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Yesterday morning, the chancellor told a
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gathering of private equity chiefs that
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you're only going to get growth if you
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get investment. Later that day, one of
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the world's biggest pharmaceutical
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companies announced it was pulling out
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of a1 billion pound investment in
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London. Welcome to the week in business
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with me, Christian May.
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Merc the 300 billion pound farmer giant
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has pulled the plug on a1 billion pound
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project at London's King's Cross saying
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the UK is just not internationally
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competitive. The building was already
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under construction and now with the
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project pulled over a 100 research
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scientists will be laid off as the
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company looks elsewhere for its future
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plans. It follows a similar decision by
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Astroenica, the UK's most valuable
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public company, to pull its400 million
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pound investment in a new vaccine site
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in Liverpool, citing a lack of
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government support. Now, you're entitled
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to ask why these hugely profitable
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farmer companies are moaning about a
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lack of government or taxpayer support.
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And it's fair question, but the nature
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of their businesses is such that they
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are woven into government strategy and
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support schemes for developing research
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uh that ultimately ends up in the NHS.
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In an ultra competitive market and when
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Donald Trump is engineering creative
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ways to lure these firms to the US, the
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government can't afford to play fast and
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loose. Merk said yesterday that unless a
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change is made to the operating
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environment, more and more companies
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will be making these sorts of decisions.
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Indeed, they are. Sir Jim Ratliff's Inos
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announced it has stopped all investment
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in Britain, citing the government's tax
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rate on North Sea oil and gas
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production. The company is diverting all
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future investment in the sector to the
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US and has warned, as they've long been
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warning, that other manufacturing
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operations in the UK, such as chemicals
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and plastics, are under threat because
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of high taxes and high energy costs. The
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firm's chief executive was clear, saying
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the UK has become one of the most
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unstable fiscal regimes in the world
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when it comes to natural resources and
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energy. One of the most unstable fiscal
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regimes in the world. Quite the
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accolade. The company said, "For us, the
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future lies in other countries." Rachel
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Reef said yesterday, "We want to make it
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easier to do business in Britain, and
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she boasted of the stability she's
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brought to the UK's investment
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landscape." What planet is she on? Sure,
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we'll roll out the red carpet for
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Chinese firms buying up our debt riddled
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infrastructure, but is this really
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something to celebrate? And meanwhile,
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spare a thought for the many businesses,
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they can't upstick and try their luck in
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more welcoming jurisdictions. In other
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words, most businesses. The boss of one
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supermarket chain told us recently that
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his sector is seen as fair game for tax
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hikes for exactly that reason. We can't
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just head overseas, they said. Nor can
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the hundreds of thousands of smaller
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businesses trying to keep their heads
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above water amid a rising sea of costs
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and taxes. The business community is
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nervous about the upcoming budget, as
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should we all be. And if you want a
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sense of just how nervous, consider that
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the private sector's leading
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spokesperson, the head of the CBI,
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yesterday urged the chancellor to rip up
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Labour's manifesto promises, and hike
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income tax. Why? Well, because without
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hikes to the biggest taxes, income tax,
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VAT, for example, the burden will fall
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again on businesses. The chancellor has
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to find tens of billions of pounds in
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additional tax revenue. And having ruled
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out touching the big levers, the fear is
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she'll be reaching for all the smaller
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levers like some kind of manic organ
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player. Dividend taxes, bank taxes,
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pension taxes, inheritance taxes, taxes
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on partnerships, changes to business
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reliefs and allowances, property taxes,
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sneaky little wealth taxes. So, it's no
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wonder the CBI would rather a broader
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income tax hike. And they have a point.
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Perhaps VAT should be looked at again.
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Adding it to cake, for example, would
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raise about a billion quid. I came
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dangerously close to agreeing with the
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CBI in my column today. If taxes have to
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rise, or rather if the government is
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determined to raise them, there are some
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targets that make more sense than
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others. But of course, the real
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argument, the argument the CBI should be
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making, is that we can't afford any
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further tax increases. And if that means
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in the absence of growth, deep cuts to
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public spending, then so be it. But just
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as tweaking taxes is damaging in its own
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way, seeking to salami slice our way out
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of a debt mountain would also be
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pointless. Radical reform is what's
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needed of the kind advocated by Steve
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Baker in Cityam. Today, Steve writes,
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"This country stands on the brink of a
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fiscal crisis unlike anything we have
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seen in our lifetimes. The numbers are
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stark. A projected 41 billion pound
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shortfall by 2030. a debt to GDP ratio
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nearing 96% and interest payments on
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government debt now doubled in a single
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year topping 16 billion quid a month.
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Despite these warning signs, he goes on,
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Westminster continues its ritual of
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denial, putting off hard decisions in
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favor of soothing rhetoric. We are
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living in the Truman show run by
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Whiteall. This isn't some distant
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theoretical problem. It's a looming
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catastrophe that will devastate millions
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of hardworking families. And where is
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the urgency from our political class?
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When Steve lost his seat as a Tory MP at
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the last election, Westminster lost one
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of its most coherent and original
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thinkers. And on the night of his
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defeat, he said in an interview that he
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felt sorry for Rachel Ree because she'd
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spent years telling everyone that George
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Osborne's austerity had been a choice,
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that it was never necessary, and that
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she was now going to have to implement
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austerity and she was going to have to
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try and do it with a bunch of Labour MPs
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who have also signed up to the idea that
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austerity was just a choice. Reeves
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hasn't quite woken up to this yet, but
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Steve was right. And one way or another,
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this government is going to have to face
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up to it. That's it from me this week.
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Stay up tod date and in the know with
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the city app and on cityam.com. And I
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will see you next week.
