As I See It
A Brexit budget is becoming more necessary by the day
Just when you think the Prime Minister can’t make the Brexit process any less attractive or confusing she suggests to the leaders of the EU members states that the UK would be prepared to stay in the limbo-land of transition for another year.
How is that meant to ensure business confidence and encourage investment when, by postponing big political decisions, it makes it more likely that boardrooms will postpone their investment decisions too?
The Chambers of Commerce has rightly called upon the UK and Scottish governments to make the post-Brexit business environment as buoyant as possible. But do we have politicians that understand business well enough? Theresa May’s behaviour suggests not.
The possibility of a second independence referendum is also known to be contributing to delayed investment decisions, making it more imperative that Nicola Sturgeon will not consider a second poll until the Brexit situation becomes clearer.
I shan’t hold my breath; for all the Scottish government talks about listening to business and wanting a successful economy we know that “independence transcends all” and maintaining her supporters in a hyperventilated state of readiness to campaign comes before encouraging economic growth.
Turning to the UK as a whole, worries about the state of Brexit-readiness of British businesses should not be overplayed. It comes as no surprise to me that some 62% of businesses have not scoped a Brexit-related risk assessment when only 5% of UK businesses actually export to the EU’s single market. One of the gains of Brexit should be that over time the other 95% should not have to carry the regulatory burden so the few can trade in the EU.
By identifying and reforming the many EU regulations designed exclusively for other parts of Europe costs here can be cut and our businesses become more competitive and profitable. The Water Framework Directive is a case in point, designed for Mediterranean countries suffering regular droughts the same rules were needlessly applied in some of the wettest northern climates such as the Scottish highlands, despite complaints by our MEPs at the time.
Reform of such regulations can be a time-consuming process but changes to taxes can be done quickly and this is where the Chancellor must act. For the UK government to boost business confidence requires a clear and unequivocal statement from the Chancellor that he will counter any post-Brexit difficulties through macro and micro-economic tax cuts.
But “the deficit”, I hear you say. Oh, for a tax-reforming chancellor who might believe in the Laffer curve and identify the existing taxes that do more harm than good and thus offer the potential to raise greater revenues by cutting rates.
The problem remains that Philip Hammond appears to be the wrong man for a task that requires creative and bold thinking. All the talk coming from the Chancellor is about raising taxes – either directly, by introducing new ones, or by stealth through the freezing of tax bands and allowances against inflation.
A budget for business, by attacking England’s ridiculous stamp duty rates, by bringing forward Corporation Tax cuts and reducing business rates would also put pressure on the Scottish Finance Minister, Derek McKay, to respond in kind in his own budget in December. We now have the highest tax levels in forty-nine years, which is nothing to be proud of for what has become a Conservative government in name only.
If the Brexit transition is extended then I fear such a budget will be more necessary than were it not.
Apart from costing the taxpayer another £10-20bn EU contribution we would remain unable to benefit from new trade deals or abolish import tariffs and quotas that keep UK prices artificially high. And for what? There’s no guarantee that providing an extra year to negotiate would give any incentive to the EU to strike a deal, quite the reverse – for every year we remain then we send another dollop of cash that could be spent in the UK solving our own very real problems.
It would mean at least three years where new regulations could be introduced without the UK having a say in their formulation. Fishermen have already called the idea a sell-out as they expect new regulations to be brought in that would kill their industry off for good before we ever leave the Common Fisheries Policy.
The obvious point is how can you have a transition period when you don’t know where you are transiting to? David Davis has called for Theresa May to reset her negotiation strategy – surely it has gone beyond that, if the drift that saps business confidence continues surely the Conservative Party should be resetting its leadership?