Labour, business and democracy

The question of Labour’s relationship with business, and business’ evaluation of Labour’s competence in financial management, has continued to rumble on all week. It started with the proclamation by Stefano Pessina, Chairman of Boots PLC, that if Labour were elected it would be a ‘catastrophe’ for the British economy. Interestingly, this did Boots’ reputation no good at all, and Labour’s Shadow Business Secretary Chuka Umunna jumped on the fact that Pessina is a tax exile in Monaco who has just moved Boots’ registered headquarters from the UK to Switzerland to reduce its tax bill by £1.1 billion.

It is important that the voice of business is heard during this General Election campaign, not least on Europe. But the British people and British businesses will draw their own conclusions when those who don’t live here, don’t pay tax in this country and lead firms that reportedly avoid making a fair contribution in what they pay purport to know what is in Britain’s best interests.

In fact, Boots’ parent company, Alliance Boots, posted a global tax bill of only £2m last year after George Osborne’s changes in tax regulations allowed it to write off £100m. I don’t remember seeing that hit the headlines, which is quite extraordinary given the supposed commitment of the Coalition Government to reduce the deficit.

There are certainly some big questions to be asked here—though I don’t think Labour is doing a very good job of asking them. Ed Balls’ inability to mention a single business leader who supported Labour was, well, a massive Balls-up. David Cameron seized on his mention of ‘Bill…somebody’ in the Commons: ‘Bill somebody is not a person. Bill somebody is Labour’s policy’.

Later in the week, as the dispute about HSBC in Switzerland emerged, Ed Miliband accused Conservative Stanley Fink of having been a ‘dodgy donor’ who used questionable tax avoidance schemes to reduce his tax bill. Fink made his money as ‘The Godfather’ of hedge funds, and he is a prominent member of the Jewish community as well as a significant philanthropist, as the Jewish Chronicle notes:

He continues to give away a third of his earnings to charities, many of them Jewish. Fink is an important communal benefactor but, while in his politics he stands right of the centre, when it comes to Judaism his beliefs are distinctly Liberal.

Fink and Miliband appear to have called it a draw in the public dispute about Fink’s tax avoidance. But Miliband did not help himself, further back, when he simply forgot to mention the budget deficit in his speech to the Labour Party conference—a quite extraordinary omission.

All this raises a question which few have mentioned: what should the role of business leaders be in influencing voting intentions in the election? Turkeys don’t vote for Christmas, so it is unlikely that any business leader is going to recommended voting for whichever party says it is going to reign in business influence. This immediately raises a basic question about democracy and the distance between political decisions and popular opinion. There are some sobering facts to consider here.

CEO_pay_v._average_slubFirst is that real average wages have stayed flat since 2007, the longest period of stagnation since 1874. At the same time, the super-rich have continued to get richer. In particular, business executives have seen their pay spiral; since the 1990s, executive pay has moved from being around 60 times that of the average worker to almost 180 times it by last year.

The second is that government policy appears to have been toothless to force businesses who make enormous trading profits in the UK, by means of sales of goods in the UK despatched to customers in the UK, to actually pay tax in the UK. Amazon and Starbucks have been the best-known examples, but Boots has now clearly joined the tax-avoiding club.

The third is the way that largely unelected ‘troika‘ of the EU Commission, the IMF and the European Central Bank are determining austerity policies around Europe. Greece’s debt has recently reduced in real terms, but has gone from being 127% of its GDP to an eye-watering 176% of GDP; on that important measure, Greece’s debt problem is worse today than it was when it was rescued, and entirely the result of externally-imposed conditions. This wouldn’t be so startling if it weren’t for the fact that there is an obvious and successful alternative approach—the one that Iceland took. Iceland’s President Ólafur Ragnar Grímsson explains:

I think the primary reason is that we were wise enough to realise this was also a fundamental social and political crisis, but overall we didn’t follow the traditional prevailing orthodoxies of the western world of the last 30 years.

We introduced currency controls, we let the banks fail, we provided support for the poor, we didn’t introduce austerity measures of the scale you are seeing here in Europe… and the end result four years later is that Iceland is enjoying progress and recovery very differently from the other European countries that suffered from the financial crisis.

All this suggests that the significant influence that business has over politics has not worked in the best interests of society as a whole. This in turn implies that business intervention in elections contributes to, rather than lessens, the democratic deficit we are experiencing—a problem which (following the failed attempt to move to PR some years ago) continues to be ignored. As Johann Hari pointed out then:

In Britain today, we have a centre-left majority who want this to be a country with European-level taxes, European-standard public services and European-level equality. We have had this for a very long time. Even at the height of Thatcherism, 56 percent of people voted for parties committed to higher taxes and higher spending. But the centre-left vote is split between several parties – while the right-wing vote clusters around the Conservatives. So under FPTP they get to rule and dominate out of all proportion to their actual support, and drag most of us in a direction we don’t want to go.

