Home » Posts tagged 'Philip Hammond'
Tag Archives: Philip Hammond
Canada’s corporate tax rate remains at 15% and that low tax rate was one of the reasons the country essentially cruised unharmed through the financial crash of 2008 and its bloody aftermath.
Throughout the global financial meltdown Canada easily led all G7 countries in growth (although Canadian growth was curtailed as compared to pre-crash projections) and the country didn’t need to increase taxes, nor make major fiscal or monetary adjustments during that period.
Although the country isn’t thought of as an offshore tax haven by any stretch, having a 14.5% corporate tax rate during the global economic crisis (it’s since risen to 15%) meant the country avoided the exodus of capital that other nations experienced.
That reasonable corporate tax rate as much as any other factor helped Canada to survive and thrive in the face of one of the most damaging economic meltdowns in modern history.
Money fleeing the country to low corporate taxation destinations is NOT what the UK government needs any time over the next decade.
Will There be Another Recession?
Of course there will be another recession. Recessions in Western countries occur every 25-years on average although unexpected economic shocks have been known to occur. Just because the average interregnum is 25-years, doesn’t mean recessions can’t also happen randomly — which means that the UK needs to begin playing it smart, now, to better survive the next global downturn.
Why Match Canada’s Rate?
Canada’s corporate tax rate just happens to fall within an economic ‘sweet spot’ — high enough that it doesn’t get named and shamed as an offshore tax haven (which tend to get a lot of bad press when a recession is on) yet is close enough to other developed nation corporate tax rates that it doesn’t get a bad reputation.
All else being equal, you want to go with what works. And Canada’s low corporate taxation plan worked wonders to help the country coast through the last recession — and it performed even better than expected, pre- and post-recession.
Sure, there were nervous moments here and there, nobody denies that. But that 15% rate combined with a steady hand on the economic tiller by Mr. Mark Carney then-governor of the Bank of Canada (now governor of the Bank of England) and the country under the steady leadership of (then-Prime Minister) Stephen Harper added gravitas and confidence to the Canadian economy at a time it was needed.
That’s all it takes to survive and thrive in recessionary times, folks.
Philip Hammond’s Next Budget
UK Chancellor of the Exchequer Philip Hammond should match Canada’s corporate income tax rates exactly, and publicly commit to that at Spring Budget 2019. Or even better, in Autumn Budget 2018.
Due to Brexit there is a real need to write both a spring and autumn budget each year, at least until the 2-year implementation period is complete.
Lowering corporate taxes could mean less revenue for HM government. That’s a possibility. But there are positives to a lower corporate income tax rate for the UK, particularly during the present economic uncertainty:
- More companies will move their headquarters to the UK to obtain a better corporate tax rate.
- More UK companies will decide to stay in the UK rather than leave it for (perceived) greener pastures during this period of economic uncertainty, although they could well have plans to return 5-years on from Brexit. (But can you count on that?)
- UK-based companies will have more money to invest in their UK operations, to increase non-labour purchases, and perhaps expand their existing factories, facilities, or number of retail outlets.
- UK companies that presently fear Brexit may hurt their business may find that as the UK corporate income tax rate falls to 15% it gives them a competitive advantage of 5% they didn’t have prior to this (proposal). Less fear and better after-tax profits. ‘Gotta like that’ said every CEO ever.
- Instead of the government needing to stimulate the economy, increased spending by UK companies flush with newfound cash will help to stabilize the economy now and through the 2-year implementation period via increased spending and hiring.
- Hiring more workers with a 5% tax savings means more revenue for HM government — as many of those workers will earn enough to pay an average 45%-55% personal income tax rate.
That’s just a short list of the benefits of lowering the corporate income tax rate to 15% and if the tax reduction announcement is timed correctly HM Revenue and Customs shouldn’t suffer any loss of revenue — and it’s possible that HMRC may receive slightly more revenue courtesy of additional personal income tax contributions if companies go on a hiring spree with their saved money.
Here’s a bonus graphic to show *what can happen* when you cut the UK corporate income tax rate…
On June 23, 2016 the United Kingdom held an historic referendum so that voters could decide whether they wanted to leave the European Union governance architecture and over 52% of UK voters elected to “Leave” the EU.
Subsequent divorce negotiations between the two sides have been sporadic with short bursts of progress.
In recent days, UK Prime Minister Theresa May suggested to EU negotiators that a figure of £40 billion would be an appropriate amount for the UK to pay the European Union as a sort of “divorce fee” to allow the UK to leave while still gaining a favorable post-Brexit trade deal with the European Union.
However, the day after PM May suggested the £40 billion divorce payment, her government tabled an autumn budget with massive budget reductions for the already cash-strapped British military, one assumes to be able to afford the unprecedented divorce bill that the UK must now pay before March 29, 2018.
This blog post discusses the pros and cons of UK Ministry of Defence cuts and suggests a better way to afford the Brexit divorce bill.
The Responsibility of Government
The Number One responsibility of every government in the world is the protection of the country’s citizens and the sovereignty of the national borders. Everything else by definition, must be of lower importance. That’s how countries work.
Yes, even the UK’s cherished and highly ranked National Health Service (NHS) funding must fall to second place behind the safety and security of the country — as the NHS could (if worst came to worst) access significant billions in funding via corporate sponsorship — an option not open to the military.
How to Determine Military Funding
The size, composition and funding of the UK military MUST be determined by its overall mission — not arbitrary decisions by bureaucrats. Full stop.
(NOTE 1) Long-term stable defence funding is far better than generous amounts one year, followed by low funding the next (due to arbitrary budgetary decisions not based on actual military need) and then, who knows what funding they might get the year after? It’s the absolute worst way to fund a military. Pencil-pushing bureaucrats might as well be working for the enemy at that point.
