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Archive for the ‘United Kingdom’ Category

According to research from the Bank for International Settlements, the long-term fiscal outlook for the United Kingdom is very grim. The data generated by the International Monetary Fund and the Organization for Economic Cooperation and Development isn’t quite as dour, but those bureaucracies also show very significant long-run fiscal challenges.

The problem in the U.K. is the same as the problem in the United States. And France. And Germany. And Japan. Simply stated, the welfare state is becoming an ever-larger burden in large part because the elderly population is expanding in developed nations compared to the number of potential taxpayers.

The good news, as noted in this BBC story, is that some folks in the United Kingdom realize this is bad news for young people.

Lord Willetts…said the contract between young and old had “broken down”. Without action, young people would become “increasingly angry”.

The bad news is that these folks apparently think you solve the problem of young-to-old redistribution by adding a layer of old-to-young redistribution.

I’m not joking.

A £10,000 payment should be given to the young and pensioners taxed more, a new report into inter-generational fairness in the UK suggests. The research and policy organisation, the Resolution Foundation, says these radical moves are needed to better fund the NHS and maintain social cohesion. …The foundation’s Intergenerational Commission report calls for an NHS “levy” of £2.3bn paid for by increased national insurance contributions by those over the age of 65. It says that all young people should receive a £10,000 windfall at the age of 25 to help pay for a deposit on a home, start a business or improve their education or skills.

To be fair, proponents of this idea are correct about young people getting a bad deal from the current system. And they are right about older people getting more from government than they pay to government.

“There’s no avoiding the pressures for more spending on healthcare and social care, the question is how we meet those pressures,” he replied. “Extra borrowing is unfair on the younger generation. “Extra taxes on the working population – when especially younger workers have not really seen any increase in their pay – will be very unfair. “It so happens that the older people who will benefit most from extra spending on health care have got some resources, so at low rates, it’s reasonable to expect them to contribute.

But I fundamentally disagree with their conclusion that bigger government is the answer.

“It is better than any of the alternatives.”

For what it’s worth, what’s happening in the U.K. is an example of Mitchell’s Law. Young people are getting a bad deal because of programs created by government.

But rather than proposing to unwind the programs that caused the problem, the folks at the Resolution Foundation have decided that creating additional programs financed by additional taxes is the way to go.

By the way, you won’t be surprised to learn that the group also has other bad ideas.

The report calls for the scrapping of the council tax system, replacing it with a new property tax which would raise more money from wealthier homeowners. The proceeds would be used to halve stamp duty for first-time buyers.

Let’s close by looking at some interesting data about the attitudes of the young.

…a poll undertaken for the Intergenerational Commission also suggested people were more pessimistic in Britain about the chances of the next generation having “better lives” than the one before it – compared with almost any other country.

Here’s the chart showing data for the U.K. and several other nations.

Congratulations to France for having the most pessimistic young people (maybe this is why so many of them would move to the U.S. if they had the chance).

And I think the South Koreans are too glum and the Chinese are too optimistic. The Italians also are too upbeat. But otherwise these numbers generally make sense.

P.S. I was very pessimistic about the U.K. in 2012, but had a more upbeat assessment last summer. Now the pendulum has now swung back in the other direction.

P.P.S. If the Brits screw up Brexit, I’ll be even more downbeat about the nation’s outlook.

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While much of my analysis focuses on the mess created by Washington, I periodically show my ecumenical nature by sharing “Great Moments in State Government” and “Great Moments in Local Government.”

And in keeping with the title of this page, I even occasionally share “Great Moments in Foreign Government.”

Today, though we’re going to get very specific and look at Great Moments in British Government. I did the same thing back in February and there’s so much new material that it’s time for an encore.

We’ll start with this story from the Daily Mail about an elderly man who was arrested for defending his home.

A 78-year-old homeowner has been arrested by murder detectives after a suspected burglar he fought with in his own kitchen died of a stab wound. …The homeowner was initially detained on suspicion of causing grievous bodily harm but was later arrested on suspicion of murder. The case has been compared to that of Tony Martin, who was jailed for killing an intruder at his home in 1999. The break-in comes amid a surge in violence in the capital, with 49 people already having died in crimes in London in 2018. …The homeowner suffered bruising to his arms but police said his injuries are not life threatening.  He remains in custody at a south London police station.

