Britain: Closed for Business?


For years now we’ve been vilifying that banks.  It’s easy to get an audience howling with rage if you say what dreadful people bankers are — and howling with approval if you propose punitive measures against them.

It is true that before and after the crisis, some banks did some very silly things.  And they failed to anticipate how bad things would get, and how lending that seemed safe might go bad.  But hands up anyone who did see how bad things would get.  Not too many, I suspect.  The misjudgement of the bankers was shared by most of us.  It’s just that they were making bigger decisions than most of us, so the consequences were greater.

As I have often written, the seeds of the crisis go back to mistakes by politicians (Bill Clinton and even Jimmy Carter, who wanted home ownership for Americans who couldn’t afford mortgage repayments) and Central Bankers like Alan Greenspan, who kept interest rates too low for too long, and said that asset bubbles would resolve themselves.  So they did, and we’re living with the consequences.

Meantime we’re asking banks to do totally incompatible things, like increasing lending to small businesses while at the same time building their balance sheets and lending more responsibly.  Oh, and paying back government/taxpayer loans into the bargain.

We need to ask whether our righteous indignation is killing the goose that lays the golden eggs.  Financial services remain a major strand of UK PLC, and we need to remember that if we make life miserable for bankers, and treat them like public enemies, they can go elsewhere, and we shall all be the poorer.

Now attention is turning to the tax paid by international corporations.  John Sentamu, no less, the Archbishop of York, has said that those who (legally) minimise their tax liability are “morally bankrupt”, and has suggested that they are little better than criminals. I wonder whether the good Bishop has any ISAs, or perhaps a pension fund?  Both ISAs and pension funds are tax avoidance devices, and a great number of people use them.  Are all these people “morally bankrupt”?  Is the Archbishop morally bankrupt?

Now the debate turns to the taxes paid by international corporations.  Vodafone is the latest in the frame.  I was watching Sky News this morning (June 8th) and they had the most wonderfully ignorant conversation about Vodafone.  We heard that Vodafone had paid no tax on £5 billion of “earnings” (they meant revenue).  Shock horror.

But Vodafone has invested massively in UK infrastructure (which is a great benefit to the UK economy), and of course they can offset some of that investment against tax.  At the same time, Vodafone has contributed £523 million to the Exchequer in indirect taxes like National Insurance, and invested £700 million + in infrastructure and 3G licences.  It spent £8 billion on UK staff (who presumably pay tax).

So.  Here is a company which builds vital infrastructure, employs a great number of people, invests in UK licences, pays large NI bills to the Exchequer, and is fully compliant with UK tax law.  They deserve a big Thank You from all of us.

We are damaging our economy with our perverse attacks on major industries.  We’re hanging up a sign that reads “Britain: Closed for Business”.  We’d better watch out.  International corporations may just take us at our word.

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15 Responses to Britain: Closed for Business?

  1. PJ says:

    I couldn’t agree with you more on this but problems close to home will soon start to bit our ‘moneymeisters on the “aristotle onassis” as more and more social avenues close down due to a lack of patronage that was a very loyal patronage up to 6 years ago! In excess of 12,000 pubs, clubs, Bingo halls, snooker clubs etc have now closed thanks to one ill conceived law, yet government continue to pander to these fake charity lobbyists. Every 10,000 unemployed costs this country £1.53m per WEEK in Job Seekers Allowance alone – 200,000 of those unemployed have come from the devastated hospital;ity sector. Clever old government eh ! Time for Lib/Lab/Con to disappear methinks!

  2. Tony says:

    Well stated Roger.

    The root of this problem is the over-bloated State that has an insatiable appetite for other people’s money, yet wastes it on stupid projects.

    Shrink the State, slash taxes and watch the boom in the economy with genuine prosperity.

  3. Donald Hedges says:

    Your article is a thinly veiled attempt to forgive large corporations Corporation Tax, which is part of the law of the land and is being aggressively avoided by these companies. It is you that is unpatriotic and a disgrace to this country, as well as these corporations.

    • Eric Worrall says:

      Then change the law – dont vilify companies which have not done anything illegal.

      If tax revenue you think should be paid is escaping the government’s clutches, and no laws are being broken, the incompetence of our politicians is to blame.

