Opinion: Are we open for business or shutting up shop?

“Let it be heard clearly around the world — from Shanghai to Seattle, and from Stuttgart to Sao Paolo: Britain is open for business,” George Osborne proclaimed rousingly in last month’s Budget. But what does this say about how Osborne views the UK? Unpick the assumptions underlying the rhetoric and the language reveals an intellectual wasteland beneath.

The reductionist’s reductions

There are two arguments against this world view. The first is that it is a highly reductionist view of any country, particularly one as culturally and socially rich as Britain. The second is that it is equally reductionist in its view of business. Why? Well, what message is Osborne sending with these corporate tax cuts? Essentially, that, as a nation, we can only compete at a discount.

Let’s say, for the sake of argument, that Britain is the business that David Cameron and George Osborne continually claim it is. What exactly are we selling? Because, whatever it is, we appear to be doing so purely on price. Osborne’s corporate tax cutting betrays a view of Britain as some tired old tart, once glorious, her charms faded, now having to drop her rates to attract passing trade.

And, barely credibly, Osborne seems to have learned nothing from his family business. What market does George Osborne’s family firm, fabric and wallpaper makers, Osborne and Little, cater for?  Well, put it like this, Wickes doesn’t stock them. In its 43 years of trading, it has built its reputation and grown its business on premium products. And it charges a premium for them.

Poundshop Britain?

What Osborne is offering is not even Poundshop Britain. At least businesses that trade under this banner have a clear brand and market positioning. They have a promise, they know their markets and appeal to and fulfill their needs. Even the universities understand the importance of a clear positioning better than the chancellor. In an increasingly competitive, global education market, they know they need to differentiate on quality rather than price.

A Sorrell state of affairs

Osborne argues that this discounting is justified to keep and attract large businesses to Britain. It was quite remarkable the speed with which Martin Sorrell announced WPP’s possible return to Britain after the budget. Leaving aside the impression that it owed more to PR than strategic business thinking, is this really the future for corporate tax policy in a truly global economy? Countries outbidding each other to attract companies until the next country outbids them?

The jury is out on the impact of Osborne’s approach. Jeffrey Sachs argues that we’re in danger of joining in the ‘race to the bottom’ in tax rates. Hamish McRae in the Independent, on the other hand, takes a more sanguine view.

The wrong view not the long view

But whatever the effect, it’s the wrong view not the long view. It’s an approach based more on speculation than building the foundations for long term, solid growth. There’s a danger that by cutting corporate tax rates and public spending rapidly you believe you’re taking decisive action rather than merely reacting to events and market pressures.

It’s kneejerk-onomics. It’s an approach that avoids the real question: what is it that we offer the world? Will Hutton articulated this recently in The Observer. It’s not just the left’s beloveds who feel like this. That stronghold of Marxist-Leninist dogma, the Economist, supports the position that growth will come not through tinkering with the corporate tax regime but with a way of attracting companies to this country through the skills of its workforce.

Zero zero vision

Focusing solely on the cuts is leadership by audit. We need leadership with audacity, that sets out an inspiring, outward looking, inclusive vision for Britain. A vision that articulates clearly what we offer the world. And a plan to realise this vision. Neither Labour nor the Conservatives currently offer this. Cameron’s Big Society at least makes an attempt, but is too introspective and apologetic for past Thatcherite howlers. Labour seems too confused by its recent mismanagement to develop anything coherent.

With a clear vision, we can then go to the world’s bond markets and like any business, answer the question, “You want this amount of debt to do what?”. With a clear vision, like any business, we can invest in what we believe is most important and judge that investment on its return (ROI). And that ROI will be defined more broadly and deeper than a narrow business view.

When businesses choose to come to Britain and, as importantly, to stay, they decide on a host of not altogether exactly calculated grounds: education, culture, healthcare, transport, what one could describe as ‘quality of life’. Because businesses are run by people. And the families of those people have a say in where they’d like to live. So the businesses work out if they can afford what we offer. Like our universities, like Osborne and Little, I believe that should be something of quality, rather than a poorly defined price point.

