Politics

Stop saying Brexit Britain could follow a "Singapore model"—it wouldn't work here

The idea that Britain could be a new Singapore is a Brexiteer fantasy which misunderstands how both economies work

November 27, 2017
Colourful illuminated skyline of night time Singapore.
Colourful illuminated skyline of night time Singapore.

Whether it’s the 150-meter infinity pool straddling the top of the Marina Bay Sands at 200 metres, the designer shops in the ubiquitous shopping malls, the constellation of luxury hotels, or the thousands of vessels dropping anchor to trade or resupply in the Port of Singapore as they trans-ship between the Indian and Pacific Oceans, most visitors are wowed by Singapore.

This one-time mosquito-ridden equatorial trading port has become a sparkle in the global economy, and in the UK, it has gathered new fans among those yearning to make Brexit Britain a sort of Atlantic version.

Among the Brexiteer fans are Boris Johnson and Michael Gove, MEP Daniel Hannan, Conservative MP Owen Paterson, finance company owner Peter Hargreaves, and of course, James Dyson, a vociferous Brexiteer, who does his manufacturing and investing in Malaysia and Singapore.

Yet you don’t have to look very far to see that while Singapore has been an undoubted economic success in its own context, there’s not much about it that the UK would could, or would want, copy.

The so-called Singapore model is rather a sort of Disney-like fantasy that Brexiteers haven’t understood properly. What they actually want is an ideological construct of low tax, low public spending and low regulation, which they casually associate with Singapore. It is, though, an illusion.

The first thing to remember is that Singapore is a city, not a country. The UK population is 13 times as big, but its income per head is 25 per cent lower. UK manufacturing is half as big as Singapore’s 20 per cent share of GDP, and while the UK runs a significant external deficit, Singapore’s is close to 20 per cent of its GDP.

Singapore is the world’s second busiest port after Shanghai while the UK’s biggest container port, Felixstowe, ranks 35th in the world. London, like Singapore, is a major financial centre, but rated higher in terms of sophistication and infrastructure.

A Singapore state of mind

It’s worth bearing in mind, too, that Singapore has properties and attributes that have evolved hand-in-hand with its successful economic model. Looking at the economy, Singapore is highly ranked, and far above the UK, in widely followed global surveys on governance, the quality of public services, competitiveness, maths and science teaching and PISA scores, the effectiveness of regulation, and information—and digital-awareness.

Experts think that Singapore’s high reputation is attributable variously to small size, cohesion, and culture—which are attributes we can’t copy—and also to a highly interventionist approach by government and public institutions in the form and functioning of the economy and society.

These include the interventionism of a meritocratic but authoritarian ‘state,’ and illiberalism, under which the government curtails civil liberties and freedom of expression, assembly and association, and still criminalises homosexuality. If there is a Singapore model, these things are part of it.

Last time I checked, this isn’t what Brexiteers want at all. On the contrary.

Building a better economy

It’s also worth noting the longer-term investment in Singapore which has been absent in the UK.

Education has always figured prominently in Singaporean public policy, which allocates to it about a fifth of public spending. It also subsidises reasonable quality housing for 80 per cent of citizens, and provides an array of other welfare services, including healthcare, through the Central Provident Fund, into which employees and employers pay mandatory proportions of wages and salaries—currently 20 per cent and 17 per cent respectively. After the age of 50, these rates taper.

Moreover, and importantly, government investment agencies, such as the Government of Singapore Investment Corporation (GIC) and Temasek, are well-funded, well-managed institutions that pay significant investment income into the government’s budget to fund spending and keep the budget more or less balanced.

They have been investing the proceeds of Singapore’s balance of payments surpluses for about 40 years, and run assets estimated at around $550 billion.

Formally, Singapore’s government tax revenues and tax rates, and public spending are low as a share of GDP, but next time you see someone boast about them, you can now say knowingly they are comparing apples with oranges.

In any case, who ever thought that a country of 67 million people with an ageing population and a prized NHS could get away with a low-tax, low-public spending strategy? You know who.

The importance of immigration

Singapore would fail to function were it not for its high immigrant and non-Singaporean population—accounting for roughly 40 per cent of its 5.5 million population. Drawn largely from countries in East and South Asia, this population has been key to Singapore’s success, not to mention the lifestyle of its expatriate workers and professionals.

Nowadays with a rapidly ageing population, Singapore is trying to seek out those with the highest educational and other skills.

You won’t find many Brexiteers arguing that Global Britain, with its 13.6 per cent share of foreign-born in the population, should exploit immigration the way Singapore has.

A different role on the world stage

Singapore wouldn’t be Singapore were it not for its role as global transportation and shipping hub, or its deep integration into Chinese and Asian supply chains. The UK is also an important transportation and investment hub, and integrated into its supply chains, but in the EU, the largest economic bloc in the world.

There may be more strings attached to single market and customs union membership, but severing these geographic ties and links for new arrangements which cannot be a like-for-like substitute will undoubtedly cost and do harm. If we want to copy the Singapore model, we should continue to mimic the integration model it pursues in its geography.

In summary…

What the Global Britain brigade want to copy is the alleged low tax, low public spending, and low red tape and regulation regime in Singapore. Yet, as I have pointed out, the allegations should be taken with a pinch of salt. In any event, the UK corporate tax rate is close to and will soon be as low as Singapore’s.

Personal and national insurance tax rates, and public spending levels in the Singapore and not as low as claimed, when making proper comparisons. Singapore’s economy isn’t low-regulation either, but it is probably better and certainly more tightly regulated.

The Singapore model then turns out to be a Brexiteers’ fantasy. It’s a model that works for Singapore, possibly for other cities and small states, but is inapplicable to the UK. What the Brexiteers wants to copy either doesn’t exist, or isn’t what they say it is.