Isn’t it time Gordon Brown stopped the FTSE stampede?
Whoa there. Hold your horses, folks. The rustle of alarm is turning into a scuttle, and the scuttle is turning into a drumming roar of feet in flight. As the economic position gets worse, it is reported that this country is starting to see some notable departures.
Is Peter Mandelson and his business nous our only hope?
The immigrants – the very immigrants about whom those MPs were so recently in a lather – are high-tailing it back to eastern Europe and, according to the National Farmers’ Union, there has been a 70 per cent fall in the number of Poles and Lithuanians willing to pick our potatoes.
The British themselves are so fed up with listening to the gloomadon-poppers of the BBC that an amazing 24 per cent of the population is “seriously considering” leaving the country for a better life abroad.
And now, in the latest insult to this country, we read that the lions of the FTSE-100 are leaving the Pride Lands of London and decamping to Dublin, or Luxembourg, or Zug, for heaven’s sake. There will be those who think these defections are nothing short of treachery.
Take Sir Martin Sorrell, the amiable bespectacled ad king and founder of WPP. With dash and élan, he has conquered markets in China and India. He has built up a colossal British firm, a world champion. He has been knighted by New Labour, but has friends and admirers all over the British political-industrial complex.
And what is he doing now, this titan of British capitalism? He is taking the headquarters of his firm and plonking it in Dublin.
“How dare he?” people will ask. There will be some who say it is the patriotic duty of all members of the Footsie to stick it out here in Blighty, to weather the storm along with the rest of us.
Here we are, shivering in the draught of an economic downturn, with our petrol and our food getting ever more expensive, and our taxes going up, and the Government desperately trying to scrape together the wherewithal to bail out the banks and provide for the winter fuel allowance, and, instead of showing solidarity with the suffering of the people, we have dozens of FTSE-100 companies either departing or threatening to depart.
In the minds of some people, it is as though the Royal Family had left London during the Blitz. Regus the serviced office provider, Henderson the asset manager, Kingfisher, the owner of B & Q – they have all either gone or are threatening to go, and now the accountancy firm Pricewaterhouse Coopers says it is advising 40 per cent of the Footsie how to vamoose to Dublin and pay less tax.
Are they traitors to Britain, in her hour of need? They are not. They are being completely rational, and are simply responding to a mixture of dithering and bullying by the Treasury.
For the past two years, the Government has been mulling over changes to the tax regime, ostensibly designed to crack down on avoidance of tax payable on the profits of overseas subsidiaries. In a nutshell, the idea is for Gordon to get his hands on more of the booty, when profits are repatriated to London.
This manoeuvre is not unconnected with the £100 billion deficit the Government is currently running, and, in a sense, one can sympathise with the Prime Minister’s position. He has to get the money from somewhere. The trouble is that, for a firm such as WPP, the bill is estimated to be anything between £50 million and £70 million per year, and they have a duty to their shareholders.
There are other parts of Europe – notably Ireland, Holland, Luxembourg and Switzerland – that do not impose these taxes, or to nothing like the same degree. So the captains of industry are off to Dublin, and this is not just some accounting dodge. This is not just a brass plate job. There will be more to it than making sure you turn over the bedclothes in Jury’s Hotel.
When you move the headquarters, you cannot help but move some of the intellectual capital. You move the company secretary. You move the secretary of the company secretary in order to keep the company secretary company. You find that some of the investment that used to go into taxis and entertainment in London is being sunk into pints of Guinness.
Pretty soon you find that you have decapitated the corporation, and transferred the head overseas, and the body will of course be yearning to be united with the organ of control.
And by the time enough of the Footsie has decamped to friendlier tax regimes, the Treasury will, of course, discover that we have lost far more in tax than we ever hoped to gain from new taxes on profits of overseas subsidiaries, and the Government will have completed another of its virtuoso demonstrations of how to throw the baby out with the bathwater.
It is of a piece with its peculiar hostility to the non-doms, who now face 40 per cent taxation on any money they bring into Britain, to invest in anything, no matter how beneficial that investment may be to Britain.
I know that the sword does not exactly leap from the scabbard to defend some of these people, but the net effect of these actions is to make Britain look ever so slightly xenophobic, and hostile to the arrival to some of the talented foreigners who have (on the whole) contributed vastly to the British economy.
The net effect of the change to tax on overseas subsidiaries is to make London less attractive as a place to locate your HQ – and that, in the current climate, is the last thing we need. Now is the moment to be doing everything we can to make London more competitive, not less.
It may be that the Irish soon find they have to raise taxes themselves, what with their guarantee for all bank deposits. But by then the damage may be done. I never thought I would say this, but our only hope appears to be Peter Mandelson, a man credited by the business world with understanding the issue and having the clout to sort it out.
Come on, Mandy: knock some sense into Gordon and stop this embarrassing exodus.
[First published in the Daily Telegraph on 07 October 2008 under the heading: “Isn’t it time Gordon Brown stopped the FTSE stampede?”]