The Week: Borisnomics: tax cuts and chlorinated chicken

Should we ever have been in any doubt, it is now absolutely clear that Boris Johnson is happy to take the UK out of the EU on 31 October, with or without a deal. If ‘no deal’ is the final option, can ‘Borisnomics’ save the UK economy?

  • Borisnomics is designed to cushion the blow in the event of a no deal Brexit
  • It combines tax cuts, spending, low interest rates and deregulation
  • More cash in the system is likely to be good for investors

Borisnomics is really just a great big tax cuts and spending bonanza designed to boost the economy and cushion the blow from a disorderly exit from the EU. It starts with a liberal sprinkling of cash over public services starved of investment in the recent near-decade of austerity - schools, the police, the NHS. 

The next prong is tax cuts. Johnson is hoping that, like Trump, the poor and disenfranchised that voted for Brexit won’t notice the rich getting richer. Johnson has promised cuts to income tax, which should boost spending. 

A notable tax cut would be stamp duty. Johnson has made it clear that he believes stamp duty needs to fall to unstick the housing market. Transactions have fallen precipitously as stamp duty increases have taken effect. High transaction costs at the top end of the market have had a ripple effect all the way through. Whether a soaring housing market is good for the UK over the long-term is debatable, but in the short-term, it may boost the ‘wealth effect’ and therefore consumer spending. 

The second prong is monetary. The Bank of England is ostensibly independent, but Johnson does get to choose the incoming governor when Mark Carney leaves in 2020. He is likely to pick someone dovish, inclined to leave rates low and possibly even introduce a new round of quantitative easing. 

Deregulation is also likely to be a feature of Borisnomics. People may argue that deregulation didn’t go that well last time; there can be little doubt that deregulation of the banking sector led directly to the financial crisis. However, this time deregulation is likely to take the form of abandoning environmental restrictions or similar, rather than targeting the financial sector. Chlorinated chicken, here we come. 

All this money sloshing about would undoubtedly be good for investors in the short-term. Having spent a long time fearing a high-tax Corbyn government, it would provide a much-needed shot in the arm for the UK economy. Whether it can mitigate the impact of a no deal Brexit, that’s a whole other question.