Margareta Pagano: How the Tories' NI plans play at the Dog & Whistle
Labour's 1 per cent rise is seen as a tax on jobs
Sunday 11 April 2010
Leave aside for a moment the funding details behind Conservative plans to reverse Labour's decision to put up National Insurance if they win the election, and celebrate the delicious spat it has caused. The reason this row should be welcomed is it has at last provoked proper debate about the sort of taxes – and cuts – the public is being offered by our main parties.
It may only be the tiniest slice of money in the scale of the overall deficit (read Chris Watling opposite for more on this), but the fact that everyone is getting so steamed up means the businessmen who have come out in support of the Tories have touched a raw nerve. Gordon Brown's extraordinary outburst, accusing the businessmen of being deceived by the pledge, was evidence of how their response to his 1 per cent NI rise has embarrassed him.
Usually, it's dangerous when business people adopt such a partisan approach to policies, but this time the danger is with the politicians who have also been forced into the open. If nothing else, the row reminds us just how chunky the NI tax burden has become for employers – who pay 12.8 per cent of an employee's salary in NI, while workers pay 11 per cent. So I was surprised when Richard Lambert, head of the CBI which supports the Tory promise, suggested the row wouldn't interest the man in the Dog & Whistle. He is wrong – the man in the pub cares deeply about how much employers are taxed, as they know how this hurts their own job prospects.
The row should also be relished because it's forced experienced businessmen into talking about the impact that higher taxes will have on future growth, and employment. While some might be cynical about business ganging up on Labour, there's no reason to believe their intervention is anything other than a genuine attempt to shout out that it's their hard work, talent and investment that provide growth. A devastating side-effects of the recession is the impact it's had on new capital investment and on productivity, which has fallen sharply recently, The UK workforce is now producing less per worker than in France, Germany and Italy.
Most growth comes through productivity gains, so how investment is kick-started again is the big question politicians are avoiding or don't have the answer to. But productivity gains are simple to achieve and come from new plant, machinery and equipment, rather than people working harder. Thus the plumber of today driving the latest transit van can do more work than he could in the 1970s. The same is true of the accountant who uses the latest Excel spread sheet.
But today the plumber can't afford a new van and the accountant doesn't want to pay for more software. So how do we get them investing? The answer will come from the private sector not government. Businessmen and entrepreneurs need to feel confident, able to borrow against their own assets, or their friends', to take the risk. That's why the Tories have played a smart card, showing they are more in tune with the punters at the Dog & Whistle than people think – the reason why Brown was so angry. If the Tories want to continue the winning streak, they should also promise reform of the NI and income tax.
Crunch talks We can learn from Alan Greenspan's example
The Americans not only do financial crises better than us, they also find out why they happened better than us too. Just watching Alan Greenspan, the former Federal Reserve chairman, being questioned by the Financial Crisis Inquiry Commission last week was a treat for anyone wondering how we got into this mess. Greenspan tried to defend his record by saying he had been wrong only 30 per cent of the time, but at least he was forced to explain. Here the Treasury Select Committee has been admirable in its banking scrutiny but other than that there has not been a single inquiry into the credit crunch. Whoever comes to power next should promise their own FCIC-style grilling so that we can learn more details. It's only 18 months since this government raised nearly £1trn from taxpayers to save the financial system from collapse, and it's staggering that not a single politician is calling for an explanation. One for the manifesto? You still have time.
Reckitt's boss gets £90m – and for once I'd say it seems well-deserved
Whenever I hear Bart Becht's name I'm reminded of Bertolt Brecht, the modernist German playwright. Now I know why – apart from his name, of course. News that the Dutch boss of Reckitt Benckiser has been paid such a whopping £90m suggests Becht could have stepped right out of one of Brecht's more avant-garde pieces of theatre. It's a huge amount of money, and will look to most people like yet another example of egregious corporate robbery.
But I am going to take a heretical line – that Becht's package appears well-deserved; first it relates not just to pay and bonuses but also to exercising share options which go back nearly a decade. Second, Becht has presided over one of the great stock-market success stories of the past decade after taking the helm in 1999. Over the past five years, investors backing Becht will have seen their shares more than double – £100 of shares in 2004 are worth £239 today – and have outperformed the FTSE 100 Index by a big margin. What's interesting is that while Becht is a manager of other people's money, he has obviously displayed entrepreneurial talents by turning this fuddy-duddy Cillit Bang-to-mustard group into a go-go stock. It's odd that we don't seem to mind entrepreneurs such as Sir Richard Branson of Virgin, Sergey Brin of Google or Mike Lynch of Autonomy making their millions. Indeed, we celebrate them. Maybe it's time we acknowledge that businessmen or women can be entrepreneurs within big firms too – Bob Diamond at Barclays and Sir Terry Leahy of Tesco are other examples of entrepreneur-managers – in companies which they didn't start, but built up. It's a new category of businessman, perhaps, but one worth thinking more about.
My own view is that Reckitt shareholders, the ultimate owners, are the best people to decide if the shy Becht really is worth such a starry role in this show – and it's hardly a Threepenny Opera.
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