Sure, they were writing in a ‘personal’ capacity. Sure, it’s going to be big news that 103 business leaders are backing the Tories in the run-up to a general election in a letter to the Telegraph. But, to me at least, the whole thing reeks of a carefully-orchestrated stunt. And one with a very high risk of backfiring.
Let’s start with the letter itself, which asserts that the “Conservative-led government has been good for business”. Notice that the Liberal Democrats are not getting much of the credit here. And, if they are, they’re not saying.
The business figures justify their support for the Conservatives on the grounds of overall economic management, which has experienced the slowest recovery from recession in 314 years. The press and media have swallowed the Tories’ claims that the economy’s pitiful performance is something to celebrate, while forgetting that the Coalition government inherited an economy in 2010 that was actually growing by 1.9%. In fact, George Osborne oversaw a decline: in 2011, growth fell to 1.6%, and to 0.7% in 2012, before rising to 1.7% in 2013.
In an Independent article in August last year, David Blanchflower said the recovery seen during the last Labour government followed a similar pattern to previous recoveries, but that this disappeared once the Coalition took power.
He said: “What is unprecedented is the flatlining of the economy in the Great Recession under the Coalition, once the recovery was already underway, from around Month 37 (February 2011) through Month 59 (December 2012). In February 2011, GDP was 4.9% below the starting level; it was 4.2% below it in January 2012 and still 4.2% below in December 2012. It had still only reached minus 3.1% by May 2013, in Month 64. The Coalition killed off recovery at birth.”
Blanchflower was not the only economics writer who could see the optimism and celebration was misplaced. To take just one more example, Keith Fray wrote in the FT last August: “That the sum total of everything produced in the economy is only now returning to the levels of six years ago is astonishing. To give some context, the recession and recovery have lasted about nine months longer than the second world war.”
In all previous recessions, Britain had recovered its lost output within four years. This recovery, however, has taken more than six.
Indeed, the ‘recovery’, such as it is, has been characterised by an increased reliance on low-paid, low-skilled, low-security – often, temporary – employment with few prospects for progression, hence its name as the Taxless Recovery. Far from helping the recovery, the Coalition’s obsession with austerity – a strategy often shown to be counterproductive and ineffective – was probably a significant contribution to our economic frailties.
Even worse, one of the Coalition government’s stated aims when assuming power was to rebalance the economy; away from unproductive activities, such as financial services, towards manufacturing; making things, instead of playing with Mickey Mouse money. This has not happened, which has contributed to the modern-day UK’s poor productivity levels – a point depressingly missed by all of the major parties as the election battle hots up. Indeed, Britain’s productivity growth is at its lowest levels since the second world war.
So the business leaders’ assertion that the Conservatives have demonstrated their economic competence can be described as questionable, at best – and, at worst, complete tosh.
Which brings us onto the UK’s corporation tax rate, which is due to fall from 21% to 20% this month. This follows its cut from 28% to 24% in 2013, and the further cut to its current rate last year. The new 20% rate will give Britain one of the lowest corporation tax rates in the western world – even below Luxembourg’s 21% – though Britain still has a long way to go before getting into touching distance of Ireland’s 12.5%
The business leaders explained their support for tax cuts thus: “David Cameron and George Osborne’s flagship policy of progressively lowering corporation tax to 20% has been very important in showing the UK is open for business. It has been a key part of their economic plan.”
‘Open for business’, eh? Isn’t that the phrase Osborne has constantly used since the 2011 budget? (Yes, it is, just so you know.) It couldn’t be that these business leaders just used the Tories’ own scriptwriters to pen their letter, could it? Surely not!
But will the new rate be affordable? Well, according to the Telegraph, yes. It claims that the “endless barrage of propaganda about companies not paying their fair share [of tax] is both unfair and misleading”.
Two points here: whichever party is in power will have to sharply cut government spending. But given Osborne’s desire for a further £60bn of cuts if elected in May – with benefits for working-age people and around one million public sector jobs set for the chop – then protecting government revenues is, surely, vitally important. Important for a government that values public services and the people that rely on them, at least.
Whole departments could disappear in an austerity drive like no other we’ve seen before, yet austerity has delivered precious little as it is. Though Osborne’s projection was amended slightly in last month’s Budget, the damage will have already been done by then.
Tax and inequality
But, then, this is no concern of the business leaders who have signed this letter. Because, with the possible exception of Duncan Bannatyne – whose net worth fell from £420m in 2010 to an estimated debt of £122m in 2013 after a costly divorce – they’re all rich enough, thanks very much, not to care about cuts.
Tory supporter Baron Anthony Bamford has a net worth of $4.2bn. Dixons Carphone and Talk Talk owner Sir Charles Dunstone is worth $2.7bn. Baroness Karen Brady’s net worth is estimated at $123m. Former M&S chairman Sir Stuart Rose was reportedly worth £34m ($51m) in 2012. He recently told Radio 4’s Today programme that zero-hours contracts should not be outlawed. MacLaren Technology Group founder Sir Ron Dennis is estimated to be worth approximately £300m ($513m).
Outgoing Prudential boss Tidjane Thiam was awarded a £7.8m salary in 2013, just days after the company was censured by the Financial Services Authority for failing to notify it of its ultimately abortive £23.4m takeover bid for AIA. The Pru was also fined for failing to deal with the FSA in “an open and co-operative manner”. Thiam holds dual nationality – French and Ivorian – and is due to become the chief executive of Credit Suisse in June this year.
Bucharest-born Sir George Iacobscu – chief executive of Canary Wharf Group plc – received £3.8m from the sale of his Songbird shares to the Qatari Investment Authority and Canadian firm Brookfield Properties. In 2013, Iacobescu was awarded more so-far unreleased shares worth a further £2.3m, taking his potential total windfall to £6.1m.
Despite the continuing anger many feel towards the banking sector, Iacobscu wrote in the FT: “A lot of the faults found in the financial system have been eradicated. London’s banking system should give international investors even more confidence.” Yeah, right!
Meanwhile, in 2012, Greene King chief executive Rooney Anand was reported as saying: “We understand, as many people do, the difference between tax evasion and tax efficiency.” Two years later, a “highly artificial tax avoidance scheme” created for the company by Ernst & Young was thrown out by the courts.
But the letter’s publication in the Telegraph could not have been more appropriate. The Telegraph Media Group is owned by David and Frederick Barclay, whose personal fortune amounts to £6bn and who are domiciled in Monaco for tax purposes. And this is the same Telegraph from which Peter Oborne resigned in February because editorial independence had been subordinated to corporate interests.
To put the tax issue in context: though volatile, corporate profits are currently running at a record high. What’s more, tax cuts for the rich have virtually no effect on stimulating the economy and will simply add to the already-strong flow of money from the poor and middle classes to the rich, while simultaneously impoverishing everyone else – including the quickly-disappearing middle classes.
So one has to ask two questions: given that the rich and their corporate interests rely on the same infrastructure – schools, roads, transport, health service – that we do to generate their wealth, is it fair that they don’t pay their share of its costs? And secondly: if these corporate interests are raking in so much money, who is it exactly that’s picking voters’ pockets?
Judging by the Telegraph’s coverage today, we can’t rely on the corporate media to give us any of the answers.