(NOTE 2) This blog post isn’t “for” or “against” Theresa May or Philip Hammond, it’s a general statement on how to best fund any military, anywhere.
(NOTE 3) This blog post is based solely on the opinion of its author, although any military officer in the world would agree were they to view it from the UK perspective.
So, what is the mission – in order of priority?
- Absolutely 100% protection of the land, sea and airspace around the UK.
- NATO commitment.
- Commonwealth mutual aid.
- United States mutual aid.
- Potential Commonwealth member mutual aid.
- Only UN Security Council approved missions (and never any unapproved foreign missions)
- Creation of a HUGE civil engineering department, on par with the U.S. Army Corps of Engineers which build many of America’s roads, bridges, dikes, levees, ports and other infrastructure too important to be left to corporations where profit makes the final decisions. Oh, by the way, the U.S. Army Corps of Engineers saves the American taxpayer more money than it costs when compared to having U.S. infrastructure projects built by corporations. The UK has missed “windows of opportunities bigger than the sky” by not building critical national infrastructure using the UK military under a USACE-style system, and it has cost multi-billions more that it should.
- Humanitarian assistance delivered to any natural disaster zone or human-caused crisis anywhere in the world.
Military forces perform better when their mission is clearly defined, when they have stable funding (and once the amounts have been promised by the government, untouchable) and have very clearly defined powers.
Tampering with this age-old formula for success is the surest way to help any military fail in its appointed role, and will work to demoralize the troops and cost the taxpayers much more than by using universally accepted practice.
- To watch a segment from LBC’s The Nigel Farage Show on the topic, click here.
- To read a related Westmonster.com blog, click here.
One of the most credible economic stewards to serve Britain in a long time is the inscrutable Philip Hammond who has done nothing but improve the UK economy since the day he was sworn in to the post. Which was merely an extension of him having been born for the job, it seems.
It’s not only that; Mr. Hammond’s word carries a lot of weight in foreign capitals, and in the EU his word is his bond. Soft-spoken, adroit and adept, Hammond is one of the darlings of financial capitals everywhere and it’s a great thing to see him in his element.
So began Prime Minister Theresa May’s summer vacation, where she and her husband (also named Philip) went off to Switzerland to take the mountain air and hold long and meaningful conversations at full stride up the Matterhorn.
Leaving the country in the capable hands of Philip Hammond must be a comforting thought for Theresa May as she and hubby blow past the tourists struggling to get to the top for a selfie. My advice: Just get out of their way or you’ll get run over. Seriously.
The Exchequer comments on post-Brexit Immigration
However wonderful it is having a powerful Exchequer, there is the temptation for them to overstep their bounds and cross over into the areas of responsibility reserved for the Prime Minister.
And just as predictably as that; Before Theresa May had gotten her first alpine air, Hammond told reporters, “there should be no immediate changes to immigration or trading rules when Britain leaves the EU in March 2019.” (Sky News)
It’s forgivable, and probably wise for Conservatives to be seen voicing the concerns of voters on both sides of Brexit. However, Exchequers should stick to their primary interest (the economy!) and let others, whose direct responsibility it is, to hold forth on immigration issues.
With Theresa away, the Remainers will play
While Theresa May gets some mountain air, the Remainers in the Prime Minister’s cabinet are clearing the air by presenting their side of Brexit — and that’s fine. But let’s make certain that fair play rules are enforced; Which means that cabinet officers publicly comment only on their primary area of responsibility. Only the Prime Minister has the authority to publicly comment on all matters, otherwise it looks like a circus.
Every misstep is celebrated in foreign capitals. People in the EU who may be opposed to Brexit are incredibly strengthened by each implied criticism directed towards the Prime Minister by members of her cabinet.
The entire period of Brexit is a highly unique time, a time where all Britons must pull together and come to the realization that many in the EU are fighting for a ‘Win-Lose’ outcome, an outcome where Britain loses vis-à-vis the European Union.
Meanwhile, the best of the Brexiters are fighting for a ‘Win-Win’ outcome where both Britain and the EU win. And those are the people I’m putting my money on.
Clear Lines + Clear Thinking = Positive Results
There’s nothing wrong with MP’s on both sides of Brexit informing the public about how they would proceed on any matter — as a sort of trial balloon to gauge public mood. That can be useful moving forward by keeping those who voted Remain interested and engaged with Brexit, and there is every opportunity that Remainers may come up with excellent ideas related to soft Brexit implementation within their field of expertise.
But greater care must be taken to avoid strengthening the hand of anti-Brexit forces in the EU, now that Britain has finally! asserted her rights.
Government ministers must draw the distinction between legitimate discussions about how Remainers (read: Soft Brexiters) or vocal Brexiters (read: Hard Brexiters) would handle any Brexit issue — and how the wrong sort of discussions or even the wrong tone of discussions could work against Britain in foreign capitals. The wrong public discourse works against both versions of Brexit.
Let’s not be naive. Each misstep by anyone in the UK government is celebrated at the EU Parliament and certain EU capitals. Whatever is going on behind the scenes within the UK government, a unified face must be presented to the world in order to obtain the best Brexit result.
Controlling the Narrative: Job #1 for Every Prime Minister
UK government ministers, and possibly even the Prime Minister herself may not yet realize the extent to which the world now sees the United Kingdom as a completely different entity. The UK no longer exists as only one of 28 EU members, and what the UK will eventually become, is unfolding every day like an onion being unpeeled.
Is the UK destined to become a nation of cross-talkers, mixed messages and unreliable partners? Or is Britain starting with a clean sheet to become all that she can and should become in the 21st-century?
Only the Prime Minister knows, as she’s the one holding the pen. Let’s see what script she writes.