The new CEO of the London Chamber of Commerce and Industry, David Frost, says tax on business should not be seen as a free hit by the UK government.
I remember precisely the moment when I knew I would leave government for business. It was when I was British Ambassador in Denmark and I was being shown around a food producing company that was a big investor in that country.
Everyone I met had such huge pride in their product, their machinery, and their company. Everyone knew they were making a real contribution to a truly excellent product.
I suddenly realised that this determination, this enthusiasm, is more common in business than in government. And I wanted to be part of it. I saw that enthusiasm again when I finally made the leap to being head of the Scotch Whisky Association and representing one of Britain’s finest and most successful products.
And I am seeing it again now as CEO of London’s major business networking organisation, the London Chamber of Commerce and Industry (LCCI). The companies I see in this great global city can beat any of the competition.
Still, it’s hard to deny that business leaders don’t seem particularly bullish just now. There is a lot of uncertainty around, so it is perhaps inevitable that London’s companies and their workers feel edgy about their future.
At the same time Britain’s economy is still doing well. The dire predictions of disaster after the Brexit referendum have not materialised. Unemployment is low. Indeed, two-thirds of London companies want to take on staff – but can’t find the right people.
How should I interpret this contradictory evidence? What should I say about how London’s hundreds of thousands of businesses feel about their economic environment and Brexit?
I faced a similar dilemma during the Scottish independence referendum. The Scottish economy was doing well. Most Scottish businesses were plainly unenthusiastic about the prospect of Scottish independence. Yet many of those who worked in those businesses were a lot keener – as the final result demonstrated.
As both referendums demonstrated, dogmatic positions taken by business can easily be disproved by events. They can turn out to be out of sympathy with the views of many who business organisations claim to represent. So my approach will not be to offer a running commentary on unpredictable events. Instead I will campaign on the fundamentals. In recession or boom, businesses always need certain conditions if they are to create wealth and prosperity. I will be calling on governments to focus on these if they want to do the best by us.
To take some examples. We always prefer predictable and well-judged regulation, with no sudden changes and no excessive costs. So we were disappointed by the accelerated and heavy-handed introduction of the ULEZ, when many companies had planned for a later date.
We always need effective spending on infrastructure and transport, and we are ready to make a contribution when we benefit from it. That is what is happening on the great Crossrail project – and is why we are so disappointed by the delays.
And we are always more successful if taxation is low, simple, and predictable. I believe those who run businesses know best how to use their profits to the benefit of their company and workers.
The recent jump in London business rates was a knock to us and we have little confidence that the system will not produce similar problems in future.
Indeed, I am worried that too many people nowadays see taxing business as a free hit – something that keeps taxes lower for everyone else. That makes no sense. Only people can pay taxes. If you tax businesses you are taxing their workers, their owners, or their customers. If you doubt that, think about the TV licence. That is a tax on televisions – but it would be absurd to think it is televisions that pay it.
In short, when government takes the right decisions, business will prosper.
That assumes, of course, that those decisions are in government’s hands. It is not self-evidently good for London’s businesses if, after Brexit, important decisions affecting our operating conditions are taken outside the country without any UK say.
On 7 May, Sir Jon Cunliffe noted that a situation in which the UK has no say in the regulation of its financial sector would be, as he put it, “very uncomfortable”.
Similarly, business organisations have often in the past criticised the EU’s drift towards heavy labour market regulation. So I will take some persuading it will be a good outcome if the EU is able to set new UK labour market rules without any UK say – as currently seems to be envisaged by the leaders of both major political parties.
So my message is: get the fundamentals right. Work with us to create the best possible business conditions. Then London’s businesses will prosper.