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Mutiny on the Quarterdeck – Dissent in Britain’s Command Economyby
Sean Corrigan
‘The increased level of government borrowing is very concerning, particularly as it is clear that increased spending in the public sector has not been accompanied by significant efficiency gains.’ So said Philip Bowman, chief executive of UK drinks giant, Allied Domecq, interviewed in the FT, insisting this view was common in Britain’s boardrooms where, Mr Bowman added, business leaders worry that the UK is ‘rapidly losing its competitive edge’ as a result. With a wry dig at Culpability’s penchant for creative accounting, he went on: ‘The Chancellor's assumptions in his recent [pre-Budget] statement appear unrealistic. It seems inevitable that further rises in direct and indirect taxes, at a more politically expedient moment, will be required… even excluding the large amounts of debt moved out of official borrowing figures in the past six years.’ And Bowman drew the obvious, disheartening conclusion: ‘A rise in UK corporate taxes remains a concern as is the threat of further rises in national insurance. Interventionist government policies across our business in such areas as employment law and regulation have already added very significantly to our UK cost base.’ Here! Here! Nor was Mr. Bowman alone in his reproaches. Tesco’s corporate captains also complained that ‘We now notionally pay 53 per cent of our profits in tax, with corporation tax and things such as property stamp duty and National Insurance contributions. We would not want to see that going up any further. And that goes for our people as well as the business.’ As we recently wrote, it is a matter of contention whether the measurable final outcomes of Brown’s hyperactivity merits the full value accorded them in the national accounts. The reason this is a dubious proposition arises from the fact that what we got given this way was not what WE chose to have, but what his minions decided was in our interest. If you don’t see why this does not achieve the same economic ‘utility’, ask any six-year old ice cream lover whether he REALLY felt happy at being given an apple for pudding instead, on the grounds that it was ‘good for him’! But, even taken as they are presented, all Brown’s tens of £ billions of extra borrowing and taxing last year delivered a paltry 2% extra real return. Tesco’s, in contrast, routinely generates around 10–11% before inflation – let’s say 8% after – on the capital IT employs. A little envelope scribbling here leads us to tentatively conclude that if Brown limited the amount lifted from Tesco – which, as the nation’s most successful grocer must be doing SOMETHING right in satisfying customer wants – so that it was left with 15% more what it alone makes in the first place, then, over 10 years, not only would the nation receive many more truly desired goods along the way, but it would also have around £8 billion pounds in extra inflation-adjusted capital to play with. Over that same horizon, sadly, Brown’s depredations would only add up to a cumulative £100 million in more real goods and services, all probably greatly misaligned with genuine consumer preferences – and NO extra capital! Among the others lined up by the FT to take potshots at Brown were: Mike Parton of Marconi – ‘a bigger concern is the impact that increased employment taxes would have on the relative cost of employment in the UK.’ Corus, fretting that higher public sector wage inflation ‘risk[s] crowding out the private sector’ and blasting both taxes and the many ‘arcane’ regulatory measures, ‘which nobody understands but which have a major negative impact on competitiveness and profitability.’ Mark Swift of the engineering trade body EEG – ‘Manufacturers… are also frustrated at the lack of progress on reform of public services at a time when they have dug deep to substantially improve their own productivity.’ Rolls-Royce – on how the government spends the £7bn it earmarks for R&D – ‘We would argue for those funds to be better directed, based on a real understanding of global markets.’ Even firms such as Hanson, British Land and Whitbread, who admitted that Brown’s doles and dispensations benefited their cash flow directly, were less than whole hearted in their praise for its overall effects. And no wonder, for, as the Telegraph reports, ‘from money laundering to wheelchairs and new rules on dismissals, businesses are faced with implementing another raft of government legislation this year, even before they get to grips with the Budget or new edicts from Brussels.’ That tireless Mr. Brown, it seems has promised to ‘reform and review’ fully 147 regulatory items this year. 147?!? Lumme! That’s almost three a week, meaning that, potentially, every other business day, Britain’s managers will have to employ someone to read, assess and then implement some new set of arbitrary rules and Kafkaesque regulations, each affecting the way they are allowed, or required, to conduct their affairs by the Socialist apparatchiks who sit in judgement over them. THAT should be good for productivity and profitability! January 8, 2004 Sean Corrigan [send him mail] writes from London. Copyright © 2004 LewRockwell.com
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