Our cautious Chancellor, now busily preparing for his Budget, said one thing this year that lifted my spirits: he warned the EU against bullying Britain as it headed for the exits. “If we are forced to be something different, then we will have to become something different... We will have to change our model to regain competitiveness.”
Well the bullying has not stopped – not least with the outrageous demand that we cough up around £50 billion or again be denied the opportunity to agree a free trade deal with our continental neighbours. Yesterday, Michel Barnier even threatened Britain against diverging from Europe on tax and regulation, surely essential levers for any independent country.
Sadly, Philip Hammond didn’t stick to his guns. He subsequently said he expects Britain to continue with a social, economic and cultural model that is recognisably European. In other words, he turned his back on the idea that post-Brexit Britain would take a leaf out of the book of tiger economies like Singapore and adopt the low-tax, low-spend, low-regulation policies that have produced living standards well in excess of anything achieved in Britain or the rest of the EU.
This is worrying. For if we are to thrive, our post-Brexit model should exactly be Singapore, a tiny country devoid of natural resources but with a booming economy and an average life expectancy of 85. In 1980, Britons were 20 per cent richer than Singaporeans on average; today they are twice as rich as us. Comparisons with Jeremy Corbyn’s dream nation, Venezuela, which defaulted on its debt last week, are even starker. Despite the world’s largest oil reserves, its citizens can expect to live a decade less than Singaporeans and earn 100 times less.
My proposition is simple. There is not much point leaving the EU and its bureaucratic jungle of regulations, only to run our economy on precisely the same lines as before. Regardless of whether it smooths the path to a deal with Barnier, what is the point of Brexit (at least economically) if we shackle ourselves to high-tax, high-spend policies endemic in the EU?
In France, Sweden and Denmark, the state spends more than 50 per cent of GDP, with corresponding high levels of personal and business taxation. We are in better shape – but not much. Our government spends about 42 per cent of GDP and our tax burden is firmly in the middle of the EU pack.
There is another way – set out by Economists for Free Trade, chaired by Patrick Minford. He is one of the few experts who has been consistently right on the major economic questions of the past 30 years – from the supply-side revolution of the Thatcher years to the decision to reject the recession-making machine known as the euro.
Minford and his team have tweaked the Treasury forecasting model to reflect the reality of trade flows and come up with a far more optimistic outlook for Britain. They predict a surge in UK growth through the 2020s – assuming a clean Brexit in which we cut ourselves free of EU regulations.
President Macron in France is terrified that Britain will break away from the slow-moving European caravan and seek to emulate the Asian tigers
The Budget is a real opportunity for a turning point in the conduct of fiscal policy in the UK – a chance to signal that our Government will make Britain one of the most competitive economies in the world. The Chancellor should look East when he rises to his feet on Wednesday, not to the sluggish, over-taxed and over-regulated states across the Channel.
President Macron in France is terrified that Britain will break away from the slow-moving European caravan and seek to emulate the Asian tigers. He wants all European horses in the race saddled with equal top weight, but if we are to reap Brexit’s full rewards, we must carry the lightest weight. To take one example: the EU is opposed to tax competition, yet it is well established that lowering the rate of corporation tax increases revenues. As the Government has cut the main rate, now just 19 per cent, revenues have surged, up 21 per cent in 2016-17 on the previous year. Even allowing for changes to the reporting date, this still represents a 12.6 per cent increase on a purely cash basis.
As we battle our way to the door and prepare to say goodbye to Brussels, the Chancellor should recognise that Brexit means bravery and boldness. Let Singapore be our model.
This article was published in The Daily Telegraph on 21 November 2017: