Shortly before Christmas, Dominic Raab made the extraordinary suggestion that we might crash out of the EU on a hard Brexit, not pay the agreed £39Bn settlement, and use that money instead on tax cuts for business. A friend acidly — and rightly — suggested that, when more and more people are needing food banks, and there seems to be an explosion in the numbers sleeping rough, there might be other uses for that money. Her point was underscored by the death of homeless person just outside the Palace of Westminster later the same day.
As a point of fact: if the UK fails to honour what has been agreed, then why would any foreign government trust us? This money is not a sweetener: it is honouring commitments the UK government has already given. If foreign governments can’t trust us, how on earth are the promised “trade deals” to be negotiated?
And the idea of “trickle down”, where money given to the rich somehow boosts everyone has been seriously challenged. The perception is that it instead widens the gap between rich and poor in a way that fuels social tension.
The meat of Raab’s suggestion seems to be that this money could be used for a short-term tax cut, to mitigate the damage to business that will come from a Hard Brexit. But this is a very crude way of doing it. Some firms face rapid bankruptcy in the face of a Hard Brexit, but others would be unscathed in the short term (though still vulnerable to a Brexit-induced recession). A tax cut would apply equally to both — not enough to save those being hammered, and a windfall for the rest. This smacks of desparation. It doesn’t have the air of well-thought policy intended to target money on where it is needed. Instead it is so un-focussed that it feels like a tax give-away.
What’s been reported of Raab’s suggestion doesn’t mention the broader question of the money that currently goes to the UK and back. This isn’t central to the £39Bn settlement figure, but if there are sudden tax breaks for some, this does throw the spotlight on money that will stop coming from the EU — which the Leave campaign suggested would come from London after Brexit.
A while back, Cornwall County Council asked the government for an assurance that it would receive from London money to match what it would cease to receive from Brussels, and was disappointed. People were promised that money not sent to Brussels would end up with the NHS — a promise abandoned the day after the referendum.
People were given to understand that London would indeed pick uo the tab when Brussels money ceased — which has turned out not to be true. People voted Leave thinking this would mean money for the NHS. That has also turned out not to be true. Now, as poverty becomes more obvious, a tax bonanza spectacularly fails to help. People have a right to be highly sceptical.
Two years ago, my suspicion was that this new “class war” was about preserving the gap between the very wealthy and the rest — if people lose out, the gap remains as long as the less wealthy lose more. Now it feels as if the wealthy Brexiteers are sufficiently cushioned not to need to worry. I also note the story about Jacob Rees Mogg moving his investment firm to Dublin to continue to nbenefit from being iside the EU after Brexut, and doubt that he is alone in this. But at the same time there are people who voted Leave because things seemed pretty broken, and assumed a change was needed, without realising that the change could make things worse. Those people have an absolute right to be angry as they lose out, and doubly angry as they discover that those who mislead them are gaining from the mess.
There’s a PS to this. An article by MEP Neena Gill appeared in my twitter feed the day after this post was published (though it was originally written in October 2017) pointing out EU regulatory framework to tackle tax avoidance is rather better than the US one, so if Brexit means closer alignment to the US, that’s good for the super-wealthy, trying to avoid tax, but not for the country.