Common Wealth?

Here’s a little throwaway concept I bounced around recently given a number of topical factors and the fact that technology has reduced the impact of global physical boundaries. Globalisation of business has demonstrated the mockery of taxation that has long existed for large organisations by merit of the recent visibility of income versus tax paid. So why not take a completely different approach in financial terms if the rules are as open to change as recently purported by Eric Schmidt?

What would be the effect of the UK repositioning itself as a tax haven for Commonwealth countries and forging an economic treaty with those countries? Working towards generating a strong, stable system of mutually beneficial financial ties similar in some ways to the EU, yet without the tying together of the core social systems, boundaries and governance that cause such problems in the European model.

Considering the attitude of the main players in the EU at present towards the UK, making such a break would certainly not make a massive difference and would also not negate the UK’s ability to trade and deal with the EU and elsewhere. It would just have a much stronger position and could offer a stronger trade options for the less affluent members of The Commonwealth. The more affluent members would benefit from the tax efficiencies offered and could also then deal better in the global economy. All would know there are common goals in stability and growth that they could depend on each other to maintain.

Now I know the minutiae of this concept would require an immense amount of work, mostly in how to extract the UK from current treaties that would be invalidated. Although probably deemed an extreme flight of fancy, I think it would at least be an interesting topic for an economist to model and see what potential new financial systems would evolve to serve such a construct. As the Commonwealth’s website proclaims it encompasses 20% of global trade with the combined members.

So the idea at the highest levels would follow;

  • UK provides tax efficient investment facilities for Commonwealth member states (Why was it that so many British institutions funds were and probably still are, invested in highly risky foreign locations such as Iceland?)
  • Banding together into a common economic block would cement existing ties and add stability to member states
  • Certain other chosen partner states could hold a privileged status and benefit from some similar tax efficiencies
  • Sovereignty, border controls and other aspects of state government would not be a part of this arrangement
  • Similarly the ability to maintain and control discrete currencies will allow greater flexibility again as not seen in the EU debacle. Member states may choose to provide better exchange rates to other member states improving tourism, trade and another market for financial institutions.

Pros

  • Member states often share a similar system of government and historically have more in common than states in the EU
  • The existing structure of the Commonwealth has continued to work even without the awareness of its existence by many people in member states. By highlighting the possible benefits of developing the structure to have a positive meaning and even beacon for citizens of member states, it would provide a framework around which stable financial futures could be built.
  • Any strong financial block of countries that work together for stability will enable global financial stabilisation. Another driver for inbound investment in member states.
  • A massive new financial model can be built, studied and developed rather than continuing to redesign existing flawed models to fit a changed global financial landscape.

Cons

  • Convincing any sane person that this is a good idea and or possible! (I preclude myself of course)
  • Immense amounts of legislation, treaties and agreements to be examined and redrafted or cancelled.
  • Drafting of a financial model that serves the benefits of all member states in terms of stability and increases each state’s ability to perform in global markets.
  • Gaining support of the people in each potential member state.
  • Perception of this could be deemed modern day imperialism although demonstrably not, if all countries choose to be a part of a construct rather than being forced. With such other strong member economies, there is no reason the structure would be led by the UK in anything more than the historical ceremonial aspects that would have no bearing on the financial constructs. Contrasting this to the blatant global commercial imperialism being enacted by China and global organisations at present, I think this idea far more transparent and worthy.

This is one for those who run down anyone that criticises current systems with the age old phrase “Well there’s no alternative so we’ll do it the way we always have” I’ll leave that for the discussion on the current uniting of Conservative and Labour to try to ensure modern, multi-party politics is stifled for another few years.

There’s always an alternative.

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