Index of Economic Freedom: UK drops out of top ten


The news that the UK has dropped out of the top-ten countries in the Index of Economic Freedom should act as a wake-up call to the politicians wishing to form the next government. The country’s score dropped from 79 to 76.5, the second largest fall among the world’s twenty largest economies (only in the USA is economic freedom declining even more rapidly). Worse still, the 2010 Index is based primarily on data from July 2008 to June 2009 – before December’s disastrous Pre-Budget Report and the arbitrary supertax on bankers’ bonuses.







Under New Labour, Britain has fallen far behind leading economies such as Hong Kong (score: 89.7), Singapore (86.1) and Australia (82.6). The UK has moved closer to the low-growth economies of continental Europe.







The implications are extremely serious. The prospect of further tax rises and more burdensome regulation will deter the private investment needed to bring about a vibrant and sustained economic recovery. Moreover, there is a growing risk that multinational businesses will move their UK operations to countries where there are fewer restraints on their activities.







The next government should therefore act quickly to reverse this worrying trend. In particular, urgent steps are needed to tackle very high levels of government spending (the UK scores just 41.9 out of 100 on this component of the Index). The imperatives of the current fiscal crisis mean either large tax rises or severe cuts to public expenditure will be necessary. These shocking figures on economic freedom strongly recommend the latter.








3 thoughts on “Index of Economic Freedom: UK drops out of top ten”

  1. Posted 20/01/2010 at 17:35 | Permalink

    […] Richard Wellings discussing the policy implications on the IEA blog. […]

  2. Posted 20/01/2010 at 23:16 | Permalink

    A drop of 2.5 points since last year is a lot. But I would emphasise the two areas where the UK already did extremely badly. On eight measures last year it was not too bad, with three scores in the 90s, four in the 80s and one just under 80.

    But on Fiscal Freedom last year’s score was only 61.5 and on Size of Government it was a wretched 40.3. So in order to improve the UK score on Economic Freedom, there needs to be tax reform and a sharp reduction in the size of government. Is either of the main political parties offering that?

    On all the other areas the UK scored higher than the European average; but on those two it was worse.

    Is either of the main political parties offering that?

  3. Posted 22/01/2010 at 18:52 | Permalink

    […] of the top-ten countries in the Index of Economic Freedom.  As the Institute of Economic Affairs explains: The country’s score dropped from 79 to 76.5, the second largest fall among the world’s twenty […]

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