On the 23 June 2016 the British people voted to leave the European Union in an exemplary manifestation of the democratic process. Why Brexit? This did not surprise me. What I did find surprising is the outpouring of scorn coming from Malta against this perfectly legitimate exercise of a democratic right. It seems that many of us think that the British should be punished and made to pay for their audacity in daring to leave the EU. In fact we should now cast them out in Biblical style and may they and their progeny be damned. We appear to have forgotten the cultural and historical bonds that Malta shares with United Kingdom and how we stood shoulder to shoulder in less fortunate times, not so long ago.
This article is not intended to pretentiously give an opinion as to what is the best course of action for the UK but to point out that the British people might actually know what they are doing and we at least owe them respect and the benefit of the doubt. In any case time will tell.
Much has been said about how the British are going to regret the decision to leave the EU and about the economic doom that will befall the UK as a result. Interestingly one does not read anywhere about what the UK’s future would have been if it remained in the EU. Surely it is logical that an option should be compared to its alternative. Would it actually have been better for the UK to continue with more of the same or was it time for a change?
To say that the majority of UK voters are racists, and that the single motivation for the Brexit vote was to send all immigrants back home, is ill informed. It is typical of EU rhetoric that when democratic outcomes do not comply with the European Elite’s agenda, these are the result of populism or the ranting of the far right. However, when the outcomes reinforce the EU agenda, it is then a victory for democracy. This is patronising in the extreme.
In my opinion the British people voted in their majority to leave the EU in order to reclaim the independence of their judiciary; in order to give back sovereignty to their parliament; in order to get back control over their economy; in order to control their borders; in order to regain competitiveness and the ability to negotiate their own trade deals; in order for their foreign policy to reflect their values and their needs; in order to regain control over their territorial waters and because, in the final analysis, this was in the best interest of their country. These are all legitimate and sensible reasons.
The UK is the 5th largest economy in the world. Prior to the referendum it was being forecast that, following a decision to leave the EU, the UK would go into recession. The opposite in fact is taking place. National output increased by 0.7% in the last three months of 2016 and the forecast increase in national output is 1.8% for 2016 and 2% for 2017. The US investment bank, JPMorgan, has endorsed the UK’s national output forecast growth estimate at 1.9% for 2017. Prosperity depends on competent governance, and not on being part of a trading bloc.
Unemployment in the UK has fallen to 4.7% in January 2017, the lowest level in more than 40 years. British business has taken up the challenge and is well set to make a success of it. The company tax rate is to be reduced from 20% to 17% in 2020. It has also been said that the Company Tax rate may be reduced further to lower than 15%. The UK has a history of reducing company tax which in 2008 was 30%.
No, reducing taxes does not mean the country is a tax haven, it just means that the government has come to its senses.
Not having preferential access to the EU single market is inconvenient but that’s about it. Every country in the world has access to the EU single market. It is merely that companies from non EU members have to pay the import duties (the common external tariff) if they wish to sell inside the union.
The UK has its own currency and can therefore use its monetary policy to its own advantage. Any central banker will tell you that a monetary policy tailored to a single country’s economic need is a huge asset.
The City’s concern is that the financial services companies would not be able to passport their services into the EU. Well, the City is also concerned that continued EU membership, and the over-regulation that that implies, would negatively affect London’s status as a leading world financial centre. The whole dilemma is to more or less be resolved by UK financial services business setting up a branch or subsidiary in an EU member state whilst still keeping the HQ in London. It’s never that simple but it is also not the end of the world for the City.
The positive economic data coming out of the UK bodes well, however there are no guarantees and the future in or out of the EU is, in any case, uncertain. It is however absurd to use uncertainty as a criticism of Brexit. It is childish to think that somehow life owes us certainty.
The EU is a fundamentally undemocratic organisation as it must be when it is centrally controlled and it governs over 28 geographically and culturally distinct electorates. This is not so much a criticism as a statement of fact. Moreover there is some confusion in EU circles where bureaucracy is mistaken for democracy.
The EU’s foreign policy is a shambles. How is it possible for the UK to have the same foreign policy as Malta or for Latvia to have the same foreign policy as Portugal? A foreign policy should be directly related to the needs of a country’s economy and to the country’s values and culture, for it to be of any use.
Your neighbours are not necessarily your best allies – history amply illustrates this point. The UK has concluded that the only entity that it makes sense to belong to is the world. This is recognition that a country may have more in common with other, more geographically distant, nations than it does with its neighbours. The UK will be developing and enhancing its already naturally existing bonds with the Commonwealth countries and the major world markets. China is implementing a similar project with the new Silk Road & Belt initiative.
As far as security is concerned, the UK is part of NATO and is certainly still a military power to be reckoned with. When it comes to security it is the EU that needs the UK and not the other way around.
In my opinion the UK and the EU should aim for a ‘win win’ outcome to the Brexit negotiations because collaboration yields better results than confrontation and because it makes economic sense for both sides. The EU should also support a democratic decision taken by the British people because the EU should champion democracy. Importantly the EU should not be a prison and a member country should be able to leave without suffering punitive measures and vindictive hostility.
This post was originally written for Portman International Ltd, a one-stop-shop for all corporate, personal, tax, residence, citizenship & property requirements in Malta.
David Marinelli is a Chartered Certified Accountant by profession and has been the owner and CEO of Portman International for the past 25 years. He advises a wide range of international clients on cross border taxation, international structures and asset protection. More recently David has added payment services and real estate advisory to his activities.