Wow, this might be even more outrageous than the story about the woman who got arrested for merely brandishing a knife in her own home.

But Americans shouldn’t laugh too much about these stories since cops on this side of the Atlantic have arrested citizens for injuring burglars.

Next is a story from the Evening Standard about so-called political correctness run amok.

Mansfield College was forced to cancel a “420 themed” bop scheduled for this Friday – April 4 – after students complained. In an email sent to students…, organisers explained that the party would be a celebration of the “internationally recognised day of protest for the legalisation of Marijuana” on April 20. It invited undergraduates to “dress up as their favourite stoner.” …It also warned: “If you’re white, don’t try to go as Snoop Dogg or Bob Marley. Blackface isn’t cool.” …The invite sparked backlash from some students who said they felt the event encouraged “cultural appropriation.” One undergraduate said the college’s elected welfare representatives were worried that the event could be exclusionary. “Anyone who might have negative experiences of drugs or addiction might be affected by it,”… Within hours the entertainment team sent round an email cancelling the event and apologising for anyone they offended. They said: “We understand that this was met with offence and we want to apologise dearly to those who were offended,” they said.

I don’t know what’s more depressing, the fact that people complained or the fact that organizers cravenly apologized.

But maybe I’m not thinking about this the right way. I had a “negative experience” that “affected” me when Alabama beat Georgia for the national championship back in January. Maybe I should demand to remove the Yellowhammer State from all maps so I don’t get “triggered”.

Our final story might belong in a column about “Great Moments in Government-Run Healthcare“, but it seems to fit well with today’s collection.

A humanist will lead a team of priests as the first atheist head chaplain in the history of the NHS. …Lindsay van Dijk is one of the youngest chaplains in the NHS and will lead three priests from the Church of England, Baptist and evangelical denominations… As a humanist, Ms van Dijk believes life is giving meaning by seeking happiness and helping others find happiness too. Humanists do not believe in God or an afterlife. …Ms van Dijk told the Times at Stoke Mandeville Hospital: ‘Anyone within the chaplaincy team goes to patients to lend a listening ear, to provide spiritual and emotional support, and doesn’t specifically say “I’m from this faith” as it’s not important. …She added that in her new role she has experienced ‘mostly curiousity’ rather than objections. …The chief executive of Christian Concern Andrea Williams said: …’Putting a humanist in charge of the chaplaincy team shows how far we have come from the Christian roots of the NHS.’

I never realized that there were “Christian roots” to government-run healthcare (if so, God must like needless death and terrible suffering).

But let’s set that aside and focus on the main story. I assume that NHS chaplains are actually government bureaucrats rather than local volunteers, so part of me is thinking this is a waste of money.

But I also am a bit perplexed by the notion of having an atheist chaplain. Isn’t that a contradiction in terms? Why not hire the woman as “head grief counselor” or something like that?

Maybe it’s time to resuscitate my “U.S. vs U.K. inane-government-policy contest“.

P.S. The U.K. might have the lead in that contest because it actually has proven that a government can be so incompetent that it can’t even give away money.

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One of the great insights of “public choice” is that politicians engage in self-serving behavior just like everyone else.

But there’s a profound difference between them and us. In the private economy, we can only make ourselves better off by providing value to others. In government, by contrast, politicians oftentimes make themselves better off by providing unearned benefits to various interest groups.

This elementary insight is a good starting point for those who want to understand how Washington (mal)functions.

And these behavioral insights don’t change when you cross national borders, which is why I periodically share examples of bizarre boondoggles as part of my series on “Great Moments in Foreign Government”. Here are some examples of prior editions.

Today, we have a special version of this series from the British Isles.

We’ll start with a story, from the U.K.-based Sunday Times, about a voluntary tax scheme in a rich part of London.

Westminster city council said it would be writing to 15,000 of its wealthiest homeowners asking them to make a voluntary donation on top of their council tax. The initiative comes amid warnings that a crisis in local government funding is likely to drive five councils into insolvency within the next 12 months, with 10 running out of money within two years. …The begging letters scheme, dubbed the “Westminster community contribution”, will see letters sent to all 15,000 band H properties, worth about £1m and above. Nickie Aiken, leader of Westminster council, said she had decided to tap the wealthy for donations because “they have asked me, ‘Why can’t we pay more council tax?’ We are giving people the option. It is an opportunity to invest in their neighbourhood.” …A total of 904 people replied.

