Answer to Question #104930 in Macroeconomics for Usman Tariq

Question

After Brexit, why should the government maintain a tight spending policy and seek a higher tax take?

Answer 1

Despite the costs of membership in the European Union, Great Britain gained access to the Single European Market, profits significantly exceeded the costs of membership in the European Union.

The EU supported UK business and provided lower prices for consumers. And now, investments will fall and millions will lose their jobs, as global manufacturers will transfer their operations to more profitable countries - members of the European Union. Trade barriers and duties will be introduced.

Consequently, the union brought Britain economic protection. Therefore, in order to compensate for these losses, the UK government will be forced to pursue a policy of child spending and seek tax increases.