After the Brexit referendum in 2016, some Conservative politicians proposed a new vision for the UK: to turn it into a lightly taxed, lightly regulated idyll for corporations—an island that would be the world’s trading partner, rather than just the European Union’s. Look to Singapore as a model, Philip Hammond, the UK’s chancellor of the exchequer, said in 2017.
Never mind that this was a misreading of Singapore, a tightly controlled, intrusive state. The Singapore-on-Thames reverie fired up the imaginations of many Brexiteers in government. Jeremy Hunt, then the UK’s foreign secretary, compared Singapore winning its independence from Malaysia in 1965 with Brexit: “There could be few better instructions for us as we make our post-Brexit future.”
That vision of Singapore-on-Thames is now dead. And Covid-19 helped kill it.
How the dream of Singapore-on-Thames died
When Hammond mooted the Singapore model, the UK was still engaged in negotiations with the EU over a new trade deal. In part, the Singapore-on-Thames idea was floated to push the EU towards a better deal, said Jill Rutter, a former civil servant in the Exchequer and now a senior fellow at UK in a Changing Europe, a London-based research organization. “It was a way of saying: ‘Look, if you don’t do a good deal, we have other options,'” Rutter said. She also pointed out that Singapore was just one of many ideals prized by Conservatives and Brexiteers. “That was the genius of the Brexit coalition. Now, you can call that nuanced, or you can call that muddled, depending on what you like.”
Among the first blows to Singapore-on-Thames was the election of Boris Johnson in July 2019. Johnson is what Rutter calls a “big-spending, splash-the-cash conservative. He’d carpet the entire country in state-funded infrastructure if he could.” Johnson distanced himself from the decade of austerity that previous Conservative governments had imposed upon the UK, Rutter said.
Some people in Johnson’s government still wanted a small state and low corporate taxes—most notably, Rishi Sunak, the chancellor of the Exchequer. “That tension was certainly there,” said George Dibb, who heads the Centre for Economic Justice at the Institute for Public Policy Research, a progressive think tank. But there were other practical concerns at hand.
British companies—particularly banks in London—weren’t hankering for financial deregulation. Johnson put on hold a reduction in the corporate tax rate from 19% to 17% so that his government could spend. “Since 2008, decreases in the corporate tax rate were based on the promise that they’d increase business investment in the UK, but if you looked at the data in 2019, that hadn’t delivered,” Dibb says. Additionally, moving the economy’s carbon emissions closer to a Net Zero goal needed an interventionist state. “There’s no way of doing that in a low-tax, low-regulation environment,” Dibb said.
The pandemic’s role in killing the Singapore-on-Thames idea
The last rites of the Singapore ideal took place during the Covid-19 pandemic, when Johnson’s government launched waves of massive spending to support the economy. “It was anti-austerity on steroids,” Rutter said. “You were in a sort of absolute, whatever-it-takes situation.”
The virus shone a spotlight on “where our safety nets and welfare systems are falling down,” Dibb says. “As we emerge from the pandemic, the public is calling for those systems to be repaired and reinvigorated—for more investment in them.” In one of several surveys reflecting this sentiment, 89% of respondents wanted a hike in government spending. A YouGov poll showed that 49% of Britons wanted spending to remain high even after the pandemic.
To fund this spending, tax policy is heading in the opposite direction to what Singapore-on-Thames would have dictated. In his budget in March, Sunak said that corporate tax rates for the largest firms would rise from 19% to 25% in 2023—the first such rise in 47 years. The government is also formulating rafts of new standards and regulations, including a 10-point plan to achieve a Net Zero emissions target by 2050. Fundamentally, Dibb said, “people have realized that the Singapore-on-Thames model was based on flawed assumptions, and that it was never appropriate for the UK at all.”