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Kathryn Swyschtch

Phillips

AP Eng Language

13 December 2017

Brexit and Theresa May

Over the summer, the United Kingdom voted to leave the European Union in a

move called Brexit. The outcome of Brexit is uncertain for now, but experts see gloomy

weather ahead. Theresa May is not helping the situation for her country. Because of

the recent political switch up in the UK Parliament and executive branch, no one knows

exactly how Brexit will affect the UK economy in the coming years. Britain's Prime

Minister and chief executive, Theresa May, will not lighten the outcome since her

current economic policy is projected to cause the economy to plummet and worsen their

existing recession.

In order to cope with the recent economic turmoil, May has diverged from

traditional Tory Policy, which is small government, less buying, and deregulation. May’s

policy includes “a cap on energy prices,” “new compulsory buying powers,” to buy land

at lower values to help council housing, more protections for the working class, and big

business reforms, especially for tech giants (Kibas). May also supports a free market

economy and a moderate approach to public spending (“Theresa May supports free

market economy”). In addition, the Autumn Budget from Philip Hammond, Chancellor of

the Exchequer, was released on Wednesday, November 22nd, 2017. It’s a reflection of

the right and May’s policy, but it got mixed reviews. Tom Kibas for The Observer said

the issues with the rights economic policy is it fails to achieve the recovery it promised
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and “lower income houses have to borne the brunt of spending cuts”.Moreover, the

majority of reform is felt in big cities, like London, not other places because that is where

the majority of value added taxation occurs, a tax the autumn budget is cutting back on.

It seems to many that the government is addressing new problems, like tech

monopolies, with old solutions, a lack of regulations. The success of the Autumn Budget

and the right’s economic policy is being measured by its effects on businesses, the

housing crisis, and other Keynesien thermometers for economic health.

The status of an economy can be measured by the success of its business,

because in a healthy economy businesses will continue to proliferate. The business

sector is already displaying negative consequences from the autumn budget

announcement and the Brexit vote. When the Hammond referred to the tax code as

bloated and complicated, businesses showed less confidence in the government

(Irvine). In addition, Michael Izza told Economia that he believes such comments will

limit growth. Izza also believes, since the outcome Brexit is hazy, that the autumn

Budget was the last chance to boost business, a chance that Hammond missed (Irvine).

Currently, business investments are remaining constant, and are expected to stay there

for the next fiscal year, according to PricewaterhouseCoopers .

Along with a lack of support for the business sector, the real estate sector is also

struggling. The current housing crisis in the UK is characterized by a lack of

homeownership and a rise in the general cost of housing, and is reflected by a rise in

homelessness. The housing crisis, and its lack of solutions, was a hot topic in the

Autumn Budget. Hammond has cut the stamp tax for specific first time homebuyers,

those buying homes less than $300,000, to incentivise the buying of homes (Bush).
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Cutting taxes to create more opportunities won’t be effective because a lack of jobs and

low wages aren’t accounted for in Hammond’s plan. Theresa May has also delegated

$10bn to Help To Buy, an off the books mortgage loan help scheme (Bush). Although

pouring money into a desperate market seems like it would help, it will not. Sam

Bowman from Adam Smith Institute called it “throwing petrol on a bonfire” due to the

severity of the housing crisis (Bush). What the real estate market needs is both money

and regulations because simply giving money to unregulated organizations and

reducing one tax will not have the desired impact that the right is expected.

Beyond Britain's personal issues, Keynesian economists approach economic

health by viewing a nation’s GDP, unemployment, and inflation rates. The Organisation

for Economic Cooperation and Development (OECD) and pwc both expect rates after

brexit to reflect the current rates, which is rising unemployment and inflation and a

falling GDP. This is not just a reflection of global trends, however. The OECD and pwc

concludes that the rest of the EU and the global market are on an upswing. Consumer

spending in the UK has dropped since the announcement of Brexit and because of this,

GDP is expected to drop from 1.8 percent last year to 1.5 percent this year according to

both the OECD and pwc. Inflation has also risen to three percent already this year and

is projected to continue to rise (pwc). More importantly, wage rates don’t match this

trend in inflation, which are only projected to increase 2.5 percent. Moreover, despite

unemployment being at an all time low, as reported by PwC, the OECD predicts this will

not stay the same due to discrepancies between inflation and wage rates. All of this has

started to happen simply because of the uncertainty from leaving the EU. This

uncertainty is a reflection of the lack of confidence in the UK government, and since the
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right only holds a slim majority, no drastic, and needed, changes are likely to happen

anytime soon.

