoned off they would remain here. That’s an advantage, surely?
Neil: National debt is already an incredible 1.7 trillion. If you borrow to invest on top of the 50 we do, another 25 you say, you need to borrow to nationalise, you may have to borrow – if the IFS is right – for day to day spending.
Corbyn: No, we’re absolutely clear we will not borrow for day to day spending.
Neil: But you might have to, if the IFS is right. Our national debt, which has already soared under the current government would soar even more under Labour, wouldn’t it?
Corbyn: No, because the – we have the rule that we would only borrow to invest for the future. We would not borrow for revenue expenditure. I mean that’s sort of a sensible rule which has not always been followed.
Neil: A technical rise.
Corbyn: And what we’d get in return is investment in better services. That in turn would encourage economic growth. Listen, we have a huge imbalance of investment. Far too much goes to London and the south east in transport infrastructure. Far too little goes to the north east, north west and Yorkshire. Those issues have to be addressed. Hence the National Investment Bank, which will be regionally based all across the UK.
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According to the polls it is looking more likely, though still unlikely, that Mr Corbyn will be our next prime minister. So I would like to know what he means by the above. My base assumption is that he has very little idea what he is talking about. But I must confess that if Andrew Neil were to ask me what a bond is, my answer would be scarcely less waffly than Mr Corbyn’s. Can Samizdata readers explain it all for me and readers like me? What exactly is wrong with his proposals, if anything?