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Buck up, Britain
May 2008
Ian Campbell OBE, ex-Director General of the Institute of Export
Everywhere, at shops, in Post Office queues, at garages there are angry people loudly expressing their discontent. And mention council tax to anyone and even the proverbial ‘sweet old lady’ will start to snarl. It has been widely reported that growing gloom over the economy has plunged the ‘feel-good’ factor to its lowest level ever, while, apparently, the Government hoped that by about this time it would have overcome its 2007 traumas (Northern Rock, lost personal records etc). However, a recent poll suggests that the Budget – which particularly affected small business owners with inflation-breaking tax rises – has scuppered such wishful thinking.
Shortly after the poll results were published, the opening of Heathrow’s Terminal 5 was a debacle, described by David Frost, director-general of the British Chambers of Commerce, as ‘a PR disaster at a time when London and the UK are positioning themselves as global players’. (See In my Opinion on Page 7)
As if that wasn’t enough of an international disgrace, tarnishing the UK’s already-under-siege reputation, we suffered the further indignity of seeing British hoodies on the front cover of Time magazine, which referred to ‘an epidemic of violence, crime and drunkenness’.
In the face of all this, the Commons Commission then instigated a High Court action – at our expense – to stop us knowing how much of our money some of its members are spending.
Returning to the business front, there was the news that Britain is now the fourth most indebted nation in the world, after Egypt, Pakistan and Hungary. Also, a report by the CBI's independent Tax Task Force (See Another Viewpoint on Page 42) makes it clear that the advantages the UK gained from cuts to corporation tax during the 1980s and late 1990s have now been lost.
Other countries have taken bold steps to cut their rates: The Netherlands and Portugal to 25 per cent and Ireland is famously at only 12.5 per cent. The UK's rate meanwhile has lagged and is now higher than the OECD average of 26.8 per cent, even after this April's cut from 30 per cent to 28 per cent.
In terms of the burden of corporate tax, the UK's effective average tax rate is now the eighth highest in the OECD. Nor is corporation tax the only burden; companies pay £1 in other taxes for every £1 of corporation tax.
Also, complexity in the tax system makes it harder for business to plan ahead and pay its taxes. The average number of pages contained in the Finance Bill rose from 153 pages during 1980-4 to 312 pages from 1995-9 and 463 pages between 2000-7. In 2007, Tolley's Yellow Tax book totalled 9,866 pages, 4000 more than in 2001. So it is no surprise that the UK now has the longest tax code in the world.
Richard Lambert, the CBI's director general, said: ‘Our traditional tax system is no longer fit for purpose and is making the UK look increasingly uncompetitive. We need bold action to restore a competitive headline rate of corporate tax.’
All in all, Britain’s standing and its economy have gone from parlous to imperilled under a government that, like the tax system, no longer looks fit for purpose.
It can now be seen that Gordon Brown’s much-vaunted stint at the Treasury was nothing but a house of cards. And, whilst it’s difficult to avoid sarcastic asides along the lines of ‘where is Prudence now’? – it is clear that someone has to take a lead on the economy that a running-on-empty government appears incapable of doing.
And the answer has to be British business. It must be hoped that UK plc has some ideas and that it can work with the Government to begin dredging Britain out of the mire.
First step, perhaps: a think tank with some revolutionary thoughts!