My immediate reaction is that there are 904 nitwits in Westminster.

But, to be fair, it doesn’t say they responded by sending extra money to the local council. Maybe they scrawled obscenities on the notice and returned it, which would have been my preferred response.

But I’m guessing many of them did cough up some cash, which makes them more foolish than the taxpayers of Norway. And even more foolish than hypocritical leftists in the United States.

It’s also frustrating that there’s no data in the story on why local councils are feeling a budget pinch. I’m guessing that they’re in trouble because spending has climbed much faster than inflation (similar to what happened where I live in Fairfax County, Virginia). So why reward that overspending with additional payments?

Now let’s head across the Irish Sea.

The Irish Times has a story about how a program that supposedly was designed to help homeless people actually is lining the pockets of well-to-do property owners.

The Government’s homeless family hub solution is not only a short-term fix for a long-term crisis, it’s a shocking deal for taxpayers that benefits private operators. …doesn’t “hub” have a cosy ring to it? There will be a total of 18 family accommodation hubs in Dublin, nine of which include hotels and B&Bs already in use being “adapted”. …Let’s take the former Mater Dei site as a prime example. Dublin City Council (DCC) earmarked €4.5 million to refurbish the former college complex to house 50 families… Sources say the project is likely to substantially overrun due to “many extras”… The problem is, after ploughing millions into a magnificent revamp, the council must hand the property back to the archdiocese in less than three years. …This is mirrored in every one of the family hubs, the longest lease being just five years. It starts to look like an incredible deal for the private owners. They get back a terrifically refurbished, furnished and equipped building, paid for by taxpayers, that can be rented out for profit. Everything goes back to the owner… On top of the deal of a lifetime, DCC is paying rent on the site, a figure it described as “nominal” but not nominal enough to make public.

Cronies getting rich(er) thanks to programs that supposedly were designed to help the poor? As Inspector Renault said in Casablanca, “I’m shocked, shocked”!

Probably as shocked as he was to learn that Obamacare cost estimates were wrong and that childcare subsidies led to higher costs in the U.K.

Sadly, insiders always figure out how to line their pockets as government gets bigger. It’s a feature, not a bug.

Last but not least, let’s travel to Scotland.

In the U.K.-based Times, we learn that the government is so incompetent that it has a hard time ripping off European taxpayers for farm subsidies.

Scottish ministers have appealed to Europe for help in heading off a looming crisis in farm subsidy payments for the second year running. Discussions have taken place with the European Commission to set up “contingency plans” in case Scottish farmers once again missed out on their payouts. An extension to the end-of-the-month deadline for processing payments is vital if the Scottish government is to avoid being hit with millions of pounds in fines. …The first minister is likely to be asked what her government is doing to make sure farmers get their payments on time. Scottish ministers came in for extensive criticism last year after an IT failure delayed European agriculture subsidy payments to thousands of farmers.

What makes this story extra depressing is that the supposed Conservative opposition doesn’t question the wisdom of handouts.

…the Scottish government had asked for a deadline extension earlier this week, prompting anger from opposition politicians. Ruth Davidson, the Scottish Conservative leader,…added: “It’s a disgrace that so many farmers are still waiting for payments, and it looks like, for the second year running, the SNP is going to have to go cap-in-hand to Europe and ask for special treatment.”

And it goes without saying that the welfare recipients…oops, I mean farmers…are anxious to know when their handouts will arrive.

Scott Walker, the chief executive of the National Farmers’ Union in Scotland, said: “Everyone who is due a payment simply wants to know when it will arrive and that is a reasonable demand.”

Sigh.

One of the reasons I was sympathetic to Scottish independence is that the entitlement mindset in the country may have been disrupted if they lost subsidies from the central government in London. Redistribution isn’t as fun when you’re taking money from your own pockets.

However, that wouldn’t have put an end to handouts from the statists in Brussels, assuming that Scotland would have been part of the European Union. So I’ll never be without things to write about. That’s good for me, bad for Europe.

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If I was a citizen of the United Kingdom, I would have voted to leave the European Union for the simple reason that even a rickety lifeboat is better than a slowly sinking ship.

