Tel. +44 (0)20 7287 4414
Tel. +44 (0)20 7287 4414
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

Bruges Group Blog

Spearheading the intellectual battle against the EU. And for new thinking in international affairs.

To Stimulate Economic Recovery, We Need Low Tax Solutions


Hands up, who still thinks the Conservatives are a low tax party? If your hand is up, might I suggest you put it swiftly down and start writing some letters to the 321 Tory MPs who this week voted in favour of the biggest tax hike since the Second World War. Someone ought to inform them.

Someone also might want to disband CCHQ come the next general election. There's no point writing a manifesto and employing an entire campaign machine to bang on about said manifesto, if you plan to toss it in the scrap heap the moment the count is done and laugh at the silly little people who unthinkingly voted you in based on those forsaken commitments.

It is a rare day that one finds themselves in simultaneous agreement with both Dominic Cummings and Sir Keir Starmer, but here we are. A 1.25 percentage point increase in tax is totally farcical, even more so when you consider the demographics of who this tax burden really falls on. I could write of the innate unfairness, the ideological incompatibility or the deep structural problems within health and social care provision itself that a tax rise will simply not solve, but the real issue here is one of fiscal aptitude. Or more accurately, fiscal ineptitude. A shortcoming that will not only wreak havoc on Britain's economic recovery now, but also lumber future generations with a financial debt they cannot hope to pay off.

The socialist view of economics is perhaps the one we all find most natural. It's certainly the easiest to explain, and that may just be the reason behind its absurd popularity. What has proven slightly trickier to grasp is, that when people feel taxes are too high, they don't sit around and perpetually grumble, but act in ways which ultimately slide the bill on to those in a lower tax bracket. Moving cash into offshore accounts is just one example. The government cannot filch what isn't there.

If we want to keep people's hard-earned cash onshore and spent in-house, then a consultation with Arthur Laffer is long overdue. In simple terms, his now infamous graph shows that if a government does not tax its people, it will not generate any revenue with which to fund the state's apparatus. However, if the tax rate was 100 per cent, the result would be the same because no one would have reason to spend or work. Acceptance of the Laffer Curve should be the default of any fiscally responsible government. Used properly and its effects are transformative.

The truth is, there are plenty of taxes which can be cut to increase revenue streams, one must only find the optimal rate. Take Hong Kong, for example. Having first adopted a flat tax rate of 15 per cent back in 1947, Hong Kong has since reaped the rewards of a competitive low tax rate, with no further tax on dividends or capital gains. Despite its tiny land mass and zero natural resources, over several decades sustained low tax policies have allowed Hong Kong to regenerate into one of the wealthiest places on Earth. Currently, income tax in Hong Kong is capped at 15 per cent of net income.

Another remarkable success story is that of South Korea, which cut income tax from 87 per cent in 1978 to 40 per cent by the late 1990s. South Korean tax revenues rocketed from $2 billion USD in 1980 to $24 billion USD by 1996, then near doubled to almost $50 billion USD in 2007. Tax reductions also played a major role in defining China's economic success. In 1978 China underwent a series of economic reforms, among which were (some) landowners' rights and the implementation of supply-side tax policies. It was these changes which stimulated the huge rates of growth that have become the stuff of economic legend.

The recipe for a successful economy isn't particularly complicated, the five core ingredients being free trade, low tax rates, a stable currency, robust private property rights and small government. Some sensible regulation may at times be necessary, but this is why government intervention should be limited, not rendered obsolete.

Brexit has presented us with the chance to become a global Britain, a country at liberty to sign advantageous international free trade deals. However, the opportunity for free trade is the only ingredient for success we currently have. Over the past year, the British pound has been placed under extraordinary pressure on account of the pandemic, and, in one way or another, the hand of government has entered every home through the back door. Private property rights have been challenged and now an impending tax rise looms.

We must work to regain the four outstanding factors that empower individuals and induce entrepreneurship, and this starts with lower taxation. Nobody works harder for a smaller slice of the cake. 

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Director : Robert Oulds
Tel: 020 7287 4414
Chairman: Barry Legg
The Bruges Group
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Founder President :
The Rt Hon. the Baroness Thatcher of Kesteven LG, OM, FRS 
Vice-President : The Rt Hon. the Lord Lamont of Lerwick,
Chairman: Barry Legg
Director : Robert Oulds MA, FRSA
Washington D.C. Representative : John O'Sullivan CBE
Founder Chairman : Lord Harris of High Cross
Head of Media: Jack Soames