Latest news with #Singapore-on-Thames
Telegraph
13-04-2025
- Business
- Telegraph
Escape ever-rising taxes? Others have tried and failed
Singapore-on-Thames has become shorthand for embracing our Brexit opportunities by shrinking the state, breaking with the failed bureaucratic model of recent decades, and transforming Britain once more into an outward looking, low tax, entrepreneurial nation. The former Conservative chancellor, Jeremy Hunt, is its latest advocate, arguing it is the best – perhaps the only – path to prosperity in a world of Trumpian tariffs and global trade wars. But for some pro-market advocates, this vision goes nowhere near far enough. Since the Second World War, we have seen the relentless, marauding growth of the regulatory and welfare state across the West. Margaret Thatcher in Britain and Ronald Reagan in the United States offered an alternative vision, but a more radical version of the pro-market creed has developed in tandem. For these libertarians, the dream is not to cut the size of the state by 10pc or so, but rather to reduce it to 10pc, or less, of what it is today. How is this to be done? Thatcher and Reagan had enough trouble pushing through their comparatively modest reforms. For roughly the last 50 years, small bands of utopians, usually Americans, have dreamed of not reforming existing states but setting up new laissez-faire nations attracting the best and brightest from across the globe. So far, they have met with only very limited success. In earlier ages, those out of kilter with the society they lived in could get on a boat and head off to distant, unexplored lands to set up their new worlds. But we are not living in the 1620s. Our latter-day Pilgrim Fathers have had to find more innovative approaches. And they have come up with three broad, would be, solutions to this predicament. The first of these is to create artificial islands outside existing nations' territorial waters. The trouble here is that existing states have inexorably stretched the borders of their sovereignty. Most nations once claimed that their realms extended only three miles out to sea, but the standard jurisdiction is now 12 miles with claims of exclusivity reaching out to hundreds of miles in some cases. Building cities mid-ocean is not an undertaking to be taken on lightly, and probably requires Elon Musk levels of wealth. But this has not put off some intrepid souls. In the early 1970s, Michael Oliver, a Lithuanian-born Holocaust survivor who became an American entrepreneur and died last year, set up the Phoenix Foundation to realise such visions. He attempted to build a capitalist nirvana on some submerged reefs around 300 miles south west of the Kingdom of Tonga. Some real progress was made on constructing the Republic of Minerva, but its nearest neighbour did not approve of this upstart nation. In a pattern followed time and again with such initiatives, Tonga came calling and lay claim to the reefs. Minerva was extinguished. This type of scheme is today championed by the California-based Seasteading Institute, founded by Patri Friedman, grandson of the pro-market guru Milton. It has attracted funding from PayPal founder Peter Thiel. They advocate for the construction of floating cities outside territorial waters. Such initiatives are under way in locations off the coasts of the Philippines and Florida, and even in the middle of the Indian Ocean. But unsurprisingly, none seems to have got much further than the planning stage. Perhaps their best hope is that Elon or a fellow tech bro will back one of them when they inevitably tire of Trump's America. The second version has been to tie up with separatist movements in soon to be independent countries. In 1973, Oliver backed a plan for the island of Abaco to break away from the rest of the Bahamas as the Caribbean territory gained its independence and set itself up as a standalone libertarian republic. It came to nothing. Oliver was not put off, and as the joint Anglo-French colony of the New Hebrides in the Pacific was gaining its independence as Vanuatu in 1980, he again tied up with separatists promising to institute a laissez-faire regime. This time the plans for the putative Republic of Vemerana ended in violence – with it died the notion that this might be a realistic approach. The third alternative is perhaps the most realistic. In a 2009 Ted Talk, Nobel Prize winning economist, Paul Romer, proposed the creation of charter cities. These are not fully independent countries, but rather to a greater or lesser extent self-governing entities on virgin land within existing states with their own pro-market rules and tax regimes. Honduras in Central America gave the go-ahead for three such schemes in the 2010s. Perhaps the most successful has been Prospera on the island of Roatan – construction began in 2021 and Peter Thiel is once more a backer. But the current Left-wing president of Honduras, Xiamora Castro, is now doing her best to unravel their autonomous status. Prospera and the other Honduran charter cities have not been helped by the fact that their strongest local advocate, former president Juan Orlando Hernandez, is now serving a 45-year sentence in a US prison for drug trafficking offences. Charter cities seem to be the most realistic experiment in establishing physical libertarian, pro-market jurisdictions. But the changing vicissitudes of politics still end up getting in their way, and will in all likelihood do so with future such experiments in other countries. The cyber world might well turn out to be the one realm where state institutions can be circumvented and alternative, market-based structures successfully pursued. After all, cryptocurrencies have been stratospherically more successful than any of these real-life nirvanas.