More specifically, demographic changes and statist policies are a crippling combination for continental Europe, almost surely guaranteeing a grim future, and British voters wisely decided to escape. Indeed, I listed Brexit as one of the best things that happened in 2016.

This doesn’t mean the U.K. has ideal policies, but Brexit was a good idea precisely because politicians in London will now have more leeway and incentive to liberalize their economy.

Though I wonder whether Prime Minister May and the bumbling Tories will take advantage of the situation.

The Financial Times has a report that captures the real issue driving Brexit discussions. Simply stated, the European Union is scared that an independent U.K. will become more market-friendly and thus put competitive pressure on E.U. welfare states.

The EU is threatening sanctions to stop Britain undercutting the continent’s economy after Brexit…the bloc wants unprecedented safeguards after the UK leaves to preserve a “level playing field” and counter the “clear risks” of Britain slashing taxes or relaxing regulation. Brussels…wants…to enforce restrictions on taxation…and employment rights. …the EU negotiators highlight the risk of Britain ‘undermining Europe as an area of high social protection’…the UK is “likely to use tax to gain competitiveness” and note it is already a low-tax economy with a “large number of offshore entities”. …On employment and environmental standards, the EU negotiators highlight the risk of Britain “undermining Europe as an area of high social protection”.

In case you don’t have a handy statism-to-English dictionary handy, you need to realize that “level playing field” means harmonizing taxes and regulations at very high level.

Moreover, “employment rights” means regulations that discourage hiring by making it very difficult for companies to get rid of workers.

And “high social protection” basically means a pervasive and suffocating welfare state.

To plagiarize from the story’s headline, these are all policies that belong in a bonfire.

And the prospect of that happening explains why the politicians and bureaucrats in continental Europe are very worried.

…senior EU diplomats, however, worry that the political expectations go beyond what it is possible to enforce or agree. “This is our big weakness,” said one. Theresa May, the British prime minister, last year warned the EU against a “punitive” Brexit deal, saying Britain would fight back by setting “the competitive tax rates and the policies that would attract the world’s best companies and biggest investors”.

Sadly, Theresa May doesn’t seem very serious about taking advantage of Brexit. Instead, she’s negotiating like she has the weak hand.

Instead, she has the ultimate trump card of a “hard Brexit.” Here are four reasons why she’s in a very strong position.

First, the U.K. has a more vibrant economy. In the latest estimates from the Fraser Institute’s Economic Freedom of the World, the United Kingdom is #6.

And how does that compare to the other major economies of Europe?

Well, Germany is #23, Spain is #36, France is #52, and Italy is #54.

So it’s easy to understand why the European Union is extremely agitated about the United Kingdom becoming even more market oriented.

Indeed, the only area where the U.K. is weak is “size of government.” So if Brexit led the Tories to lower tax rates and shrink the burden of government spending, it would put enormous pressure on the uncompetitive welfare states on the other side of the English Channel.

Second, the European Union is horrified about the prospect of losing membership funds from the United Kingdom. That’s why there’s been so much talk (the so-called divorce settlement) of ongoing payments from the U.K. to subsidize the army of bureaucrats in Brussels. A “hard Brexit” worries British multinational companies, but it worries European bureaucrats even more.

Third, the European Union has very few options to punitively respond because existing trade rules (under the World Trade Organization) are the fallback option if there’s no deal. In other words, any protectionist schemes (the “sanctions” discussed in the FT article) from Brussels surely would get rejected.

Fourth, European politicians may hate the idea of an independent, market-oriented United Kingdom, but the business community in the various nations of continental Europe will use its lobbying power to fight against self-destructive protectionist policies and other punitive measures being considered by the spiteful political class.

P.S. Here’s a Brexit version of the Bayeux Tapestry that probably won’t be funny unless one is familiar with the ins and outs of British politics.

P.P.S. Here are some easier-to-understand versions of Brexit humor.

P.P.P.S. And here’s some mockery of senior politicians of the European Commission.

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I realize that we’re in the midst of an important tax battle in Washington and that I should probably be writing about likely amendments to the Senate tax bill.

But long-time readers know that I’m bizarrely preoccupied by international tax issues (I would argue for very good reasons since global tax competition is a way to discipline greedy politicians and because I want the power of governments to be constrained by national borders).

