Deregulation after Brexit. The idea that the UK could flourish outside the EU as a low-tax, low-regulation, high-growth state is one which drove many Eurosceptics in the decades preceding the Brexit referendum, and has characterised the debates on the right that have taken place since about the extent of regulatory alignment the UK should have with the EU. Proponents of this view, including Lord Frost, Boris Johnson’s chief negotiator, were determined that the UK’s negotiations with the EU should avoid commitments that would limit the ability of the UK to compete on regulatory standards or on tax levels. They argued that the EU’s bargaining position was driven by fear of being out-competed by a newly unshackled UK

  • New push. A new paper from the Adam Smith Institute attempts to give definition to this argument, calling for the UK to become a ‘Singapore-on-Thames’. It argues that the UK should adopt a range of free market policies, such as cutting taxes and regulations, to make the economy more efficient. But the bulk of the report proposes greater marketisation and competition in key public services such as healthcare and education, in order to reap the rewards of higher growth and better outcomes. The author Bryan Cheang does acknowledge that there are significant political and cultural differences between the two countries.
  • Scunthorpe? Writing in the Telegraph, City economist Roger Bootle welcomes the new push from the ASI, heralding it as an antidote to the current trajectory of tax rises and state expenditure, which he says puts the UK more on a trajectory of Scunthorpe than Singapore.
  • Divergence tracker. UK in a Changing Europe publishes an updated ‘UK-EU regulatory divergence tracker’ to identify how Brexit is being implemented in this field. 

Impossible and undesirable? While the goal of transforming the UK into a deregulated haven off the coast of Europe has animated some, there are plenty who have argued that this is neither possible nor desirable. Writing at the height of the Brexit debates, former FT journalist Jeevan Vasagar argued that the vision of Singapore held up by UK free-marketeers did not represent the reality of the city state. 

  • Delusion. The Financial Times’ chief economic commentator Martin Wolf concluded that it is unrealistic to expect that the UK could ever approximate the Singapore economic model. Wolf highlights the extraordinary level of personal savings enabled by Singapore’s Central Provident Fund, which compels employers and workers to contribute 37% of their income for social insurance, health and pensions. This is the key to understanding the country’s apparently low level of public spending.
  • Race to the bottom. Labour economist Charles Woolfson argues that Singapore-style regulation is often code for a ‘race to the bottom’, particularly in relation to labour standards and the welfare system.
  • Business view. Businesses do not necessarily welcome an attempt to out-compete the EU on low taxes and deregulation. UK business leaders warned during the Brexit process that they opposed regulatory divergence, even if it also brought lower tax rates. They warned that regulatory divergence would adds to costs, introduce frictions in labour markets and supply chains and raises prices. The Tony Blair Institute has explored a middle ground.
  • Singapore: an entrepreneurial state? The Institute of Government’s Jill Rutter argues that the wrong model is being learned from Singapore. It is the city-state’s belief in state-supported business innovation which marks it out: more Mariana Mazzucato than Adam Smith.

The Government’s deregulatory agenda. It is not clear how far the Singapore-on-Thames model seriously informs government thinking about the UK’s economic future, particularly given the impact of the Covid pandemic, which has delayed and derailed many of its policy objectives. However there are some areas where a deregulatory agenda is being pursued. 

Weekly Updates


Energy company bailouts. Britain’s seventh-biggest energy supplier Bulb, which has 1.6m customers, was placed into ‘special administration’ last week. The Government has set aside nearly £1.7 billion to keep the firm afloat after the recent surge in energy prices had made it insolvent. The effective bailout of Bulb is emblematic of the failure of competitive energy markets, argued Christine Berry in the Guardian.

  • Public ownership and a just transition. Common Wealth make the case for taking the energy sector back into public ownership and say this could be the key to securing a just energy transition and accelerating the roll-out of renewable energy infrastructure. 

Water companies. Ofwat has found that three of the biggest water companies have ‘weak financial resilience’. The regulator warned that Southern Water and Yorkshire Water were both carrying levels of debt, including liabilities such as financial derivatives and defined benefit pension schemes, which would be higher than the regulated value of the companies. Southern Water was forced to pay a £90 million pollution fine earlier this year for deliberately pouring raw sewage into the sea.

Climate change

Cambo cancelled? Shell has pulled out of the controversial development of the Cambo oilfield near the Shetland Islands. Environmental campaigners hope this spells the beginning of the end for North Sea oil projects. However, the FT warns that celebrations may be premature, suggesting that private (and less accountable) investors may be tempted to replace Shell in the project.

After COP26. The Climate Change Committee (CCC), the government’s official watchdog, says that the UK is currently “nowhere near” meeting its emissions targets set out in the Government’s Net Zero Strategy. Reviewing the outcome of COP26, the CCC report says that stronger policies are needed, such as taxes on carbon-intensive goods. (Twitter thread summary here.) 

Climate accountability. Companies are not disclosing climate-related risks as part of their audit reports, say Greenpeace in a study of company annual reports. Auditors at polluting companies are supposed to integrate climate change and the 1.5 degree target of the Paris Agreement into their financial statements and audit reports, but many are failing to do so.

Wellbeing economy debate. Last week Caroline Lucas MP led a debate on moving to a ‘wellbeing economy’, arguing that this model would help meet climate goals. In its response the Government argued that the UK government already takes wellbeing seriously, and rejected scepticism over economic growth. The debate was covered on Sky News.

Local economies and devolution

Levelling up. The publication of the Government’s White Paper on levelling up has now been pushed back to January 2022. It is believed that proposals will include American-style regional governors in rural areas and the creation of a new levelling up quango. 

Community capitalism? Former Chief Economist at the Bank of England, Andy Haldane, says we need a ‘fundamental rethink’ of capitalism and need to explore what he calls “community capitalism”. 

Tax and macroeconomic policy

Capital gains tax. Capital gains tax will not be raised, the Treasury has said. The Office for Tax Simplification (OTS), had suggested that capital gains tax (CGT) should be raised and the allowance lowered, to bring it more into line with income tax. However, the Treasury has rejected these suggestions, in the wake of a growing Conservative backlash against planned tax rises.

Public debt and debt servicing costs. The New Economics Foundation’s Frank Van Lerven argues that debt servicing costs shouldn’t keep the Chancellor up at night. He notes that although spending and debt have risen significantly, ultra-low interest rates mean than the amount government spends servicing the debt, in interest payments, has fallen.

Public services and social care

Education spending. The Institute for Fiscal Studies (IFS) found that total UK education spending fell by 8% in real terms between 2010 and 2019. The most deprived schools were the worst affected, with a real-terms fall in spending of 14% per pupil. 

  • Spending review. £4.4 billion was announced for the schools budget in the Government’s Spending Review up to 2025. This will bring spending back to 2010 levels, but still means that there will have been 15 years without any overall growth in school spending. The full IFS report is here

Public perceptions of public spending. The public struggles to understand the relative scale of different forms of public spending, a poll by More in Common has found. In general people overestimate public spending on policing, schools and defence, whilst underestimating spending on pensions and the NHS. On average the public think MPs’ pay takes up 8% of overall public spending, when in fact it is less than 0.01%. Net zero spending is thought tol take up 10% of the overall budget when it is actually forecast to take only a little over 1%. 

IPPR State of Care Conference 2021. On Wednesday 8th December, the IPPR will host its annual State of Care Conference and will focus on what ‘build back better’ means for health and care. Speakers include former head of the civil service, Gus O’Donnell and Chief Executive of the NHS Confederation, Matthew Taylor. You can sign up for the event here.