Brexit means … Singapore! warns chancellor
Philip Hammond has implied that if cut out of the single market, Britain will fight back with a new low-tax economic model. Opponents say he is threatening a deeply disturbing trade war.
Six months ago Theresa May walked into 10 Downing Street as the UK’s prime minister. Her greatest challenge was to steer the country out of the EU.
She initially said little on the subject – her mantra was simply ‘Brexit means Brexit’. But tomorrow, she will deliver a major speech in which the British public will get the most comprehensive view yet of what Brexit really means.
We may not even have to wait. For yesterday her chancellor Philip Hammond seems to have let most of the cat out of the bag. In a remarkably lucid and frank interview with German newspaper Welt am Sonntag he nailed the UK’s colours to the mast.
He said that immigrations controls were not up for negotiation and that Britain would regain control of its borders. ‘That’s the message the British people sent on June 23rd.’
He then turned to the economy. Referring to the well-known sliding scale of western economies in which one end represents free markets/low social spending (USA) and the other end represents regulated markets/higher social spending (France), he confirmed Britain’s position somewhere in mid-scale and said the UK government wished to remain there.
But then came what has been interpreted as a threat. He said that if Britain was excluded from the the European single market it would have to find a new economic model that worked and could compete with the European model.
Labour leader Jeremy Corbyn characterised it as saying: ‘well, if you don’t give us exactly what we want, we are going to become this sort of strange entity on the shores of Europe where there’ll be very low levels of corporate taxation’. ‘We’ll become the European Singapore’ said others.
The wealthy south-east Asian city state places famously few restrictions on its businesses — particularly in financial services. Its education system and quality of life are highly regarded. But it scores poorly on inequality rankings, and its people are among the hardest-working in the world.
The government’s supporters say it is right to drive a hard bargain. The UK should be confident that it can get what it wants – it has the fifth largest economy in the world. Under the European economic model, businesses face too much red tape and not enough incentive to invest. And this is the UK’s chance to introduce the migration controls which most of its population want.
Its opponents say it is needlessly antagonising its allies. It is already in a weak negotiating position, facing 27 other countries. The European social model is worth fighting for — it creates relatively egalitarian societies and protects workers from exploitation. And clamping down on immigration will make Britain nastier and poorer.
- Re-read the description of Singapore in this article. Would you like to live in a country like that?
- Has the UK government got the right approach to Brexit?
- You are a journalist invited to attend Theresa May’s speech on Brexit tomorrow. Write five questions you would ask her.
- Choose three countries that interest you from different parts of the world. Write a one-page summary explaining how their economies differ, and a paragraph explaining which of them you would most like to live in.
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Q & A
- I’m not taking part in these negotiations. What does this mean to ordinary people?
- Brexit could change the nature of the country you live in. The deal Britain gets will affect important things in your life, such as the job opportunities open to you. If Hammond’s words turn out to be true, you may pay less tax — especially if you are going to run a business. But it could also harm services you use and make society less equal.
- But I don’t live in Britain.
- A major change in the UK economy would have a big impact on other countries too. If Britain cuts corporation tax, for example, others may feel obliged to follow suit. If they do not, businesses may go where they will pay less tax. This would affect people in Europe first, but could change the lives of many others around the world too.
- June 23rd
- The date of the referendum and vote for Brexit. Along with ‘regaining sovereignty’, ‘controlling immigration’ is considered a major reason for voting to leave the EU.
- Single market
- The EU free trade area which requires goods, services and people to be allowed to move freely between member states.
- Corporate taxation
- Tax on businesses’ profits (’corporation tax’ in the UK).
- A 2015 OECD-led study ranked Singapore’s education system as ‘the world’s best’, though critics dislike its methods.
- Quality of life
- Singapore had the best of any Asian city last year, and 26th in the world, according to consultancy firm Mercer.
- According to the Gini coefficient, a measure of income inequality used by the UN. Singapore’s economy relies heavily on several hundred thousand low-paid foreign workers.
- Singaporeans worked an average of 2,389.4 hours in 2014, according to the Ministry of Manpower — more than any other country in the world.
- EU workers’ rights are guaranteed by the European Social Charter, for example, maternity leave and paid holiday.