It might just be that the rise of UKIP changes this situation, as it could split the right-leaning vote and make the election result a little more representative of the views of the electorate. And the SNP has now tabled an alternative approach to deficit reduction, which opens more options.

There is no doubt that party policies will have implications for the economy, and that we need to take these seriously, alongside a raft of other considerations. But when business leaders support one party over another, we can be confident of one thing: they are doing so to protect their own interests, and not the interests of democracy. We should probably take no notice.

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3 thoughts on “Labour, business and democracy”

  1. I agree that we should take little notice. The politicians (and the media) tend to gather around the voices of wisdom that come from those who work in business and in banks, which is presumably because if you wear a tie to work you must know something about how to run things.

    Yes banks and businesses are important, but more important are people; yes the economy is important, but more important are people. Politicians seem to be simply financial bureaucrats finding the best way to move money, keep money, money, money, money. They have no vision, they have no character. I do not know enough about Syriza in Greece to endorse them, but I do know that I value their challenge to the system of elected and unelected people dictating to those without money.

    We desperately need sensible yet radical challenges in this country to the ruling elite, which is not going to come from UKIP, but must come from somewhere, probably the grassroots, and may take shape over the next parliament. We could pay for it with taxes reclaimed from HSBC.

    • It is interesting that democracy as a system is as capable of furthering the interests of an elite group at the top against the interests of ordinary people quite as much as any other system of government. The extent to which politicians, big corporate leaders, top civil servants, the legal world and the media all inhabit the same exclusive, self-serving world seems far more evident now than was appreciated a few decades ago. The two great motivators would appear to be power and money. As for changing things, our once in 5 years ‘first past the post’ voting opportunity is a charade and we all know it. As populations increase, the power of ordinary citizens is diluted further and of course elections for the EU parliament are all but meaningless.

      But I’m not cynical and I do vote because I can’t help but be interested in what goes on; and I believe the fallen condition of human beings means that, while we constantly strive to make things better, we will never achieve perfection. And Christians are hardly any better in this regard because sinless perfection is not ours to experience in this world. A quick tour of the politics within our Church of England would reveal as much viciousness and incompetence as anywhere else I’m sure (maybe more?)

      As for Labour and Conservative jousting over affection for business leaders, I seriously doubt if any of it will effect the outcome of the next election. These 2 parties seem to me to share common aspirations for consumerism and political correctness, and neither seems the least bit in touch with ordinary voters. Grass roots movements can achieve a lot but they seem to come and go, and very soon it’s business as usual.

      But this time the smaller parties may be far more influential in subtle ways and no one can be sure how things will turn out. That makes for an interesting few months if only because of the political banana skins lying in wait for our leaders. And as John Cole used to say in his lovely Irish accent: ‘it’s when things descend into the gutter that the truth comes out!”

  2. Good article Ian.

    The European Court is a kangaroo court sitting above courts which is incomprehensible to most of us. Many of the Judges have never been Judges before and not even lawyers. Their latest stupidity is to award a fine against the parents and the Italian state when the parents bought a child in Russia to adopt – but explicitly NOT giving Italian nationality to the child. Since they are at the top there is nobody to appeal to against such a thoughtless ruling. They don’t even consider the questions they ask but put subjects together that interest them and then re-phrase the question … so they are not even a proper Court.

    Against this background some Bishops tell us Christians to vote for the EU. Why? How thoughtless.

    Labour latest Facebook note asks why the Conservatives allowed bonuses to continue to bankers …. they omit to mention that it was Labour who allowed the bonuses to continue in the first place.

    The Conservatives have shown that they are not conservative anymore at all under David Cameron. All of the points raised by the Council of Europe showing that European countries are responsible for persecuting Christians and naming the UK on several counts – all of them are under David Cameron. All of them when the Conservatives are now trying to be left of centre. The whole escapade continues with the Equalities office wasting taxpayers’ money paying to sue a firm of Christian Bakers when the gay-rights campaigner is actually attacking Stormont not the Bakers, and they have failed to establish that the gay-rights campaigner actually had the correct rights to use the image from the Muppets (of Eric & Ernie in case you were wondering).

    Harriet Harman is driving a pink battlebus for labour and noticeably not admitting that men are equal. She proudly proclaims that all the new Labour candidates are female … someone on her staff really ought to tell her that some of them are male.

    Christians do have a problem when candidate for election lie.

    The Conservatives are attacking UKIP only because UKIP have now seemed to take the Conservative vote – This is not surprising given that the Conservatives have abandoned their own voters.

    Labour are attacking UKIP because they have finally woken up to the reality that they are taking Labour’s vote as well.

    In amongst this unseemly melee the vote of Christians is not simply ignored … we are now disenfranchised which is truly appalling. Who does a Christian vote for? That is the real question.


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