A country is far greater than the more narrowly defined value companies place when choosing where to operate. But if you are shouting you’re open for business, it helps to know what business you’re in.

Read more by or more about , or .
This entry was posted in Op-eds.
Advert

9 Comments

  • Simon McGrath 2nd May '11 - 7:23pm

    @andrew – Ireland’s emigration is an effect of their being in the Euro. If they had their own currency again it would have plumeted and Ireland would be a very attractive base for many companies. i have no doubt that they would be getting many many jobs as they would be a highly skilled, english speaking low cost location.

    A few months ago they were advertising cheap weekend breaks to London in Dublin – madness.

  • Hi Simon

    I have to admit that it’s been a long few days so it may just be me, but this seems quite a muddled article:

    “Unpick the assumptions underlying the rhetoric…. “
    Well as far as I can see, you haven’t stated what the assumptions are and who they belong to, so I find it hard to unpick them.

    “..reductionist’s reductions..”
    I was under the impression that the term “reductionist” referred to a belief in reducing a complex subject to its component parts to make it easier to understand. I would have thought that was a pretty good way to describe cabinet government, government would be to complex for one department so it is split into constituent parts to make it easier to understand and manage.

    In this case Osborne was acting as the Chancellor giving a budget speech, so you wouldn’t expect him to go into great depth on other subjects He did acknowledge that other countries had gained ground – “In the last decade, other nations have reduced their business tax rates, removed barriers to enterprise, improved education systems, reformed welfare and increased exports”. Now if he had started going into real detail in all the areas where improvement was needed would you:

    a. Have congratulated him on not being reductionist.
    b. Screamed blue murder as he was trying to take credit for all of the hard work carried out by LD Cabinet Ministers.
    c. Died of boredom as the budget speech entered the third day.

    Also, he actually did give 4 points where Britain should improve:
    • Have the most competitive tax system in the G20;
    • Be the best place in Europe to start, finance and grow a business;
    • Be a more balanced economy, by encouraging exports and investment;
    • And have a more educated workforce that is the most flexible in Europe

    Plus of course he also talked generally about various other aspects of government that could prevent growth.

    In all, your article seems to talk about many things that the Government is already trying to sort out, but you seem to have taken one tiny part of the puzzle and created a whole argument about failure? I believe you have an MA in both politics and economics so I wouldn’t have expected this sort of error from you, which makes me want to ask what is the real reason is behind the article itself?

  • Simon de Deney 3rd May '11 - 7:00am

    @chris_sh
    Thanks for taking the time to respond Chris.
    It’s a biggish area, so anything that may not have been completely clear or explained I hope was deliberate, in that the aim behind the article was to kickstart a discussion rather than provide a definitive critique.
    The starting point was an irritation at the glib frequency with which politicians trot out the cliché about Britain being open for business as if it answered everything. It reeks of motherhood and apple pie. It’s been well worn by everyone from Tony Blair and Gordon Brown (Foot and Mouth 2001) to David Cameron and George Osborne, but by no means do this quartet have an oligopolic control on the phrase.
    You’re right that ‘reductionist’ can have the meaning you mention, but it also has a frequently derogatory colour (see the Shorter Oxford Dictionary), so after consideration, I felt it was legitimate to use the phrase.
    I’m not sure I’d wish a three day budget on anyone, although some feel as if they last that long (although often many of the crucial details only start to emerge some time after Budget Day itself). Of course the Chancellor should focus on his area of responsibility and I’m not denying that there are measures being introduced that are helpful.
    However, the aim behind the piece was to provide a different, a business- and marketing-centred perspective on Osborne’s approach to corporation taxes in particular and more widely the economy. If you lay claim to treating a country as a business, then it’s helpful to use the analysis, skills and approach that businesses use successfully. The arguments around how to handle countries’ deficits tend to fall into the ‘deficit deniers’ and the ‘savage cutters’ camps. Return On Investment and branding seems to offer a more valuable and productive approach to the debate.

