Labour's magic tax yield

Labour on Gateshead Council today proposed a motion on the economy that had clearly been cut and pasted from the national Labour website. There were no surprises in it: it contained the half-baked, uncosted, unrealistic, back-of-an-envelope proposals that are the best that Labour can come up with at the moment.

In their motion, Labour claimed their proposal for a bank bonus tax would raise £2 billion. This is a debatable point but let's suppose for a moment that they did manage to gather that sum. Labour suggest the money would create 100,000 jobs for unemployed young people who would then build 25,000 affordable homes. The trouble is, the £2 billion from the bank bonus tax would be more than swallowed up employing 100,000 people. £2 billion divided between 100,000 workers means £20,000 per job. Out of that sum employers' national insurance would have to be paid as well as pension contributions. It means that the pay will be about £16,000 at best, not exactly the high paid jobs Labour keep claiming they want.

These costs however mean the £2 billion is all spent before a single brick can be laid. A rough estimate of the cost of the materials for building one, small, affordable house is about £40,000, or £1 billion for the full programme. Then of course there is the cost of the land, which could be billions for the 25,000 houses to be built(typically it is the largest single cost involved in building a new house).

In addition to all of this, Labour state that all the jobs will be for young unemployed people. That's a laudable aim but it comes with a significant problem. Building houses needs a skilled workforce. 100,000 unemployed young people would need to be trained. That will take time and money. So yet again, this £2 billion programme will require even further money to be spent on it.

One Labour councillor shouted at me that the houses built would be sold. Personally, I would have thought it better to build affordable housing for rent but quite how they would have any houses to sell when all the money had been spent before a brick could be laid is not explained.

Basically, Labour's scheme is a back-of-an-envelope policy that will cost vastly more than the £2 billion allocated to it. Far from being a bonus tax, it is a magic tax - £2 billion to be collected and it can magically be spent many times over, instantly creating an army of skilled workers and thousands of new homes. The Coalition Government has Project Merlin. It seems Labour has Merlin the Magician writing their policies.