From today's Sunday Times.
Bosses can’t enter French airspace without being hijacked by Macron, and they love it
‘The true driver of growth is not government. It is the energy and dynamism and originality of the private sector.” Boris Johnson’s address to the CBI in November will live in infamy as “the Peppa Pig speech”. But his remarks as a whole were intended to make a profound point. It is not just rather wonderful that a pig that looks like a hairdryer has become a business worth £6 billion and counting. It is that post-Brexit Britain will prosper only if it is hospitable to innovation and entrepreneurship — the kind of innovation, as he pointed out, that saved countless lives during the Covid crisis.
Yet since the referendum the signals we have been sending business have been mixed — to put it politely.
For the past few months I’ve been working on a project with my colleagues at the Centre for Policy Studies think tank, supported by Shore Capital. We have spoken to more than 100 senior decision-makers, controlling hundreds of billions of pounds in capital, about what they think of Britain as an investment destination. It is, as far as we’re aware, the largest such exercise anyone has carried out. And the overwhelming message of the report, which is published tomorrow, is that Britain has been gradually becoming a worse place to put your money.
This verdict was all the more powerful for being fairly measured. People didn’t start ranting to us about Brexit. They didn’t excoriate the government. They talked about Britain’s natural advantages, its strengths in all manner of sectors, the high level of investment it attracts and how it was still a much more attractive destination on many fronts than its rivals in Europe.
But they also talked about the burden of tax. The safety-first culture of regulation. The planning system. The lack of certainty. How the government still hasn’t set out an irresistible narrative about post-Brexit Britain as an investment destination. How Whitehall departments never seem to talk to one another. About a hundred niggly things, from queues at Heathrow to limits on investment schemes, that we could be doing better.
To see why they may have a point, consider the chancellor’s own address to the CBI, at its annual dinner last week. The headlines blared: “Sunak vows to cut business taxes”. But that isn’t what he was promising at all.
Yes, the chancellor did promise new tax breaks for business investment in the autumn. That’s very good news: the woeful level of such investment is one of our biggest economic problems. But these new rates will be a replacement for the temporary “super-deduction” brought in to juice corporate spending during the pandemic. They may be more generous. They will probably be less so.
And then, next April, comes the real stinger: a six-point increase in corporation tax for firms making more than £250,000 in profit. This is a great big thumping tax rise on business. By the end of this parliament it will earn the Treasury more than £17 billion a year.
That isn’t the end of it. Last month the government made the extremely sensible decision to protect low and middle earners from its national insurance rises (a compromise first suggested in this column). But the hike in the other half of national insurance, paid by employers, went ahead as planned.
Similarly, the energy price cap has helped to protect consumers from soaring gas prices — even if it does not feel that way. But there is no cap for businesses, which have been exposed to the full horror in the markets.
Then there is the debate over a windfall tax on energy companies. This measure remains what it always has been — economically damaging, fiscally insignificant (when compared with the scale of the cost-of-living crisis) and politically irresistible.
Those in No 10 are right when they resist such a tax as “un-Conservative”. But how Conservative was it to raise the prospect in the first place, to force energy companies to increase investment? As with Michael Gove’s arm-twisting of the housebuilders on cladding, the quid pro quo was very clear: do what we want, or we’ll tax you. In other words: nice dividend you’ve got there. Shame if anything happened to it.
It’s easy to see why each of these decisions has, individually, been made. The government needs to repay the enormous costs of the pandemic. Taxing businesses is a lot more popular than taxing consumers. The Treasury thinks George Osborne reduced corporation tax too much anyway. We do need massive investment in energy to cut costs, cut carbon and cut out Putin.
But, taken as a whole, it’s hardly an agenda that puts business first — or encourages it to move here.
It’s not just about policy, though. What many of our interviewees talked about was the importance of culture, tone and narrative. Of the pro-business agenda being consistently championed from the top.
The example that came up constantly was Emmanuel Macron. Apparently, a chief executive can hardly cross into French airspace these days without having their plane diverted to the Elysée Palace. One business leader told us that invitations to the president’s latest glitzy investment summit at Versailles went out within hours of his re-election — with follow-up emails sent to junior colleagues to make sure the message had landed.
Britain put on its own investment gala in October, featuring dinner at Downing Street and tea with the Queen. But we aren’t holding another on the same scale until 2023. The prime minister has a crowded priority list, but he proved as mayor of London that, when he puts his back into it, there are few people better at wooing business — or championing wealth creation.
Many people in No 10 and the Treasury, at very high levels, completely get the importance of this agenda. The creation of the Office for Investment has been widely praised, as has the chancellor’s proposed reform of financial regulation. But we need to make it an absolute priority.
Shouting to the world that Britain is a resolutely, implacably and vocally pro-business country isn’t the kind of thing that wins votes, though I wish it were. But it’s the only way to generate the growth that votes come from. One of the key points from our research is that investors want to buy into success: the more business-friendly Britain is, the more dynamic our domestic economy, the more the world’s best companies and talent will want to come on board.
As one of our interviewees said, complaining about the slow pace of post-Brexit reform: “On much of this stuff, everyone knows what needs to be done. We need to get on and do it.” Amen.
No comments:
Post a Comment