So I can’t resist commenting on a Washington Post story about the tax implications of the upcoming wedding of Prince Harry and Meghan Markle.

It may seem like a modern fairy tale, but the upcoming wedding of Britain’s Prince Harry to American actress Meghan Markle will come with some mundane hurdles. Perhaps most inconveniently for the British royals, this transatlantic partnership could end up involving the United States’ Internal Revenue Service.

Most readers probably wonder how and why the IRS will be involved. After all, Ms. Markle no longer will be living in the United States or earning income in the United States after she marries the Prince.

But here’s the bad news (for the millions of Americans who live overseas, not just Ms. Markle): The United States imposes “worldwide taxation,” which means the IRS claims the right to tax all income earned by citizens, even if those citizens live overseas and earn all their income outside of America.

…there already has been widespread speculation that the union of Prince Harry and Markle eventually could result in some British royal children wielding American passports. But there’s a big obstacle in the way: American tax laws. …The United States’ citizenship-based taxation system is unusual: Only Eritrea has a similar system. It’s a relic of the Civil War and the Revenue Act of 1862, which called for the taxing of U.S. citizens abroad.

Here’s what this means for the royal family.

Markle’s American citizenship could open up the secretive finances of the royal family to outside scrutiny. If she remains a U.S. citizen, Markle will have to file her taxes to the IRS every year. And if she has more than $300,000 in assets at any point during the tax year — a likely scenario, given her successful acting career and her future husband — she will be expected to annually file a document called Form 8938 that will reveal the detail of these assets, which could include foreign trusts. …Although Markle’s tax information would not become public once sent to the United States, it would leave the royal family open not only to IRS review but also the risk that the information could leak, said Dianne Mehany, a tax lawyer at Caplin & Drysdale.

So what’s the solution if the royal family wants to avoid the greedy and intrusive IRS?

Ms. Markle will need to copy thousands of other overseas Americans and renounce her citizenship.

…the royal family employs some of the country’s best tax consultants. …”My guess is that she’ll be pressured by the Royal family to renounce [her U.S. citizenship], even if she’d rather not,” Spiro added. In many ways, that solution may be the simplest. And if Markle does give up her citizenship, she won’t be alone. Treasury Department data show that 5,411 people chose to expatriate in 2016 — a 26 percent year-over-year increase and potentially a historic high — and experts expect that number to keep rising because of the increasing tax burdens placed on U.S. citizens living abroad.

And it’s embarrassing to acknowledge that the United States has a very barbaric practice (used by evil regimes such as Nazi Germany and Soviet Russia) of extorting funds from Americas who are forced to give up citizenship.

She…would be subject to a potentially considerable exit tax.

This is adding injury to injury.

But Ms. Markle can be comforted by the fact that she’s not an outlier. Because of America’s bad worldwide tax regime (and especially because of FATCA, which makes enforcement of that bad system especially painful), an ever-growing number of overseas Americans have been forced to give up their citizenship.

Maybe as a wedding present to Prince Harry, American politicians can junk America’s terrible worldwide tax regime. That doesn’t require dramatic change, but why not fix a bunch of problems at once? I’ll simply point out that the flat tax is based on the common-sense approach of territorial taxation (governments only tax economic activity inside national borders).

P.S. This issue also impacts America’s Olympic athletes.

P.P.S. And Santa Claus as well!

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Since I’m in London for a couple of speeches, I’ve taken advantage of this opportunity to make sure I’m up to speed on Brexit.

Regular readers may recall that I supported the U.K.’s decision to leave the European Union. Simply stated, the European Union is a slowly sinking ship. Getting in a lifeboat doesn’t guarantee a good outcome, I noted, but at least there’s hope.

The European Union’s governmental manifestations…are – on net – a force for statism rather than liberalization. Combined with Europe’s grim demographic outlook, a decision to remain would guarantee a slow, gradual decline. A vote to leave, by contrast, would create uncertainty and anxiety in some quarters, but the United Kingdom would then have the ability to make decisions that will produce a more prosperous future. Leaving the EU would be like refinancing a mortgage when interest rates decline. In the first year or two, it might be more expensive because of one-time expenses. In the long run, though, it’s a wise decision.

