Viva España

In this seemingly endless EU referendum debate there is one thing that has not, I think, been mentioned and it is crucial.

We know that the UK is now in a sweet spot, outside both the eurozone and the Schengen zone. But the UK has another advantage over the other big economies in the EU. France only reluctantly allowed the UK to join in the 1970s – do you remember General de Gaulle, the man from France who said “non”? He showed not much gratitude for our support in WW II, liberating France and promoting him against the wishes of the United States, an interesting episode that I will save for another day. Well then we had high taxation and we were in the stranglehold of trade unions determined to destroy the British economy. Now we have a skilled workforce (many of them immigrants) and crucially 20% Corporation Tax, massively lower than the rates in Germany, France and Italy. Is it any wonder that there is inward investment here, both from inside the EU and from the rest of the world? It is, as they say, a no-brainer.

This is why the UK has prospered within the EU. Manufacturing companies locate here, employ people and then both employer and employee pay tax. If you are an employee you will be infuriated that you have to pay a higher rate than your employer but remember that your employer pays your National Insurance, puts a bit in your pension and, probably, only gives you a job because of the beneficial Corporation Tax here. This didn’t come about by accident. George Osborne inherited from his Labour predecessor a rate of 28% and he, to his credit, has driven it down to 20% and, I hope, will keep lowering it.

Left wing governments love to tax corporations. They believe that they can scoop up the money and redistribute it to the electorate as a reward (bribe) for voting them into power. They are wrong. They drive away employers, drive up unemployment and, as they cannot contemplate cutting spending, they raise personal taxation. Anyone seriously disadvantaged by this ploy moves abroad and the economy is driven into a downward spiral from which it only recovers when a right wing administration is elected.

Of our EU allies Spain has got the message and has reduced its rate to 25%. France still tries to screw 33.3% out of a company unwise enough to locate there. Ireland has made it a corner-stone of their economic policy to charge 12.5% and that has brought them considerable benefit. My point is, if we leave the EU, will companies now in the UK prefer to stay because of our low tax regime or will they re-locate to avoid tariffs on sending their goods into the EU? I think Spain will do jolly well if we leave.