Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

A Britain Bigger Than Brexit

Posted by hkarner - 27. Mai 2020

American rubbish! (hfk)

Date: 27‑05‑2020

Source: The Wall Street Journal By The Editorial Board

Reviving the U.K. economy is now Boris Johnson’s challenge.

Britain’s Prime Minister Boris Johnson .

Brexit negotiations between London and Brussels have resumed, and rarely has that issue been less important. What matters now is how both sides plan to recover from the coronavirus recession.

The biggest opportunity is Britain’s. The EU looks set to spend years mired in impossible arguments over how to pay for the pandemic’s costs, especially in nations with weaker fiscs. Brussels plods onward with its project of expanding Europe’s bureaucracy and regulatory micromanagement, Germany was slipping toward a recession even before the virus, and Emmanuel Macron’s reforms are stalled in France.

Alone among Europe’s large economies, Britain entered the pandemic crisis in good health with improving confidence and a government, under Prime Minister Boris Johnson, capable of governing. Mr. Johnson’s challenge now, far more than Brexit, is to leverage those advantages into a strong recovery.

Britain chose early in the pandemic to subsidize 80% of wages for furloughed workers, up to £2,500 ($3,000) a month. That has kept workers more closely attached to their employers, but at a stupendous taxpayer cost. The issue now is whether those businesses will survive. Data this week showed joblessness and social‑welfare claims skyrocketing in April. Reopening the economy—most of it, and quickly—has to be the priority or nothing that comes after will alleviate the mounting damage.

One immediate challenge will be fiscal policy and especially taxation. Early rounds of coronavirus spending pushed government borrowing to 2.8% of GDP in the financial year that ended in March, and government debt is now 98% of GDP as revenues fall and pandemic spending rises. Mandarins in the Treasury say higher personal or corporate tax rates will be necessary alongside government spending freezes.

Talk about a mistake. The fiscal hole from the pandemic is so big that no tax increase can fill it. Only economic growth can. Tax policies that reward entrepreneurship and business investment will be especially important as Britain competes for capital after Brexit. Rather than increasing tax rates, Chancellor Rishi Sunak can reduce taxation on capital investment by allowing full business expensing. The Adam Smith Institute also proposes a tax holiday on repatriated earnings that British companies use to invest at home.

Every policy now should focus on encouraging investment and economic growth. Reforming the byzantine zoning system would boost construction. Cutting the 20% consumption‑tax rate and allowing more stores to operate for longer hours on Sundays would create more opportunities to revive consumer spending. These and other ideas aren’t politically sexy, but added up they’d create a bigger stimulus for the U.K. economy than any Brexit deal would.

As America also reopens, a reviving partner in Europe will help. One boon would be to conclude a new post‑Brexit U.S.‑U.K. trade deal. Washington can fill the breach if continental Europe’s economies keep stuttering.

Mr. Johnson thought Brexit would be the main event of his tenure, but that will now be the pandemic. The challenge is much greater, but so are the opportunities for a greater British revival.

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