Others reached the same conclusion.

“Black Swan” author Nassim Nicholas Taleb…told CNBC’s “Power Lunch” the EU has become a “metastatic and rather incompetent bureaucracy” that is too intrusive. “The way they’ve been building it top down from Brussels is doomed to fail. This is 2016. They are still thinking 1950 economics,” said Taleb, who is also the author of “Antifragile” and is an advisor to Universa Investments. Taleb has warned about an EU breakup for some time, calling it a horrible, stupid project back in 2012.

That being said, there is a lot of angst in the U.K. about what will happen during the divorce process, in part because of the less-than-stellar performance of the Tory leadership.

There are three things, however, that British politicians need to remember.

First, the EU bureaucrats are terrified at the prospect of losing $10 billion of annual payments from the U.K., which is why they are desperately trying to convince politicians in London to cough up a big pile of money as part of a “divorce” settlement.

And “desperately” is probably an understatement.

The UK…contributions to the EU do come to over €10 billion a year. That is a substantial fiscal hole for the European Commission to plug… The Commission would prefer not to reduce expenditure since the structural funds and agricultural subsidies it distributes help to justify the EU’s existence. …it is not surprising that the Brexit divorce bill has become a sticking point in the negotiations. If the amount is big enough, it could tide the EU over for a few years. In Brussels, a problem kicked down the road is treated as a problem solved. This gives the British some leverage because it is most unlikely that the Commission will have lined up any new sources of funding, or agreed what it can cut, before March 29, 2019, when negotiations have to be completed. With no deal, the EU might end up with nothing at all.

Second, European politicians are terrified that the U.K., which already has the world’s 10th-freest economy, will slash tax rates and become even more competitive in a post-Brexit world.

If you don’t believe me, maybe you’ll believe European officials who say the same thing.

European leaders will insist that the UK rules out tax dumping as part of any trade deal struck during Brexit negotiations… Matthias Machnig, the German deputy economy minister, called for a “reasonable framework” in tax and regulation, and warning “a race to the bottom in tax and regulation matters would make trade relations difficult”. Donald Tusk, the European Council president, also warned this morning that a deal must “…encompass safeguards against unfair competitive advantages through, inter alia, fiscal, social and environmental dumping”. The fear is that unless the trade deal which binds the UK into the European standards on tax, competition and state aid the UK will lead a regulatory “race to the bottom”.

Third, failure to reach a deal (also know as a “hard Brexit”) isn’t the end of the world. It’s not even a bad outcome. A hard Brexit simply means that the U.K. trades with Europe under the default rules of the World Trade Organization. That’s not complete, unfettered free trade, but it means only modest trade barriers. And since Britain trades quite successfully with the rest of the world under those rules, there’s no reason to fear a collapse of trade with Europe.

Moreover, don’t forget that many industries in Europe will pressure their politicians to continue free trade because they benefit from sales to U.K. consumers.

Around one in seven German cars is exported to the UK. Around 950,000 newly registered vehicles in the UK last year were made in Germany. As many as 60,000 automotive jobs in Germany are dependent on exports to the UK. Deloitte have explored the potential effect of a “tariff war” on the industry. …German politicians are realising this. The Bavarian Minister for Economic Affairs, Ilse Aigner, has said that “Great Britain is one of the most important trading partners in Bavaria. We must do everything we can to eliminate the uncertainties that have arisen.” …The Minister is correct. …A comprehensive free trade agreement is not only vital, but should be easy to achieve. In other words, spiteful protectionism from the Commission would accomplish nothing but impoverishing all sides.

The bottom line is that the U.K. has plenty of negotiating power to get a good outcome.

So what does this mean? How should British politicians handle negotiations, considering that they would like free trade with Europe?

Part of the answer is diplomatic skill. British officials should quietly inform their counterparts that they understand a hard Brexit isn’t a bad outcome. And they should gently remind EU officials that a hard Brexit almost certainly guarantees a more aggressive agenda of tax cuts and deregulation.

But remember that it’s in the interest of U.K. policymakers to adopt good policy regardless of what deal (if any) is made with the European bureaucrats.

The first thing that should happen is for British politicians to adopt a low-tax model based on Singapore. Some experts in the U.K. are explicitly advocating this approach.

