US foreign policy was said to have undergone a pivot towards Asia and a reset towards Russia during the first Obama administration. Those two words, pivot and reset, could now be applied to UK economic policy in the wake of Brexit.
The pivot is a new potential focus on reducing the tax burden to boost competitiveness. The reset is dusting down those key national infrastructure projects, such as Heathrow runway expansion, and pressing the go-ahead button in the national interest.
The chancellor’s statement on corporation tax this week pointed towards a pivot. I think the chancellor is right to want to cut corporation tax, but I’d go a whole lot further and use the cash saved in payments to the EU to help sketch out a 10-year plan for a reduction in its rate to 10 per cent.
Ten years to 10 could become the mantra. A 10 per cent rate of corporation tax would be seen as the lowest rate in the world for the leading economies, outside of tax havens. What better signal to give to the world that Britain is open for business?
Of course, re-directing the money that went to Brussels to perceived corporate fat cats may not go down well politically, but it’s just a case of biting the bullet and accepting that in the new world order tough decisions will have to be made. The political fall-out would need to be addressed by giving an extra £1bn or so to the NHS. Not the wisest use of the cash, without continued reform, but a case of political needs must. Add the two together and the cost exceeds direct payments (less the rebate) to Brussels, and so there would need to be savings elsewhere, but a 10-year transition would be perfectly doable.
Ten years to 10 would also help offset the effects of any Common External Tariff placed on UK exports to the EU.
With Boris out of the race for Prime Minister, it might also become easier for the government to press the reset button with regard to runway expansion at Heathrow. So less tax and more infrastructure could be the surprising competitive dynamo unleashed by the referendum result.
What else needs to change? There needs to be a comprehensive marketing of the UK across the globe. We need to promote Brand Britain. And here’s where the potential is enormous.
Did you know that the UK is a superpower? This is not in hard power, such as having nuclear weapons or the size of our defences (though these things clearly add to hard power). No, the UK is a superpower when it comes to measuring soft power (e.g. the American Dream, Cool Britannia, history, culture, traditions and values). The UK ranks number one in published measures of soft power. We push the US into second place, which is quite an achievement. This is a tremendous base on which to build the idea of Britain being open to the world.
We’ve entered a period of profound uncertainty but let’s not miss the opportunity to put in place economic policies which are obviously positive for our long-term economic health, and which would have been overlooked without the referendum result. Let’s not waste a good crisis.