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‘People’s QE?’ Left-wing leader’s plans for the UK

Left-wing idealist rallies UK Millennials
Proud to call myself a socialist: Corbyn

Jeremy Corbyn has emerged as a surprise front-runner in the leadership race for the U.K.'s opposition party – and now has economists as well-known as Paul Krugman and Joseph Stiglitz backing his economic policies.

The veteran Labour Party MP, who was previously known more for his anti-war campaigning than his economic expertise, wants to see what he calls "people's quantitative easing" to deliver large infrastructure projects instead of the bond-buying on a massive scale employed by the Bank of England in the past six years.

The U.K.'s center-left opposition party has been left rudderless since Ed Miliband fell on his sword after the disastrous May election campaign. In the race for the Labour leadership, Corbyn, who has been an MP for 30 years without becoming a serious contender for high office, has emerged from seemingly nowhere as the frontrunner ahead of his more centrist -- and some say blander -- colleagues.

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He told CNBC at a rally in Ealing, West London: "We would take some of the money that's gone into the banks to start a National Investment Bank.

"We're looking particularly at investing in housing and rail infrastructure."

Corbyn's campaign also wants to renationalize the U.K.'s railways, re-examine corporate subsidies and garner a greater tax take from big companies.

"A lot of economists have been very supportive. We've had messages of support from Krugman and Stiglitz," Corbyn said.

"They're not the last word. If we want to live in a society and economy that works for all you've got to invest. If you leave it all to the market, they won't do it."

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Corbyn arrived late at the rally in Ealing, West London, because, as part of his commitment to egalitarianism, he wanted to speak to the few hundred people who couldn't squeeze into the 450-person capacity hall.

Like Greece's left-wing prime minister, Alexis Tsipras, and his fiery former finance finister Yanis Varoufakis, Corbyn eschews ties. However, he is rather more mild-mannered and reticent than either Greek politician. He is also known for sticking to his political principles in his personal life: cycling around London and wanting to send his children to comprehensive schools.

His economic plans, dubbed Corbynomics, have been attacked as a "path to penury" by think-tank the Centre for Policy Studies, and criticized by many mainstream U.K. economists.

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"There is an intellectual spasm that Jeremy Corbyn is playing into. There is a feeling of mis-allocation, that there are funds available but they are going into short-term projects and not into long-term value," David Marsh, managing director & co-founder, OMFIF, the monetary policy think-tank, told CNBC.

"He is pure, but unelectable."

Richard Murphy, one of Corbyn's economics advisers, defended his focus on corporate subsidies and increasing the tax authorities' resources to track down tax avoiders and evaders.

"This issue is bigger than HMRC can deal with at the moment," he told CNBC. "Spending up to £300 million on staff could raise £8 billion extra, according to people I speak to at HMRC."

Corbyn may not have the polish and public speaking flair of David Cameron, the Old Etonian Prime Minister, but the attendees listen as enraptured as the devout at a religious event. Many were either recently signed-up younger people or old Labourites who found themselves forced to the outskirts of the party as its leadership moved towards the center ground.

"I'm very proud to call myself a socialist, somebody that wants to share the wealth and share the experience and share the abilities of everybody. Socialism is basic humanity. I consider myself a reasonably human kind of person," Corbyn told CNBC.

- By CNBC's Catherine Boyle.