I call this the Singapore effect. When Singapore separated from the Malaysian Federation in 1965, it apparently faced a grim future. But the realisation that no one was going to do it any favours acted as a spur to effective government – with spectacular results. We could do the same. We need a strategy that lays out the path to reductions in corporation tax, lower personal tax.

Marian Tupy of the Cato Institute explains why copying Singapore would be a very good idea.

Why Singapore? Let’s look at a couple of statistics. In 1950, GDP per capita adjusted for inflation and purchasing power parity was $5,689.91 in Singapore. It was $11,920.58 in the U.K. Average income in Singapore, in other words, amounted to 48 percent of that in the U.K. In 2016, income in Singapore was $82,168.33 and $42,287.17 in the U.K. Put differently, Singaporeans earned 94 percent more than the British. During the intervening years, Singaporean incomes rose by 1,344 percent, while British incomes rose by 256 percent. …the “threat” of Singaporean tax rates and regulatory framework ought not to be a mere negotiating strategy for the British government vis-a-vis the EU. It ought to be a goal of the British decision makers—regardless of what the EU decides!

Here’s a chart from Marian’s article.

Or the U.K. could copy Hong Kong, as a Telegraph columnist suggests.

Our political leaders still seem to lack a vision of what Britain can achieve outside the EU… Perhaps they are lacking in inspiration. If so, …Hong Kong…is now one of the richest places in the world, with income per capita 40 per cent higher than Britain’s.

And much of the credit belongs to John Cowperthwaite, who unleashed great prosperity in Hong Kong by limiting the role of government.

Faced with…the approach being taken in much of the West: deficit financing, industrial planning, state ownership of industry, universal welfare and higher taxation. How much of this did the British civil servant think worth transposing to Hong Kong? Virtually nothing. He had a simple alternative: government spending depended on government revenues, and this in turn was determined by the strength of the economy. Therefore, the vital task for government was to facilitate growth. …He believed in the freest possible flow of goods and capital. He kept taxes low in order that savings could be reinvested in businesses to boost growth. …Cowperthwaite’s view was that higher government spending today destroys the growth of tomorrow. Indeed, over the last 70 years Hong Kong has limited the size of the state to below 20 per cent of GDP (in Britain it is over 40 per cent) and growth has been substantially faster than in the UK. He made a moral case for limiting the size of government, too.

In other words, the United Kingdom should seek comprehensive reforms to reduce the burden of government.

That includes obvious choices like lower tax rates and less red tape. And it also means taking advantage of Brexit to implement other pro-market reforms.

One example is that the U.K. will now be able to assert control over territorial waters. That should be immediately followed by the enactment of a property rights-based system for fisheries. It appears that Scottish fishermen already are agitating for this outcome.

The Scottish Fishermen’s Federation says the UK’s exit from the European Union will boost jobs in the sector, reports The Guardian. It’s chief executive Bertie Armstrong said the exit will give them “the ability to recover proper, sustainable, rational stewardship through our own exclusive economic zone for fisheries”.

Let’s close with some Brexit-related humor.

I already shared some examples last year, and we can augment that collection with this video. It’s more about USexit, but there’s some Brexit material as well.

And here’s some more satire, albeit unintentional.

The President of the European Commission is so irked by Trump’s support for Brexit that he is threatening to campaign for secession in the United States.

In an extraordinary speech the EU Commission president said he would push for Ohio and Texas to split from the rest of America if the Republican president does not change his tune and become more supportive of the EU. …A spokesman for the bloc later said that the remarks were not meant to be taken literally, but also tellingly did not try to pass them off as humorous and insisted the EU chief was making a serious comparison.

I have no idea why Juncker picked Ohio and Texas, but I can state with full certainty that zero people in either state will care with a European bureaucrat thinks.

And speaking of accidental satire, this tweet captures the mindset of the critics who wanted to pretend that nativism was the only reason people were supporting Brexit.

Last but not least, we have another example of unintentional humor. The pro-tax bureaucrats at the OECD are trying to convince U.K. lawmakers that tax cuts are a bad idea.

The head of tax at the Organization for Economic Co-operation and Development, which advises developed nations on policy, said the UK could use its freedom from EU rules to slash corporate tax but the political price would be high. …”A further step in that direction would really turn the UK into a tax haven type of economy,” he said, adding that there were practical and domestic political barriers to doing this. …The UK is already in the process of cutting its corporate tax rate to 17 percent.

