Are the Tories just defending crony capitalism?
Published by The Guardian (10th February, 2015)
The embryonic general election campaign has been dominated by big business and its hostility to Labour. Attacks from former friends and avowed enemies have hurt the party – and rightly so. Some of Ed Miliband’s assaults on the ‘predators’ of capitalism struck deserved targets, but his solutions and failure to understand risk takers and wealth creators undermine his claims for the country’s top job.
Yet the Tories should be wary of crowing too much alongside their corporate friends. Yes, Miliband may have undone years of hard work by his party predecessors, seeking to prove that Labour could triangulate the interests of business, voters and Whitehall. But as yet another sordid tax-avoidance scandal breaks over the activities of HSBC, there are questions for the Tories: are they merely defending a corrosive form of crony capitalism?
Certainly the coalition has much to boast about on the business front, despite its short-sighted stance on immigration and uncertainty over Europe. It has cut corporation tax, reduced red tape, extended tax breaks and focused on job creation. The Tories can claim competence at the helm of the fastest-growing major advanced economy, and to be increasing Britain’s attractiveness in the global marketplace. But in a tight contest this may not be enough – especially for a party still viewed by many voters as being in the pocket of the rich.
Such fears can only be sharpened by the latest revelations exposing how a British-registered bank helped thousands of wealthy people dodge tax. Yet again we glimpse the contempt so many super-rich seem to have for their fellow citizens, stashing away vast sums to avoid handing a fair share of their cash to the state. It may not always be illegal, but it is highly unethical when the world’s finest financial brains spend their days using financial trickery to defy the desires of elected governments.
There is something depressing about the way politics and big business are so entwined that such practices carry on regardless of who is in power. Labour did little to stop them in office, for all the synthetic outrage now – while Jean-Claude Juncker, the leader who made Luxembourg the richest state in Europe by feeding off such corruption, was given the EU’s top job. At least David Cameron opposed his appointment. Yet it defies belief that his party embraced Lord Green – the man who ran HSBC – and made him trade minister, sticking with him even after the bank was found to have facilitated money-laundering by gangsters and terrorists on his watch.
When I raise such issues with ministers, they retort that Britain leads the way in seeking international consensus to prevent such abuses. “You have to move at the pace of the slowest country,” said one. This may be true. Yet there is nothing to stop them insisting that all firms in Britain disclose how much they pay the exchequer, which would fit their drive for greater transparency and allow the public to determine if they wish to deal with those evading duties. Starbucks showed the power of consumer pressure on this issue. And why on earth do ministers deal with any business that subverts government activities by not paying its fair share of taxes?
It is right to support wealth creators; our future depends upon them in a fast-changing world. But the flip side of backing a business culture is to insist that those benefiting show similar good faith. If red tape is lifted, those that rip off consumers should be hit hard. And having lowered corporation tax, the coalition should take the toughest line possible with those evading taxes. Yet how readily the Conservatives rushed to enlist the executive chairman of Boots, Stefano Pessina, to their cause last week, despite his enthusiasm for tax havens– and just look at some of the tycoons and hedge-fund titans attending the party’s lucrative fundraising dinner tonight.
During the last election campaign I was in Tory party headquarters when I heard that Sir Philip Green, the Topshop chief, was about to promote the party cause. When I pointed out this might backfire given his family’s tax position my arguments were brushed aside, and he appeared at a high-profile event alongside Cameron and George Osborne. This highlighted complacency on an issue that should have been at the core of an austerity government.
The need for responsible capitalism was a key part of the Tory modernisation message in opposition; think back to the chocolate orange obesity furore or Cameron warning Davos on the dangers of gross ineequality six years ago. But for all the tinkering with banking or energy, have we heard any squeals from corporate cartels being squeezed or rich tax avoiders being prosecuted? This would have been politically astute – as well as helping both consumers and the economy, since disruptive capitalism is such an invigorating force when it exploits the established order’s frailty.
There is an arrogance afoot among the super-rich, many thinking that normal rules of society do not apply to them. These self-serving elites seek to capture western governments, ensuring they can increase their wealth while protecting their interests. Such cronyism is damaging to the economy, just like misguided politically inspired interventions. Certainly the Conservatives should attack Labour for its antipathy to wealth creation – but they also need to find the right balance between business and politics.