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‘Wacky’ economics: Could the UK thrive under Corbyn?

Proud to call myself a socialist: Corbyn

The U.K.'s main opposition Labour Party looks set to elect its most left-wing leader for years on Saturday – but could his radical economic policies become mainstream?

The veteran Labour Party MP Jeremy Corbyn has emerged as a surprise frontrunner to succeed Ed Miliband, after years where the party moved towards the center ground. Corbyn, who has never held a top party position in the 30 years he's been a Member of Parliament, wants to see what he calls "people's quantitative easing" to deliver large infrastructure projects via a National Investment Bank, instead of the bond-buying on a massive scale employed by the Bank of England in the past six years.

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

In this, Corbyn is in agreement with some well-known economists. However, when it come to some of his other ideas – such as renationalizing the U.K.'s railways, re-examining the incentives given to companies to invest in the U.K., and garnering a greater tax take from big business -- have raised more eyebrows. Corbyn also plans a potentially punitive windfall tax on assets which were privatized on the cheap, some of them decades ago.

"Economists are split between wanting some kind of stimulus in the UK but are put off by his wackier ideas on nationalisation of some nationalised public services," Simon French, chief economist at Panmure Gordon, told CNBC.

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There are also concerns that his ideas may impact the Bank of England's vaunted and valued independence. Under "People's QE", it appears that a Corbyn government, not the Bank, would decide on the amount of bonds to be purchased, which could critically undermine its independence.

"Whilst increasing public infrastructure is undoubtedly a good thing, financing it by forcing the Bank of England to print money and therefore abandoning central bank independence, is clearly not," Paul Hollingsworth, U.K. economist at Capital Economics, wrote in a research note.

Of course, Corbyn, if he is elected leader, will not contest a general election until 2020, and his ideas may have modified by then.

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The more immediate question is whether lobbying from a more left-wing Labour administration may shape Conservative Party policy in any way. The ruling party has taken advantage of their unexpected overall majority in May's election to reinforce their message of austerity and focusing on paying down the U.K.'s deficit. George Osborne, the Chancellor of the Exchequer who may be Corbyn's rival for Prime Minister in 2020, has continued with his plans to reduce the deficit.

Yet he may want to project a warmer, less austere image and boost employment as the election draws nearer – which could lead to more spending on public works.

"Osborne has a track record of pinching Labour's ideas," Hollingsworth pointed out. "Perhaps he'll want to take some of the wind out of Corbyn's sails by increasing spending on infrastructure projects too."

- By CNBC's Catherine Boyle