Some aspects of Hammond and May’s plan, such as running a deficit budget

short term, are positives and have potential to impact a large sum of people in the UK.

However, it does not counteract the lack of regulation and confusion that is the british

tax code. Chris Sanger told Economia that the autumn budget has “no fundamental

changes;” sixty percent of the proposed tax cut is the chancellor freezing the field duty

and it won’t affect a lot people because it has already been done before (Irvine). In

addition, according to the OECD, the UK will fall far behind its competitors (France,

Germany, Italy) in GDP growth with the 2018 fiscal year at 1.0 projection for Britain

because of Brexit. All is not fraught because one solution is for the bank of England UK

central bank to keep its fiscal policy non competitive and cooperative despite the rising

inflation because it’s projected to be temporary (Muckett). The OECD suggests fast and

strong negotiations will cause the outcome of Brexit on the economy to be better than

expected, but the high uncertainty has muddied domestic and foreign investments for

Britain (Chu). Overall “the prevailing view seems to be that if the last labor government

got the country into this, the conservatives have kept digging,” as Kibas stated. Granted

the real effects of Brexit will not be felt until after happens, the current autumn budget

and economic policy of UK governmental leaders is ineffective and unoriginal.

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Works Cited

Bush, Stephen. Theresa May's New Policies Are a Combination of the Good, the Bad and

the Stupid. Newstateman, 1 Oct. 2017,

www.newstatesman.com/politics/economy/2017/10/theresa-mays-new-policies-are-

combination-good-bad-and-stupid. Accessed 1 Dec 2017

Chu, Ben. “UK Economy to Slow Rapidly in 2018 as Hard Brexit Looms, OECD Forecasts.”

The Independent, Independent Digital News and Media, 20 Sept. 2017,

www.independent.co.uk/news/business/news/uk-economy-growth-forecast-latest-

updates-hard-brexit-leave-eu-2018-projected-oecd-a7956776.html. Accessed 29 Nov.

2017.

Irivine, julia. “Business Community Uncertain What to Make of Budget.” Business

Community Uncertain What to Make of Budget, Economia, 23 Nov. 2017,

economia.icaew.com/en/news/november-2017/business-reacts-budget. Accessed 30

Nov. 2017.

Kibas, Tom"Britain's economy is broken. We desperately need new ideas; If the country

was economically bankrupt in 2010, it is intellectually bankrupt in 2017. On the eve of

the general election, politicians of all parties have rarely been so devoid of progressive

ideas." Observer [London, England], 4 June 2017. Accessed 29 Nov. 2017.

Muckett, Joel. “UK Economic Growth to Slow Due to Brexit, OECD Says.” UK Economic

Growth to Slow Due to Brexit, OECD Says, Economia, 29 Nov. 2017,

economia.icaew.com/en/news/november-2017/uk-economic-growth-to-slow-due-to-

brexit-oecd-says. Accessed 30 Nov. 2017.

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PricewaterhouseCoopers. “UK Economic Outlook.” PwC, Nov. 2017,

www.pwc.co.uk/services/economics-policy/insights/uk-economic-outlook.html.

Accessed 1 Dec 2017

Smith, Emma. “Autumn Budget 2017: What Measures Did the Chancellor

Announce?”Accountancy Age, 22 Nov. 2017,

www.accountancyage.com/2017/11/22/autumn-budget-2017-measures-chancellor-

announce/. Accessed 1 Dec 2017

“Theresa May Defends Free Market Economy.” BBC News, BBC, 28 Sept. 2017,

www.bbc.com/news/business-41419858.. Accessed 1 Dec 2017.