Chancellor Philip Hammond has suggested that the UK won’t cut taxes and fiscal regulations after Brexit.
The Chancellor stated that the UK will remain within the ‘EU average’ in terms of tax rates, and will not seek to reduce taxes in a bid to become more competitive.
He commented: ‘I often hear it said that the UK is considering participating in unfair competition in regulation and tax.
‘That is neither our plan nor our vision for the future.
‘I would expect us to remain a country with a social, economic and cultural model that is recognisably European.’
In January, Mr Hammond stated that the government may have to ‘change its economic model’ if the UK was unable to remain in the EU single market.
He commented: ‘We will change our model, and we will come back, and we will be competitively engaged.
‘I personally hope we will be able to remain in the mainstream of European economic and social thinking. But if we are forced to be something different, then we will have to become something different.’
The Chancellor’s recent statements come amid ongoing Brexit negotiations, with government officials debating the free movement of EU citizens in the UK.
A survey carried out by the Institute of Chartered Accountants in England and Wales (ICAEW) has suggested that just 43% of firms have discussed the risks that Brexit poses to their business.
The ICAEW found that only 29% of businesses surveyed have made Brexit plans. 6% of firms expect a positive Brexit outcome, whilst 40% predict that EU negotiations will have a negative impact on their business.
Additionally, only 21% of firms surveyed would be willing to explore new markets.
The research also suggested that 29% of businesses believe that the free movement of goods, services and capital between the UK and the EU is essential for growth. One fifth of respondents stated that they also value access to a skilled EU workforce.
Michael Izza, Chief Executive of the ICAEW, said: ‘With 20 months until departure, it is now the government’s responsibility to help pave the way for business success once we have exited the EU.
‘Issues raised within our research – such as access to skilled EU workers and the free movement of goods and services – should be firmly placed on the Prime Minister’s radar when she engages in talks with the EU to ensure the priorities of business are fully considered and complacency is avoided.’
The government has created a new business advisory group, comprised of five major UK business groups.
The Confederation of British Industry (CBI), the Federation of Small Businesses (FSB), the British Chambers of Commerce (BCC), the Institute of Directors (IoD) and manufacturers’ organisation the EEF make up the new business group, and their director generals will meet weekly with the Business Secretary, Greg Clark.
During a recent parliamentary session, Mr Clark reported that he had met with businesses, business leaders, employees and investors around the UK since the Brexit vote. The new group will seek to ensure that business has more input into the Brexit negotiations.
Dr Adam Marshall, Director General of the BCC, hopes that the new business advisory group will also help to achieve a ‘business-friendly’ Brexit outcome that addresses firms’ ‘real-world needs’.
Commenting on the creation of the new business group, Mr Clark said: ‘The government is creating a new EU exit business advisory group to ensure business is not only heard, but is influential throughout the negotiations.’
Meanwhile, Stephen Martin, Director General of the IoD, stated: ‘A good Brexit outcome is one that puts the economy, jobs and prosperity right at the centre of the negotiations, so we wholeheartedly welcome the formation of this advisory group by the government.’
The Queen has delivered her annual speech at the state opening of Parliament, in which she outlined the government’s legislative agenda.
This year’s speech differed to speeches given in previous years: it outlined the government’s legislative plans for the next two years, as opposed to one.
Earlier in the week, the government took the decision to cancel the 2018 Queen’s Speech in order to give MPs ‘extra time to deal with Brexit laws’.
Brexit proposals granted to the UK government include the power to make any future changes to UK laws, flexibility to accommodate trade agreements with the EU and other countries, control over the import and export of goods and the ability to end the free movement of EU citizens into the UK.
Other proposals outlined in the speech include a data protection bill designed to strengthen consumers’ rights, a national insurance contributions (NICs) bill aimed at ‘making the NIC system fairer’, and a financial guidance and claims bill, which establishes a new statutory body to co-ordinate the provision of debt, money and pension guidance.
Business groups have responded to the Queen’s Speech. Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said: ‘While Brexit isn’t the top immediate priority for many businesses, firms of every size and shape want to avoid turbulence and confusion during the Brexit transition. The government’s proposed bills on trade, customs and immigration must minimise adjustment costs and maximise opportunities.’
Meanwhile, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), commented: ‘It’s good to see commitment to special support to help British businesses export to new markets around the world, which we look forward to engaging with the government on.’
In his annual Mansion House speech, Chancellor Philip Hammond stated that any Brexit deal between the UK and the EU must put UK jobs and prosperity first.
Mr Hammond revealed that the government will seek a ‘bold and ambitious’ free trade agreement, that covers both goods and services. He also stated that mutually beneficial transitional arrangements will be made in order to avoid ‘disruption and dangerous cliff edges’.
Agreeing ‘frictionless’ customs arrangements to facilitate trade across UK borders is also a priority during Brexit talks, Mr Hammond said.
Additionally, the Chancellor pledged to keep taxes ‘as low as possible’, stating that higher taxes will ‘slow growth, undermine competitiveness and cost jobs’.
Responding to the Chancellor’s speech, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘In the negotiation itself, small businesses are looking to the government to secure an ambitious free trade agreement with the EU, while still allowing small firms to retain access to the skills and labour they need to grow and prosper.’
He continued: ‘While Brexit is the dominant issue of the day, our members are increasingly concerned about the weakness in the domestic economy. We therefore welcome the Chancellor’s commitment . . . to a low tax burden.’
Five business groups, including the Confederation of British Industry (CBI), the Federation of Small Businesses (FSB) and the British Chambers of Commerce (BCC), have called for the government to secure continued access to the European single market until a final Brexit deal can be struck with the EU.
The letter to Business Secretary Greg Clark calls for the government to ‘put the economy first’, and to ‘prioritise an early agreement on guarantees for EU citizens’ already residing in the UK.
A final agreement between the UK and the EU should guarantee certain economic principles, as outlined in the letter. These include securing tariff-free goods trade between the UK and the EU, establishing a flexible system for the movement of labour and skills between the UK and the EU, and protecting the benefits of free trade agreements currently delivered through the EU.
The letter, which is also signed by the Institute of Directors (IoD) and manufacturers’ organisation the EEF, comes as Brexit Secretary David Davis enters into formal Brexit negotiations with the EU.
Commenting on the negotiations, Mr Davis said: ‘I want to reiterate at the outset of these talks that the UK will remain a committed partner and ally of our friends across the continent. And while there is a long road ahead, our destination is clear – a deep and special partnership between the UK and the EU. A deal like no other in history.’
The UK is set to leave the EU by the end of March 2019.
The UK economy experienced the weakest rate of growth in the EU during the first quarter of this year, figures published by European statistics agency Eurostat have suggested.
Britain’s economy grew by just 0.2% in the three months to March – a significant fall from the rate of 0.7% recorded during the last quarter of 2016.
Experts believe that Brexit was partly to blame for the UK’s low economic growth rate, alongside rising prices due to lower sterling.
The data also revealed that growth for the EU as a whole totalled 0.6% in the first quarter of 2017. It found that the French economy grew by 0.4%, whilst German economic growth rose by 0.6%.
Economists expect Britain’s Gross Domestic Product (GDP) rate to rise slightly in the coming months.
The UK economy is set to grow by 1.6% by the end of 2017, as predicted by the Organisation for Economic Co-operation and Development (OECD). However, the OECD also expects UK economic growth to fall to 1% during 2018, as Brexit looms.