Banks and business, RBS and Diageo: The Empire Strikes Back
published this on 12:55 am, Thursday, 17th December, 2009Business| Community News| Politics | Comments (rss) | Respond | Ping |
In a pincer movement, two massive businesses, each driven back with a recent fall from grace, have launched attacks on the impertinence of government for, well… governing.
RBS
The Royal Bank of Scotland’s unprecedented fiscal irresponsibility sees it now 84% state owned after yet another handout at the taxpayers’ soup kitchen – this time of £25.5 billion.
In spite of this situation, which in any normal sector of society would be humbling, the RSB’s Chief Executive, Stephen Hester has blamed government ‘interference’ for a £15 billion drop in the banks share price.
Mr Hester has been quoted as saying – in respect of the issue of bankers’ bonuses and of asset sales forced by the EU: ‘We have been very clear that the process of politicisation of RBS is damaging’.
And, wait for it, he went on to say: ‘Political interference has damaged our share price over the last few months.’
Where, exactly, does Mr Hester think the RBS share price would now stand had there been no sustained government ‘interference’, starting almost 18 months ago and, in the case of the secret early bungs from the Bank if England, kept secret from the taxpayer?
If the government had not ‘interfered’ there wouldn’t even be a Royal Bank of Scotland today. The RBS bankers now fighting to keep their often unearned bonuses would be tucked up in those other lucrative jobs – somewhere in cyberspace presumably - we’re always being threatened they just might take if they feel undervalued.
Diageo
Sky News’s Jeff Randall’s guest in yesterday’s Jeff Randall Live show was Diageo’s Chief Executive, Paul Walsh.
With Jeff Randall, Paul Walsh moved another pawn forwards in the same game. Delicately, almost gracefully for a bruiser, he let it be known that Diageo had ‘options’ and would naturally be exploring them all.
Under what had all the appearance of pre-arranged ‘pressure’ from Randall, he admitted that, with operations all over the world, it is ‘plausible’ that Diageo might move its HQ out of the UK. The grace note was his wide-eyed ‘… but I hope it doesn’t happen’.
Don’t forget that Randall was not talking to any old employee of Diageo waiting to see how his company would move. Walsh – the CEO – is the man who would take the decision to move the company HQ – but you’d never have guessed.
Walsh’s problem – and the plausibility of Diageo exploring its ‘options’ arises from the tax regime on spirits. He declared that 98% of Diageo’s customers use alcohol responsibly so why should the company pay an ever rising tax that is presented effectively as a social cost when, in fact, it’s simply the government milking a cash cow?
While the current government would milk a passing cat – the species can’t vote – and the next one will have to milk anything that moves and breeds, there are a couple of hard questions – not asked by the helpful Randall – on Walsh’s assertion.
How exactly does he know that 98% of people buying any of the wide spectrum of Diageo’s alcohol products are responsible drinkers?
Where are the statistics to back up this claim?
What, actually is the research method that could produce such statistics? Are there scene-of-crime personnel combing the streets with varieties of pooper-scoopers, seizing dollops of vomit for analysis so refined it can identify the original brand name? As Private Eye say, ‘We should be told’.
The fact – uncontested by the compliant Randall – was simply delivered with the assurance of a skilled performer of sleight-of-hand conjuring tricks.
Business and the state
Walsh does have a point in saying that an anti-business culture is damaging to any national economy. Wealth creation is undoubtedly a major economic driver.
A mature relationship, though, is a two-way one, where each plays its part responsibly. Businesses are significant users of public services, paid for by the state from tax revenues. A very basic example is road transport where major movers of products accelerate the degradation of road surfaces and are consistent polluters.
Underiying every democracy is the fundamental notion that, however we arrange the specifics, a fair and civilised society works on the basis of ‘To each according to his need. From each according to his means.’
This relies on two fundamental principles, each of which is persistently abused. Needs are exaggerated. Means are disguised.
Individual or corporation – we all have responsibilities to address.
For businesses, there would be no need for a tax regime that reduces the profit incentive if all business simply acted responsibly in paying their fair dues in tax in the first place.
But the bigger the company the more expensively capable are the tax avoidance specialists they employ. People of a certain generation will remember the national outrage in 1980 that greeted a revelation by the Sunday Times.
It demonstrated that the entire Dewhurst chain of butchers, owned by the meat barons of the Vestey family, had paid no more than £10 tax on a profit of more than £2.3m.
If the corporations paid their fair contribution to the country which hosts their operations, no one would worry much what they paid their staff or how much profit they made.
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December 17th, 2009 at 11:24 am
Many years ago during the “Wall Street Crash” many bankers were threatening to jump out of windows to certain death. On lookers on the ground were yelling for the bankers to reconsider advising them not to do it. Now adays, our bankers aren’t threatening to jump (we would offer encouragement for them to do it), but they are asking for bonuses for a job poorly done.