Telegraph
04-04-2025
- Business
- Telegraph
It's time to make the post-Brexit decisions at last
The world economy is still reeling from Donald Trump's blizzard of tariffs. China is the latest to retaliate, with 34 per cent tariffs on US imports. The worst trade war since the 1930s now looms. With the markets already anticipating a recession, both in America and beyond, it is imperative that Britain acts swiftly to avoid being swallowed up in this global maelstrom. The Prime Minister seems to have hunkered down, leaving his impetuous Foreign Secretary David Lammy to hint at retaliation, with his remark on a visit to Brussels that 'all options are on the table'. This is mere posturing. Retaliatory tariffs would achieve nothing but higher prices for consumers and would risk countermeasures from Washington. The former chancellor, Jeremy Hunt, is on the right track, though, by calling on the Government to revive the vision of Britain as 'Singapore-on-Thames'. After Brexit, there was genuine enthusiasm for plans to turn the UK into a low-tax haven for international trade and investment. Alas, that opportunity was squandered. Instead, inertia took hold and we have clung to the European model outside the EU – the worst of both worlds. Time has now run out for that model, with its crippling fiscal burden and unaffordable welfare bills. Only a leaner, more agile British economy will be able to navigate a course through the storms ahead. Both the US and the EU have just become more expensive places in which to do business. This gives London and our other cities a chance to seize the commercial initiative. In a protectionist world, Rachel Reeves must do more than promise to be just a little less profligate. Her Spring Statement may only be a week old, but it is already a museum piece. Nothing less than root-and-branch reform of the public finances will do now, and if she cannot deliver it, Sir Keir needs to find a chancellor who can. David Ricardo, the British economist who conceived the theory of comparative advantage – the basic principle of free trade – wrote: 'Taxation under every form presents but a choice of evils.' Unless we take Ricardo's insights to heart, Britain has a bleak future. Instead of forcing wealthy 'non-doms' to emigrate, the taxation system must be redesigned to make the UK a magnet for prosperity. And rather than raise retaliatory tariffs, we should embrace the comparative advantages that flow from our historic status as the champions of free trade.