      Suggesting anyone is morally bankrupt for paying their legally required taxes is the real disgrace.

      • Donald Hedges says:

        Having been an officer within HMRC I know that tax is being aggressively avoided. If they offered me a job at a senior level I would go after all these multi-nationals. But if you want to pussy around with your mock angst and moral indignation, be my guest.

    • Sorry Donald, but you’re entirely wrong. If they break the law (that’s tax evasion, not avoidance) they should be prosecuted and punished. But if they’ve paid tax according to the law, and we think it isn’t enough, we must change the law. And blame the Treasury for creating an extraordinarily complex tax code full of opportunities for creative accounting.

  4. DougS says:

    Legally avoiding the payment of tax to a government (and they’re all pretty much the same) seems like a good way of avoiding serious waste. By holding on to some of their own money, companies are able to expand and employ more people, which is a good thing, especially when the alternative is handing it to a spendthrift bureaucracy.

    One point though, if any company has lied to HMRC about, for instance, where a business transaction took place, this could have consequences!

  5. Roger, you are so right, the bankers now getting the back-end rubbish from Vince Cable and Gerorge Osborne, crippling them with repayments, mis selling PPI, etc, etc and then trying to force the part sale of LLoyds TSB,to the Co-op, and the Co-op not having sufficient capital, and so the next step is to force privitisation of RBS. What a muddled thinking the treasury and George Osborne are trying to enforce.. The HM Government are not bankers and should NOT interfere with their investment arms, If they collapse so the whole UK will follow. RBS share price fell nearly 5% today because of this interference.

  6. Let’s be clear. Depreciation on capital expenditure is an expense just like any other, and should be deducted from profit when calculating tax, just as Vodafone have done. They have also been deducting the cost of the 3G licences paid 10 years or so ago. Even though the moron Brown received the money then (and wasted it) they were only allowed to claim for tax over a number of years.
    Unfortunately it is too easy for the papers to print misleading stories to sell copies.

    On the other hand, artificially transferring profit to other countries must be close to being illegal. However, proving it is another thing. It’s like me transferring half my wages to my wife, just to save tax and pretend she has done some of the work.

  7. Charles Wardrop says:

    Churchmen should be very reluctant to enter the secular political arena, but could appropriately argue that making wars is morally bankrupt, as is rattling (nuclear) weapons.
    Using up our money on useless Greenery and politicos’ freebies is none too moral either, but it’s not the Churches’ spiritual responsibility to intervene in such matters.

  8. Scareypants says:

    Well as an sme owner, i want to see the back of the EU and the ” special favours” given to multi nationals and banks by the EU and our government
    The corporatist bunch of elite are using government powers to close down many small businesses in my industry almost daily purely because the multi nationals cannot compete fairly. ( douglas Carswell highlights this problem well) it is strange that with national and local government on their side along with EU regulatory bodies, tax perks and top lawyers and accountants and bailed out banks bunging them millions to bail them out when failing badly, they still can’t keep hold of their customers . What do they do? They send out the mafioso to close the competition down. They have an excellent protection racket working between them.
    I am not sure when the UK became Russia , I must have been asleep

  9. Mike Stallard says:

    As an MEP, you will know the answers to these questions:
    1. Why is President Barroso deliberately confusing tax evasion and tax avoidance?
    2. What are the plans for the EU to move the banking sector from London to Frankfurt?
    3. Is it true that our national budget is scrutinized in Brussels?
    How far is London already under the control of EU directives?

    • Barroso (and a lot more people who ought to know better) are deliberately confusing avoidance and evasion, to ride the wave of popular (and media) outrage with bankers. There is no considered and deliberate plan to move the financial services industry to Frankfurt — just a lot of individual measures which reduce London’s competitiveness. In fact they do nothing for Frankfurt’s competitiveness either, so expect the industry to move out of the EU altogether — as so many others are. Currently our national budget is scrutinised in Brussels, but at the moment they have no powers to alter it — although they are free to comment and criticise.

  10. Techno says:

    As part of my pension planning, I have invested in a fund and I now indirectly hold shares in Vodafone, and Google as well.

    It is not just employment and infrastructure, people like me have our pension savings invested in them as well.

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