Though maybe I shouldn’t list this as unintentional humor. Maybe some British politicians will be deterred simply because some tax-free bureaucrats in Paris expressed disapproval. If so, the joke will be on British workers who get lower wages as a result of foregone investment.

By the way, here’s a reminder, by Diana Furchtgott-Roth in the Washington Examiner, of why Brexit was the right choice.

As we celebrate Independence Day on July 4, we can send a cheer across the pond to the British, who declared independence from the European Union on June 23. For the British, that means no more tax and regulatory harmonization without representation. Laws passed by Parliament will no longer have to be EU-compatible. It even means they will be able to keep their high-efficiency kettles, toasters, hair dryers and vacuum cleaners. As just one example of the absurdity of EU regulation, vacuum cleaners with over 1600 watts were banned by Brussels in 2014, and those over 900 watts are scheduled to be phased out in 2017. Brussels bureaucrats say that these vacuum cleaners use too much energy. No matter that the additional energy cost of a 2300-watt vacuum cleaner compared with a 1600-watt model is less than $20 a year, that it takes more time to vacuum with a low-energy model, and, most important, people should be able to choose for themselves how they want to spend their time and money. I, for one, prefer less time housecleaning.

Amen. As much as I despise the busybodies in Washington for subjecting me to inferior light bulbs, substandard toiletssecond-rate dishwashersweak-flow showerheads, and inadequate washing machines, I would be far more upset if those nanny-state policies were being imposed by some unaccountable international bureaucracy.

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I wrote yesterday about a very depressing development in the United Kingdom. Politicians in that country – including some supposed fiscal conservatives – are contemplating a big expansion in the burden of government spending in order to give pay hikes to the bureaucracy.

What makes this so unfortunate is that the country has been making fiscal progress. Ever since 2010, government spending has grown by an average of 1.6 percent annually. And since the private economy has expanded at a faster pace, this period of restraint has satisfied my golden rule. In other words, the public sector – though still very large – is now a smaller burden on the private sector.

This progress could be quickly reversed, though, with a new spending binge. And it would be especially foolish to throw in the towel just to give more money to government employees. Just like in the U.S., bureaucrats already are overcompensated compared to their counterparts in the productive sector of the economy.

Let’s take a closer look at whether U.K. policymakers should end “austerity” and expand the relative burden of government spending.

The Centre for Policy Studies in London has examined the issue, and this new research from CPS debunks the notion that there should be large increases in bureaucrat compensation.

But since we covered that topic yesterday, let’s focus instead on what CPS discovered when reviewing the impact of spending restraint on various economic aggregates.

…when examining OECD countries that were left with a large budget deficit in 2010 (those countries with a deficit of over 5% of GDP in 2010), it appears that there is a strong correlation between those countries that cut spending by a higher degree, on average, and countries which achieved a larger reduction in deficit, higher average growth rates, a larger fall in proportionate unemployment and marginally better wage growth (see Figures 5, 6, 7 and 8). Of course, correlation does not necessarily mean causation. However, this provides strong evidence that there is no link between austerity and lower growth, higher unemployment and weaker wage growth.

Let’s look at the charts referenced in the excerpt.

We’ll start with Figure 5, which looks at relationship between spending restraint and deficit reduction. Nobody should be surprised to see that the symptom of red ink shrinks when there’s a reduction in the underlying disease of too much government spending.

I think the most important data is contained in Figure 6, which maps the relationship between economic growth and spending restraint. As you can see, a lower burden of government spending is associated with better economic performance.

There’s also a connection between smaller government and lower joblessness, as shown in Figure 7.

Last but not least, Figure 8 shows the positive relationship between lower spending and higher wages.

As explained in the CPS report, correlation is not causation. But since these results are in sync with research from academic scholars (and even research from left-leaning bureaucracies such as the IMF, World Bank, and OECD), the only prudent conclusion is that the U.K. should not give up on fiscal responsibility.

And perhaps the real lesson is that a constitutional spending cap should be enacted whenever a consensus for good policy materializes. That way, there’s a much lower risk of backsliding when politicians get weak-kneed.

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