Tuesday, May 6, 2008

Is the UK doing economic re-modeling?

Last year's tax reforms seem to be causing problems to the government with many "constituencies" and social-economic groups of Society. The abolishion of the 10 pence tax rate is one. The tax measures for resident non-tax-resident persons. The tax measures re the earnings of corporations based in the UK that earn much of their revenue and/or taxable income abroad. Other than its direct, fiscal, aspects, tax systemics do reflect a wider strategic model for a country, its state, its economy and its Society.

Under Margaret Thatcher, the UK's model was changed. Eg the UK became the European (and EU) destination of choice for the European HQs of many US, Japanese and other multinationals. That is one of the reasons, IMO, that the UK governments of Mrs Thatcher and Mr. Major were in no way willing to accept the application of certain EU labor laws in the UK and negotiated an opt-out in the EU Maastricht Treaty (1990), leading to a Social Protocol that applied to the then 11 other member states, but not the UK.

The model did not change that much, IMO, during the "Blair" years! Maybe the decision not to use a transitional period (eg 2 years as most other "old" EU member states did) for the work rights for citizens of the A8, the eight large countries that joined the EU in 2004, was a strategic mistake. Because it flooded the UK with more intra-EU workers than it could, socially, handle. Because economically, amazingly enough, the UK economy was able to absorb all this volume of work seekers and unemployment rose only very marginally. Yet, that influx seems to have created many "systemic" effects within the UK's socio-economic system and dynamics, that have since been coming to the surface.

By becoming IMO a world Metropolis, London, has to some extent become less part of the UK. Britain and England. If one looks at history, this is not an uncommon effect for emerging Metropolises of the past. Many of the "natives" feel alienated in the "new", Metropolitic and Cosmopolitan, environment. Some economically, some work-wise (employment), some culturally, some "psychologically". They suffer a "shock".

Many of the UK's "old" citizens may actually be under such a shock. Many may recall the days before Cosmopolis or even before those "liberal" Beattles. who IMO reshaped the British Society. Maybe Budicca, whose sculpture rests on the banks of the Thames, and king Arthur, have gained "value" for many Britons. But as DNA analyses in recent times have suggested, the DNA of Britain, is a multi-culti one, and that effect dates well before the recent decades. The bottom line of this note is that maybe, de facto, last year's tax reforms were not part - or do not seem to be part - of a new "comprehensive" strategic model for Britain. I say "do not seem".

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BRs
Nick

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