Telegraph
04-04-2025
- Business
- Telegraph
The irony of Jeremy Hunt's call for Britain to be more like Singapore
SIR – Jeremy Hunt suggests that, in response to Donald Trump's tariffs, Sir Keir Starmer should embrace Brexit freedoms and turn Britain into Singapore-on-Thames (Commentary, April 4). Why did this not happen when his party was in power, and he was chancellor? We might all be better off now had the Tories offered lower taxes and less regulation – in other words, real Conservative policies. Felicity Guille London SW6 SIR – Mark Carney appears to have undergone a Damascene conversion to the benefits of sovereignty, and now we have Jeremy Hunt – a fellow member of Project Fear – promoting the idea of Singapore-on-Thames. In the same edition, on your Letters page, Nicholas Bevington (ironically writing from Singapore to criticise Brexit) reminds us that 42 per cent of our exports go to the EU, and 15 per cent to the US. Not a bad outcome, given the dire predictions in 2016. Mark Robbins Bruton, Somerset SIR – How many times have we heard from government ministers in recent days that Britain's response to American tariffs will be 'pragmatic' and 'in the national interest'? If only the Government would take the same approach to its energy policy, and abandon the measures that have been responsible for pushing up prices. That might help our industries remain competitive. Michael Hodgson Petersfield, Hampshire SIR – How can President Trump expect Nato countries to increase their defence budgets to 5 per cent of GDP if he undermines the stability of European economies through his tariffs? Harry Wells Andover, Hampshire SIR– I don't understand the criticism of President Trump's tactical tariffs, given that so many nations have had protectionist policies for decades. Should America instead simply sacrifice itself to those who want an unearned advantage in the global marketplace? D S A Murray Dorking, Surrey SIR – I can't help noticing that many of those who backed the recent tractor protests in Westminster are now suggesting that we allow chlorine-washed chickens over the Atlantic. How will that help British farmers? And all in the name of soothing one ego across the pond. Nigel Parkin Grantham, Lincolnshire
Telegraph
04-04-2025
- Business
- Telegraph
11.5pc tax and overhauling net zero: What Singapore-on-Thames would look like
Singapore's first leader, Lee Kuan Yew, was famed for his iron self-discipline. Yet, even he broke down in public when he announced Singapore's expulsion from Malaysia and its enforced independence in 1965. For an island state barely 30 miles wide, this was an economic shock infinitely greater than anything Donald Trump's tariffs might inflict on Britain today. 'We had said that an independent Singapore was simply not viable,' wrote Lee. 'Now it was our unenviable task to make it work.' But make it work he did: under Lee and his successors, Singapore flourished into a country where GDP per capita is now 70 per cent higher than in Britain. More than anywhere else, Singapore demonstrates how a sudden economic dislocation can be transformed into an opportunity to prosper. Jeremy Hunt, the former chancellor and foreign secretary, wrote in The Telegraph on Friday that this was an example for Britain to follow. Singapore built its success on free trade and openness, allowing the country to create and attract globally competitive businesses, generating high wages and high-skilled jobs. So how practical would it be for Britain to turn itself into Singapore-on-Thames? If we decided on this course, our driving national mission would have to be maximising the UK's competitiveness. Hunt argues that we should resist protectionism and remain defiantly open to imports, even when others impose tariffs on British goods. Instead of fearing an incoming tide of cheap products, Hunt says that we should welcome any such inflow as a spur for British companies to innovate and succeed. But would they rise to the challenge or simply go out of business? How exactly would Britain adopt Singapore's model? Taxes Low taxes are a crucial component of Singapore's success. The highest income tax rate is 24 per cent, paid by anyone earning over 1 million Singapore dollars (£570,000), while the UK's comparable rate is 45 per cent. Someone earning the equivalent of £46,000 pays only 11.5 per cent in Singapore. Meanwhile Singapore strives to encourage investment by having no capital gains or inheritance tax. As for corporation tax, Singapore charges 17 per cent compared with 25 per cent in Britain. If the UK were to embrace Singapore's model, this would require sweeping tax cuts, designed to give British business a competitive edge. That would, in turn have profound consequences for the size of the state. Public spending Singapore can afford low taxes because government spending is around 15 per cent of GDP, barely a third of the UK's 45 per cent. Because Singapore has less than 6 million people, that still allows a relatively generous public expenditure per capita of just under £10,000. The British state, meanwhile, spends about £13,000 for every individual in the country. Copying Singapore would, therefore, require Britain to cut per capita spending by about 30 per cent. Could any British party win an election by promising to slash public expenditure by £3,000 for every single voter? Lord Lilley, the former trade and industry secretary who now sits on the House of Lords committee on financial services regulation, believes that any comparison between UK and Singaporean state spending is misleading. He points out that Singapore requires compulsory contributions to a Central Provident Fund, which covers health care and pensions. 