  • Simon de Deney 3rd May '11 - 8:03am

    @Andrew I agree about the difficulties of overcharging for something that doesn’t deliver and I think your point about sustainability is an important one. I don’t know the circumstances around Ireland’s labour exodus, but I’d imagine that there is a historical element playing its part. Emigration and diaspora have tended to form a larger part of Ireland’s relatively recent past.

  • Simon de Deney 3rd May '11 - 8:11am

    @Stephen W I agree that cuts in corporation tax may make Britain marginally more competitive, but it’s interesting to look at the US or Germany, which, under OECD calculations, have higher overall corporate tax levels, but which run fairly successful economies. I think they support the idea that you have to consider what you’re charging companies and people to come to your country for, rather than just focusing on the price. If I want to buy Louis Vuitton, I’m prepared to pay for it. I’d be delighted if I’m offered it for Samsonite prices, but if everyone starts to buy Louis Vuitton at that price too, then my perception of its value will suffer.

  • Hi Simon

    “The starting point was an irritation at the glib frequency with which politicians trot out the cliché about Britain being open for business as if it answered everything”

    I suppose if it is a bug bear phrase of yours then it is fair to lay into it, however there are so many meaningless words/phrases in politics (e.g. lessons learnt, the people have spoken and we will listen, opportunistic, progressive) that I tend to blank them out.

    However, working on the assumption that we could operate the Country like a business, I would make the following comments:

    1. I think we’d be hard pressed to go to the bank at the moment to ask for further funds. We’ve overspent and will continue living beyond our corporate means for some years yet. I think it more likely that the banks would thumb their nose at us. We’ve only increased the chance of not paying even more interest as the banks thought we were serious about tackling the cost over run.
    2. In order to impress the banks we’d need to show that we had a fairly efficient organization and probably good worker relations. That would be hard to do as the public sector unions tend to be militant, plus it may help their political party if they actively stir up trouble. An ultra efficient business may not be in the best interest of any board that replaces the current one.
    3. Many of the reforms being proposed could take a generation to work through (e.g. education reform). You are fighting vested interests to sort this issue out and of course a new board may take over before the work is complete. Such a change would probably see the improvements tail off or reverse.
    4. If a company has a brand PR disaster then it has some options open to it, e.g. try re-branding, try discounting to get customers back, change the product packaging, sell the company to another company who may be better placed to recover the situation. Now our business doesn’t really have most of the options, but we can make a start by reducing our price (corp tax, making the tax system more efficient, offering other tax breaks etc) which may bring more customers in. Once they are here are turnover will increase (tax income) which in turn may provide the money to ramp up our attempts to make the business more efficient (as the short term cost of such efficiency drives may require lots of extra funding).

    It’s an interesting concept and could be debated for a very long period (or at least until the article moves so far up the page that it is impossible to find it).

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?

Advert



Recent Comments

  • Phillip Bennion
    I will be chairing an event at Spring Conference entitled "Containing Russian Revanchism; What Must We Do?". Nathalie Loiseau MEP (France) and Petras Austrevici...
  • Christopher Haigh
    Too true John. Russia is an outlying vast place that can't quite work out if it belongs to the east or the west Putin might be wanting to reunite Russian minor...
  • john oundle
    'Matt Wardman Kremlinologising, I wonder whether Germany having tied themselves to Putin for energy' This is the most staggering part, Angela Merkel decid...
  • Fiona
    Thanks for writing this Michal, and for your role in this excellent programme. There's nothing quite like seeing things in person to help people understand how ...
  • Matt Wardman
    @Noncomformist :-) . Digging a little, it is surprising what they are willing to put on the block. At the moment there is quite an internecine argument go...