British chancellor Philip Hammond – dubbed ‘Spreadsheet Phil’ by MPs for his dour approach to his profession – revealed his sly side on the weekend. When grilled by German paper Die Welt about whether the UK government has plans to become the tax haven of Europe, drastically cutting corporate tax post-Brexit, Hammond said that the UK would like to remain ‘in the European mainstream of economic and social thinking’, but it may have to ‘change its model’ should a trade agreement not be reached.
This thinly veiled threat enraged many European newspapers, alongside many on the left in the UK. Labour leader Jeremy Corbyn bemoaned the fact that the chancellor wanted a ‘bargain-basement economy’.
Are left-wing fears that Brexit Britain under the Tories is going to become a ‘neoliberal fantasy island’ coming to pass? Are Hammond and prime minister Theresa May hatching a plan for the UK to be the new Luxembourg or Cayman Islands? Hardly. In the Autumn Statement, delivered last November, the first after the Brexit referendum, Hammond did announce that corporation tax will fall to 17 per cent, ‘by far the lowest overall rate of corporate tax in the G20’. This may be below the EU average, but it pales in comparison to Ireland, for example, which has consistently charged corporation tax of 12.5 per cent for well over a decade.
Many have been quick to identify the chancellor’s uncharacteristic entertaining of the UK gaining tax-haven status as simply a tactic aimed at negotiating a good deal with the EU. As Guido Fawkes put it: ‘We can give the EU plenty of carrots to give us a good deal… we can also give them a few sticks too.’
However, what does seem genuine in the Die Welt interview is Hammond’s conviction that the future of Britain’s economy is either the ‘European social model’ or some kind of taxation-lite rogue state. It’s clear what the Remain-voting chancellor wants. As he puts it, ‘most of us who had voted Remain would like the UK to remain a recognisably European-style economy with European-style taxation systems and European-style regulation systems’. However, if this is not on the table, he added, ‘the British people are not going to lie down and say, too bad, we’ve been wounded… we will change our model, and we will come back, and we will be competitively engaged’.