John McDonnell’s supermarket checkout tax: bad economics, bad Socialism

The Labour Party is considering a tax on supermarkets that use self-service checkouts, with the aim of preserving jobs.  A motion proposing such a tax was passed by St Ives constituency Labour Party in January and John McDonnell has welcomed it on his “People’s Chancellor” Facebook feed.

The problem is that it is both very poor economics and reflects a seriously confused political message.

The economics issues are obvious.  St Ives CLP argues that the tax would compensate for the loss of tax and national insurance revenues represented by the loss of jobs, but, quite obviously, it’s not as simple as that.  But there is no hard evidence that the introduction of self-service checkouts reduces costs for supermarkets – there is evidence any staff savings are likely to be offset by maintenance costs and higher theft.  The move towards greater automation is likely to be long-term and supermarkets – in the UK – are not talking about moving to complete automation.  When the queues lengthen, the response will still be to open more staffed checkouts.  While there is evidence that retail employment is falling, the reasons are likely to be complex – including, for example, changes in seasonal patterns – all of which bear on the question of whether such a tax might have perverse incentives, or just end up increasing food costs for consumers or reducing employment further.

In other words, the economic issues are complex, and by endorsing this proposal McDonnell has fallen into the classic trap of the economically semi-literate – of proposing simple solutions in the face of complex issues.

But there is political confusion here too.  Ever since industrialisation, technology and automation have made some occupations obsolete.  Very often those occupations are associated with drudgery; and technology has enabled things to be done in different, more effective ways that change economic patterns.  For example, when I first joined the Civil Service in the 1980s, there were typing pools and small armies of people employed solely to deliver paper around the building.  There were no computers on desks.  By the time I retired every Civil Servant had a PC and information was passed by email.  When I went to Brussels on Government business I carried a Blackberry and a laptop with remote wireless access.  And there were no mass redundancies of typists and paperkeepers – just managed change.Would anyone seriously advocate going back to the old days?

And for many Socialists, part of the point of increased productivity was that it reduced drudgery and freed individuals to do more fulfilling work, or simply to work less.  Technological advance need not mean impoverishment; a Socialist society was one in which it meant precisely the opposite.  It comes down to a question of how that change is managed, and for whose benefit; there is nothing inherently Socialist about maintaining employment in low-paid jobs, and using taxes to incentivise businesses to do so seems to be the complete absence of a Socialist approach.

The dilemma for Labour is that is widely perceived as weak on the economy; which places a special responsibility on its leadership to be rigorous and credible.  And as long as the Shadow Chancellor is prepared to endorse this sort of economic and political illiteracy, that’s not going to happen.


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