'We fund them through compulsory contributions and we call it taxation; they do it differently, but actually the difference [in spending per head] is much less,' says Lilley. Even so, reducing income taxes to anything like Singapore's levels would entail radical surgery on the British state, including the NHS and the welfare system. Regulation Singapore has developed a thriving financial services industry – now a pillar of its economy – and Lilley holds up its approach to regulation as a model. 'People constantly mention Singapore,' he says. 'When you ask what happens in Singapore, it's not that they don't have thorough rules against fraud or financial manipulation, they just do it in a much better way.' If a bank or a wealth manager is considering Singapore as a location, the regulator will assign an official to tell the company exactly how it can comply with the rules. The emphasis will be on making it as easy as possible for the new operation to come to Singapore. Lilley says that Britain should adopt the same mindset. 'We need to look at all our rules and regulations,' he says. 'Part of the reason why we don't do that is because the whole civil service, for 40 years, preferred to leave it all to Europe. Even now, when we're free to make changes, they look for every reason not to do it.' Shanker Singham, a leading trade expert, agrees that Singapore's broader approach to regulation is a model for the UK, stressing how one reason for Trump's tariffs is America's conviction that other markets are over-regulated. 'If we were to improve our regulatory system, then we get a win-win situation,' says Singham. 'First of all, we improve our own economy, but we also increase the chances of getting a deal with the US.' Trump's unpredictability was shown yet again today when he raised the possibility of cancelling all tariffs on Vietnam in return for a bespoke deal with the US. Singapore's attitude to regulation would, in principle, be easiest for Britain to replicate, though the EU would certainly object. But the country's emphasis on national competitiveness would still collide with other priorities of the British state. Net zero The drive to decarbonise power generation has given Britain the highest industrial electricity prices in the developed world. The consequence is that swathes of energy-intensive manufacturing have been rendered uncompetitive at a stroke. Britain is in the process of closing down the remnants of the steel industry. Other enterprises like chemicals are in similar difficulties. The government has also promised to stop issuing new exploration licences for the oil and gas industry. Deliberately undermining the viability of entire industries flies in the face of Singapore's ethos and the imperative of national competitiveness. Singapore has a similarly ambitious target to reach net zero by 2050 – with the crucial difference that the industries most threatened by this project are less important to its economy. If Britain is going to emulate Singapore, the government would have to review its approach to net zero. EU Any talk of Britain becoming Singapore-on-Thames is anathema to the EU. Throughout the Brexit negotiations, the EU feared the emergence of a low-tax, low-regulation market of nearly 70 million consumers next door. The solution was the level playing field guarantees (LPF) in the Trade and Cooperation Agreement between the EU and the UK. The LPFs cover environmental standards, labour law and state aid. Britain could choose to deregulate anyway and simply break the LPFs, but the EU would hit back with 'rebalancing' measures designed to negate this advantage. If, for example, Britain adopted new and divergent environmental standards, the EU could retaliate with tariffs and not necessarily in the same sector, perhaps targeting fish exports. Any such decisions would go to independent arbitration by a panel of experts from both sides. Whatever the outcome, adopting a Singapore approach would jeopardise the deals that Sir Keir Starmer wants from Brussels, including one to ease the trade in plants and animals between Great Britain and Northern Ireland and the EU. As the smaller market without the protection of membership of a trade bloc, the UK would be at a disadvantage in any negotiations. The irony of Singapore's story is that the country would never have chosen the model that delivered such success. Lee Kuan Yew strove to avoid independence for his homeland. Once this was thrust upon him, he made it into a virtue. Faced with the similarly unsought pressure of Trump's tariffs, Britain could undoubtedly adopt some of Singapore's virtues: its approach towards regulation and above all its single-minded pursuit of national competitiveness. But going the whole way to Singapore-on-Thames would mean slashing taxes and radically shrinking the British state. Sir Keir Starmer already has five missions; of all prime ministers, it's hard to believe this might become his sixth.
