Graham's column in the Journal May 2017
This is the week election manifestos are published and journalists will scrutinising them in great detail. As a business owner I want to focus on one thing, Corporation Tax. This is the tax that businesses pay on their profits and it is the darling tax target of the so-called progressive political parties. Labour and the Liberal Democrats both want to put up Corporation Tax and spend the receipts on their pet projects. When they promote a seductive social policy, awkward journalists ask an obvious question, ‘how will you pay for it?’ The answer always seems to be increases in Corporation Tax.
The real question that should be applied to the policy of raising the rate is ‘how it will affect the entire economy?’ The Labour/ Liberal Democrat policy of increasing Corporation Tax is bad mathematics. The current rate of Corporation Tax is 19%. According to the Financial Times, the Government collects around £56 billion per year from Corporation tax, this has grown by 21% during a time that rates have been reduced. Politicians who are promising big spending are using fool’s gold to pay for it. The higher the rate of Corporation Tax the less it will collect, the current Government has hit the sweet spot; the rate is low enough to provide incentives to business but not too low to deprive the Government of tax receipts.
Putting up Corporation Tax will cause businesses to locate to countries with better rates, stop foreign owned firms relocating here and it will deprive businesses of proceeds of profits from which they are investing. It could also reduce the amount available to the Government for public services.
These points don’t just apply to big business; one of the businesses I own is a small firm that provides video and photographic services to other companies. With the proceeds of the Corporation Tax reduction it invested in new computer equipment that has enabled the business to grow.
30% Corporation Tax was an anchor weighing down business, slowing progress and holding up investment. Winston Churchill once said the politicians should not treat business as ‘a tiger to be caged, or a cow to be milked but as a strong horse pulling the economy forward.’ That approach is as correct today as it was in Churchill’s time.
The region of the UK that needs business investment most is the North East, which is why I urge local voters to set their minds against the blandishments of higher spending by Labour and Lib Dems and towards more realistic tax policies that provide incentives for business by helping them to scale up and provide jobs and economic growth
Gordon Brown once said that the best form of welfare is a job. Labour has moved away from that common sense approach, which is one reason voters are moving away from Labour.
In Tees Valley, where I live and my businesses are located, the Conservatives defied the pundits and shocked the North’s political establishment by winning the Mayoral election for the new Combined Authority, with local businessman, Ben Houchen, coming out on top.
As somebody who advocated the new devolved authorities and urged the entire North to embrace Mayors I couldn’t be happier. Ben can now set about working with business to deliver the economic growth Tees Valley urgently needs. It is no surprise he won. Labour is seen as having taken the area for granted for a long time. His flagship policy is to restore our local airport to a position where it can provide some services to local people. Its flights and passenger numbers are at an all-time low. This is because of a botched privatisation by the local authorities.
Ben’s approach has surprised some people in politics; owning shares in an airport doesn’t seem very Conservative. Neither does capping utility prices, which Mrs May intends to do if re-elected. But both policies are entirely consistent with a pragmatic approach that puts what works ahead of political theory. When Tony Blair was first elected he took the same approach to the economy, keeping Conservative spending targets and maintaining low income tax rates. When Mrs Thatcher was Prime Minister she ‘capped’, the rates and provided a mortgage tax subsidy for private home owners. So it should be no surprise that Ben intends to tackle an issue that has been a long running sore on Teesside. Serious politicians are pragmatists first and ideologues second. Core beliefs drive their approach, practical answers drive their policies.
In the election of the North East’s first Metro Mayor, and in the General Election for our new MPs, the Party that is realistic and practical will win through. My vote is with Mrs May!