Why should business pay tax at all? That’s a provocative but forlorn question to ask in Budget week. Business pays corporation tax on profits because that’s what voters expect, partly because many are conditioned to believe profit is a sin and partly because all would prefer to pay less tax themselves. Investors pay tax on capital gains because — as the American bank robber Willie Sutton said of his crimes — that’s where the money is. And companies pay more tax as business rates on premises because that’s the easiest way to collect contributions towards public services from which they benefit — but it’s also an easy levy to relieve at times, like now, when the private sector needs help.
Those are the principles with which the Chancellor was wrestling last weekend, while on one side business lobbyists urged him to rely on a rocket-shaped recovery to rebalance the public finances and on the other, Lords Clarke and Hague declared tax rises, corporate and personal, to be the only righteous path. Rishi Sunak’s aim to increase corporation tax rates over time from 19 per cent towards the international average of 24 or 25 per cent has been well signalled, as has his intention to harvest more capital gains tax. Such rises may make personal tax hikes more palatable because business is seen to share the pain. But are they really worth the candle?
Here’s a killer fact: the portion of total UK tax receipts in 2019/20 that was paid by companies was just £52 billion of corporation tax plus £29 billion of business rates, representing one tenth of a total national tax take of £825 billion; put another way, the corporate tax bill amounts to less than 4 per cent of GDP. This year, with reduced profits and business rates relief, it’s likely to be lower.
Let’s remember that personal taxes are part of a democratic contract by which voters pay for government, but corporate taxes and their accompanying grants, reliefs and allowances are something else: not a revenue fountain but a management tool. They are government’s chief means of encouraging capital investment and they’re best kept low, not too complex and not changed too often if we want to be internationally competitive.
The measure of an intelligent corporate tax regime is whether private-sector jobs are being created, the built environment is being renewed, talent and innovation are flourishing, unfair advantages (including those of digital multinationals) are diminishing and foreign companies want to do business and build factories here. Not whether HM Treasury can squeeze a little extra bunce from companies to make voters feel less angry about their own rising tax bills.
A stain on Barclays
Amanda Staveley, the Yorkshire-born femme fatale of Middle Eastern finance, may or may not have finally lost her multi-million-pound High Court claim against Barclays in relation to its 2008 fundraising from Gulf investors, depending on whether her company, PCP Capital, takes the case to appeal. But she has won a moral victory against the bank whose executives disparaged her in crude language but were ruled by Judge Waksman to have been ‘guilty of fraudulent misrepresentation’ in offering PCP’s client, the sheikh of Abu Dhabi, worse terms for participation in the financing than were being offered to investors from Qatar.
The judge found the evidence of Barclays point man Roger Jenkins ‘clearly unsatisfactory’ and of the former chief executive John Varley ‘evasive’ — but did not award damages because he was not persuaded PCP could have raised sufficient funds to complete the deal. His decision follows the acquittal, after a second trial, of Jenkins and two other Barclays men, charges against Varley and the bank itself having been dropped. The Gulf fundraising has been repeatedly scrutinised, but no judgment ever brought against Barclays — ironically creating a court-tested precedent for what was, to quote the judge again, ‘serious deceit’.
When the Barclays team conjured this deal to avoid a Treasury bailout, the City admired their gall. They argued that they were acting in the long-term interest of existing shareholders: although the new Gulf capital brought dilution, a bailout would have been worse. If they were also motivated to protect their own remuneration from the curbs they feared a state shareholder might impose, well, that’s bankers for you.
But it’s worth asking: where would Barclays stand today if its boardroom poker players had folded and accepted years of semi-nationalisation before eventually escaping, as Lloyds did, back to the private sector? Impossible to say whether shareholders would be better off or even poorer — but for sure Barclays’ reputation, and that of British banking generally, would be a lot less stained.
Tireless de Gelsey
City veterans will join me, I’m sure, in saluting the passing in his 100th year of William de Gelsey, the tireless Anglo-Hungarian networker who was managing director of Orion Bank in London, a leading light of what we used to call the ‘euromarkets’ and a permanent fixture at those international bankers’ gatherings that my predecessor Christopher Fildes labelled ‘boondoggles’. I first met de Gelsey at one such in Osaka, Japan, in the mid-1980s and renewed our acquaintance at his elegant bachelor apartment in Ennismore Gardens, where he habitually offered early evening White Lady cocktails while reminiscing about how he talked his way into the UK in 1939 by claiming to be the junior Hungarian golf champion and once danced with the teenage Princess Elizabeth.
His CV tells us he studied at Cambridge before joining ICI in 1942 and moving into banking in 1960, but leaves a lacuna of which, so far as I know, he never spoke: the National Archives online catalogue records a wartime Special Operations Executive personnel file in his name marked ‘closed for 78 years’. We’ll have to wait until January 2025 to find out what’s in it.