During the Olympics and Paralympics we have been reminded of just what a great country we live in and suddenly there is a surge of pride and optimism in what we can achieve.
Apart from our sporting prowess what else is great about the UK and what makes it a great place to do business?
Firstly I would point to our innate sense of fair play; maybe this also has something to do with our love of sport. Generally we do not tolerate unfairness in society and this had helped us create a strong legal system with laws that are generally respected and adhered to. If you gain wealth in the UK the system protects your property rights, unlike other parts of the world where you would have to keep the local police and politicians 'onside' by various other means.
Despite the many debates about our school the UK does have a well educated population. Of course improvements can be made but everyone has the opportunity to better themselves through their schooling and this is provided to everyone by the state. This means that businesses operating in the UK can draw on a well qualified workforce. There can be little doubt that a better educated population is also a less violent and more law-abiding one. Together with our state benefits, which provide a safety net, we avoid the desperation that leads to the extreme poverty, and violence seen in other parts of the world. In the UK a successful businessman generally doesn't need to hire personal security guards.
The state also provides universal services such as a routine rubbish collection service that ensures that our streets are clean and hygienic, we care about protecting our environment and maintaining a pleasant and healthy place to live.
The crown jewel of our public services, of course, is the NHS, which ensures that our population is relatively healthy. A healthy workforce is a productive workforce. Again this is provided free to everyone so we have fewer workers struggling with poor health.
Therefore businesses that operate in the UK are benefiting from a wide range of background public services that they can not be sure to get in other parts of the world, especially low wage countries and those with poor records of human rights. It is right and proper that businesses and high income individuals should pay higher taxes because they benefit most from the environment that is created by the public services.
We often hear the argument that taxes need to be lower in order to attract business to the UK or keep high wealth individuals working in the UK but how much truth is there to this argument? How many businesses could realistically move abroad and still operate in the UK market? Well none of our bricks and mortar retail business for a start - they physically need to be on the high street but Internet business can operate overseas and the government needs to clamp down on tax dodgers like Amazon. Tesco is one of our biggest businesses but they cannot leave the UK tax system and still benefit from doing business here, they cannot do business without employing British workers.
The building industry can only work from within the UK and almost all of the service industries need to be in the UK to interface with their customers. Some workers might come from other countries but this is a relatively small number and easily controlled. Some manufacturing could move overseas, indeed much of it has already done so but despite the apparent advantages of low wage labour markets several foreign companies choose to build cars in the UK.
In summary I would argue that the UK offers a great environment for businesses and business people to work and live and we should not be scared of them leaving if they don't like our system of public services and taxes on the wealthy to fund them.
Occasionally a truly unique entrepreneur emerges but generally speaking if Business A didn't exist then similar Business B would take it's niche and thrive just as well. Successful people like to think they did something special but often they were just in the right place at the right time and marginally more lucky that their competitor. We should not be scared by threats of business people flying the country - it simply won't happen because they are onto too good a thing here in the UK.
Sep 12, 2012
Feb 12, 2012
Banker's Bonuses
The outcry over large bonuses paid in the financial services sector, in particular investment banking, is understandable but the argument seems to be missing a couple of critical points;
1. we should not really be so concerned with how private businesses choose to run their affairs. What has impacted the general public is the enormous amount of money the government had to invest into the banks to avoid a terrible crisis. Steps are already under way to ensure we never have to do this again and in future poorly run banks should be allowed to go to the wall with investors taking the hit as they would in any other business.
2. no-one seems to be asking how investment banks can make such huge profits (in good times at least) that they can afford to pay such massive amounts to their staff both in salary and bonus. Only a small proportion of these profits come from proprietary investment (i.e. where the bank gambles with its own money) and the majority comes from trading on behalf of clients, the largest of which are the pension companies. So, the fees paid by pension companies make up the majority of the banks profits and it is our money that goes into these investments whether it be in the shape of a pension or an ISA.
In any other form of business we would be asking questions about the competitiveness of a market that allows such massive profits to accumulate. Undoubtedly the mega-mergers that went through in the wake of the 2008 financial crisis were bad for competition and the sooner they can be reversed the better.
Alternative forms of financial management should also be encouraged such as credit unions, co-operatives, etc that retain capital within a community instead of seeing it disappear into the pockets of a faceless, probably overseas multi-millionaire.
1. we should not really be so concerned with how private businesses choose to run their affairs. What has impacted the general public is the enormous amount of money the government had to invest into the banks to avoid a terrible crisis. Steps are already under way to ensure we never have to do this again and in future poorly run banks should be allowed to go to the wall with investors taking the hit as they would in any other business.
2. no-one seems to be asking how investment banks can make such huge profits (in good times at least) that they can afford to pay such massive amounts to their staff both in salary and bonus. Only a small proportion of these profits come from proprietary investment (i.e. where the bank gambles with its own money) and the majority comes from trading on behalf of clients, the largest of which are the pension companies. So, the fees paid by pension companies make up the majority of the banks profits and it is our money that goes into these investments whether it be in the shape of a pension or an ISA.
In any other form of business we would be asking questions about the competitiveness of a market that allows such massive profits to accumulate. Undoubtedly the mega-mergers that went through in the wake of the 2008 financial crisis were bad for competition and the sooner they can be reversed the better.
Alternative forms of financial management should also be encouraged such as credit unions, co-operatives, etc that retain capital within a community instead of seeing it disappear into the pockets of a faceless, probably overseas multi-millionaire.
Feb 10, 2012
Supermarket Low Pay
Rates of pay for the lowest earners at the big four supermarkets are between £6.50 and £7.50 an hour and many of their employees need state benefits just to make ends meet. On Newsnight they estimated that this costs some £50 a month per employee on average.
The idea of a Living Wage at around £8.50 was floated and it would seem fair to employees of such large businesses, so perhaps all businesses with a staff of 50 or more should have to meet the Living Wage. Despite the large profits and high executive pay these companies would have good cause to be upset by this.
I would suggest that National Insurance should be cut by a couple of percentage points in order to lower the costs for businesses to employ people. The nett cost to the tax man should not be that significant due to the corresponding drop in benefits paid out.
Almost all the extra money paid to such low earners goes straight back into the economy, some in direct taxes and others through indirect taxes (VAT) and the knock on effect of increased spending on the high street.
For a just society we have to aim for everyone to have the opportunity to work and we also need to find ways to reduce the consumption rate of all natural resources. Much better to spend tax money on getting people into work than artificially reduce the cost of non-renewable resources such as fossil energy.
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