Flat White

Brexit’s lessons for Australia

13 December 2016

5:59 PM

13 December 2016

5:59 PM


Soon after the decision by the British to quit the European Union, I found myself at a dinner of about fifteen young and old friends from across the political spectrum. When we discussed Brexit, I found all of my colleagues were surprised that I strongly supported the decision. We took a straw poll on whether or not we were in support; I was in a minority of one.

Anyway, I pointed out that the UK had, with the Commonwealth, stood almost alone against Hitler from 1939 through to 1941 while Stalin was effectively an ally of Nazi Germany and the United States was neutral. This was the country, which had given birth to a constitutional system in which there were checks and balances and the rule of law while many if not most European countries suffered under absolute monarchies and more recently fascist and Communist dictatorships.

Why should it subject itself to the dictates of Brussels? Ted Heath had misled the British into thinking they were entering into a mere common market in which there would be free trade. He never revealed that this was intended to become a federation but a federation without a democratic heart, one governed from the continent by a class of Eurocrats raised in a tradition alien to the common law and concepts of limited government. I said that at last, Britain had regained her sovereignty and her independence. She could now once again resume the close and fall relationships she once had with those countries most similar to her, the Anglosphere and the Commonwealth. My colleagues saw if not disaster for the UK, decline.

More recently, in What Next: How to get the best from Brexit the prolific author and commentator Daniel Hannan MEP recalls that immediately after the referendum, a Reuters poll of City economists showed 71 per cent were predicting a recession in 2016, a position shared by most of the major banks. It seems that economists are as poor in predicting the future as are most of the commentariat who as we know tend to have a left-wing agenda. Notwithstanding the considered opinions of many, the outrage of the elites, and the machinations of the judges and politicians, it is likely that Brexit will be achieved. And a good thing too.

Brexit, Hannan explains, is a process and not an event. He warns that politicians on both sides of the journal have a perverse incentive to present the negotiations as difficult and tetchy. This he says is to make themselves to look tough and to lower expectations. We saw Australian politicians taking exactly the same position over the backpackers’ tax, which incidentally only a mean and petty government would seek to impose.

Hannan says there are three broad aspects in getting Brexit right. The first is the deal with the 27 members of the EU. The second is dealing with the hundred and 65 non-EU states – he ranks the United States, Australia, Canada, New Zealand, Singapore, Hong Kong and India as among the most important. While Barrack Obama threatened Britain that if she left the EU she would be at the back of the queue for a free trade agreement with the US, Donald Trump has welcomed Brexit with open arms. He will no doubt revive the special relationship which Obama had virtually abandoned. The third broad aspect is the domestic reforms the British must undertake in consequence.

Of these three broad aspects, Hannan says the first is arguably the simplest but the third is by far the most important. This is so true. There is no point leaving the EU if you just duplicate its many mistakes.  And the domestic reforms he prescribes for Britain are equally applicable to Australia. In particular, he refers to the Chilean experience of the 1980s.

One particular reform was to devolve responsibility for pensions to private providers. He says that as a result, Chileans have benefited hugely from privatisation. He points out that if most governments were commercial pension providers, they would be closed down because they are so inefficient and wasteful. From the enormous amount of money they take in compulsory contributions they waste an enormous amount and pay only the most meagre state pensions.

The big problem in the transition to the reformed pension system was the massive one-off cost involved. He asked the minister, José Piñera, how he handled this. Piñera said there was no easy answer; the government just had to economise. But when he brought the ministers on board, instead of protecting their own budgets, they   willingly searched for savings in their portfolios. The result was that the savings indicated were actually in excess of what was needed.

Australian politicians could learn from this. But the first thing they have to do is to set an example. How ridiculous it is that the Prime Minister has a vast staff with a CEO on close to $700,000 when he has the whole public service to rely on. Menzies had five or six people around him. And why should parliament rise for two months over the summer when Congress sits close to Christmas and starts again soon after the New Year.

So here’s my advice to the government. Cut your staff, cut your pay, cut your perks, pay yourselves superannuation similar to that paid to ordinary Australians, and ban politicians from becoming lobbyists (including lobbyists under any other name) for five years from leaving parliament. And follow Donald Trump and ban forever lobbying by former politicians for foreign governments or entities which are close to foreign governments.

Stop travelling around the world to completely useless conferences which are only photo opportunities and where the decisions have been made by the bureaucrats well in advance.  Stop travelling around the country for political purposes or for tourism at taxpayers’ expense. And if you really believe in global warming – which most of you say you do – make sure that your CO2 footprints are no larger than the average Australians.

Have the parliament sit longer, as the American Congress does, so that you can do essential things are not rush them through at the last minute, as you did  your mean and petty  backpacker tax. (In fact, if you thought about it you wouldn’t have introduced it at all.)

But back to Hannan. He says the guiding principles for the reform of government are three – localism, thrift and simplicity. Just on the latter the Australian government’s introduction of a new tax on self-funded retirees is an example of something which is remarkably complicated and imposes unnecessary compliance costs on anybody on superannuation or considering going onto superannuation; apart from being highly inequitable.

What we need is low taxation and less regulation. On taxation Hannan says we shouldn’t use the tax system to send messages, reward or punished particular groups or advance a social and agenda. So no obesity tax on sugar, for example.

He gives a splendid example for Britain, one which we could adopt in Australia. He points out that the man who created the economic miracle that is born in Hong Kong was a Scottish Colonial Office official, with the euphonious name, Sir John Cowperthwaite.

He served as financial secretary in Hong Kong from 1961 to 1971. His reforms – low taxes, small government, light regulation, free trade – turned one of the poorest places in the world into one of the richest. Asked by Hannan what had been the hardest part of his job, he replied: “Doing nothing is a full-time job. Don’t imagine that laissez-faire means putting your feet up. All officials want to extend their powers; all bureaucracies will grow if they can. To stop it happening you need to be at your desk before the civil servants come in and still be there when they go home.”

In Australia, this advice should best be given to a Prime Minister in relation not only to the bureaucracy but also the politicians and especially the politicians of his own party.

It’s the theme which was so obviously adopted by both Ronald Reagan and Margaret Thatcher.

Our model Prime Minister might also make a note of Hannan’s prescription that while governments have great capacity to do harm, they have limited (I would add very limited) capacity to do good. So do for Australia what Sir John Cowperthwaite did for Hong Kong.

David Flint is presenter of ‘Safe Worlds – Conversations with Conservatives’ on Safe Worlds TV and YouTube

Show comments