speri.comment: the political economy blog

The two sides of speaking up for business

Business executives will continue to tell us how to cast our votes in May’s general election, but, before being persuaded, check the evidence on both sides of the argument

Matthew Watson, Professor of Political Economy and ESRC Professorial Fellow, University of Warwick

Matthew WatsonAs the British general election approaches, it seems that there are some things that it’s possible to find easy access to say and some that it’s not.  It also seems that there are some people who can speak their own prejudices with impunity whenever they want to make their opinions known, and yet others for whom the burden of proof is so demanding that they have their right to democratic participation, in effect, revoked.  This annoys me, puzzles me and intrigues me in equal measure.

Take the recent case of Stefano Pessina and his plea to the British electorate to take care when voting in May.  By inadvertently returning a Miliband government, he says, we run the risk of imposing a ‘catastrophe’ on the British economy.  Even though the Sunday Telegraph was unsure that it had a genuine story – alerting its readers to Pessina’s unwillingness to specify which of Labour’s economic policies he particularly objected to – its editors ran it anyway.  The credentials of the speaker, it seems, convinced them that their readers would identify authority in his words, despite the fact that they were uttered without accompanying explanation or evidence.

So, who is Stefano Pessina?  And what significance can be read into the fact that he was given such a notable platform for expressing his purely personal opinion that a Miliband government would be ‘not helpful for business, not helpful for the country’?

Exhibit #1.  He is one of the world’s richest people, with a personal fortune estimated at around £7.5 billion.

Exhibit #2.  He has made his name in the world of corporate mergers, coming to prominence in Britain through the merger of Alliance ChiChem and Boots Group to form Alliance Boots, which itself has subsequently merged with Walgreens.

Exhibit #3.  His ever-expanding corporate empire enables him to claim that he is one of Britain’s largest private-sector employers.

Perhaps this was all the Sunday Telegraph needed to know to invite him to intervene in the general election campaign.  This was a ‘businessman’ speaking up for ‘business’ in a political context in which some of the dirtiest mud you can throw at your opponents is to accuse them of being ‘anti-business’.  With there still being at the time ten weeks to go before polling day, it would be naïve not to expect the right-wing press to have lined up many first-hand endorsements by Britain’s business elites of the economic instability that Labour Party success would bring.

But, as ever, there are two sides to the story.  For so many people in Britain, when they hear a ‘businessman’ speaking up for ‘business’, the first image that comes to mind is not that of a benevolent bringer of jobs.  This image might be crucial to the ostensible authority to be found in business executives’ pronouncements.  Yet it has a notable counter-image.

There have been far too many revelations in recent years of global brand businesses exploiting the grey areas between their multi-jurisdictional presences for large parts of the electorate simply to turn a blind eye.  When a ‘businessman’ speaks up for ‘business’, the company’s interest in eroding its tax payments is often a close companion.  The House of Commons Public Accounts Committee has worked hard to unmask thriving and potentially lucrative operations that promote companies’ tax-switching activities.  Under changes introduced by the Coalition government to the rules concerning Controlled Foreign Companies, firms now have far greater scope to establish subsidiaries in tax havens that have nothing but accounting roles.  They charge fees to their own operating companies to transfer profits from the jurisdiction in which they are made to the jurisdiction in which taxes on those profits are to become due.  This, of course, always means transferring profits from a higher-tax to a lower-tax country.

So: how does Pessina stack up on the other side of assumptions about what it means for a ‘businessman’ to be speaking up for ‘business’?

Exhibit #4.  None of the journalists reporting on the story have so far found evidence that he pays any income tax in Britain, which suggests an important inversion of the principle of ‘no taxation without representation’ whenever he is given a newspaper platform from which to air his views.

Exhibit #5.  Recent research has suggested that Alliance Boots has used subsidiaries in tax havens to change the balance between its British cash and debt holdings so as to avoid over £1 billion in taxes.

Exhibit #6.  Alliance Boots also took advantage of changes introduced to corporation tax by Chancellor of the Exchequer, George Osborne, to more than offset the £90 million it paid in tax in Britain in 2014 with a tax credit note of gigantic proportions.  It revolved primarily around a recalculation of its deferred tax bill to reflect future tax bands and not the bands in operation when the profit was made.

What in particular annoys, puzzles and intrigues me in the debate surrounding business-friendly government in Britain is which pieces of evidence are allowed instinctively into the public domain.  Pessina will be one of many people of his kind who will be invited to have a say on their preferred outcome of the May general election on the presumed authority that derives from Exhibits 1, 2 and 3.  But, thankfully, that outcome will eventually be decided not on the basis of who has the most money to defend in the current system, but by people exercising their rights as citizens.  Those rights, as every student of politics knows, come with associated responsibilities.  And it is precisely on the issue of responsibilities, as Exhibits 4, 5 and 6 show only too well, that Pessina and his like consistently fail the British electorate.

Why, then, is he provided with so much voice in the debate?

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