The Socialist 22 March 2007 |
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Who are the real scroungers?
Here is where the money goes...
You can tell when Budget Day is coming because the bosses step up their wailing for tax cuts. Taxes are too high, moan their accountants, and paying tax is too complicated. Gordon Brown had better sort it out, they say, or we're off.
Never mind that Brown has saved companies approximately £70 billion since 1997 by cutting corporation tax. And never mind that, unlike the rest of us, the bosses have accountants to work out - and fiddle - their tax returns. Before considering if Corporate Britain deserves tax cuts, let's look at what they have already got.
Britain is a very profitable place. Figures from the Office for National Statistics (ONS) two years ago showed that the overall rate of return for British companies is higher than those in the USA, Germany or Canada.
In 2006, according to the Department of Trade & Industry (DTI), operating profits as a percentage of sales for British companies outperformed Europe in 10 of 33 economic sectors, including banks, industry, retail and pharmaceuticals. So in some of the biggest and most important parts of the economy, British companies are raking it in. Thanks to Blair and Co. progressively privatising the NHS, healthcare in Britain is nearly twice as profitable as Europe relative to its "sales".
Maybe small shareholders are benefiting? Maybe a few are, but the bulk goes elsewhere. ONS figures show individuals own less than 15% of UK shares. That percentage is decreasing. Charities, pension funds and the public sector hold less than 20% of shares. However, big companies own two-thirds of publicly available shares, so it's the owners of these corporations who are lapping it up. Half of these corporations are financial institutions - insurance companies, banks, hedge funds etc.
Also, 2006 Christmas bonuses for top managers across Britain totalled £19 billion and they increased their own wages by 28% in 2006 - 10 times the average rise in wages and almost 15 times the percentage increase the government intends to give to nurses this year!
The share of income going to the top 1% of people has returned to pre-1939 levels. In other words the divide between the proportion of income going to the billionaires, and what the rest of us are left with, is now as deep as it was in the era of the Great Depression, hunger marches and mass unemployment.
But it is not just about the rich getting richer. They are looting the economy to such an extent that research and development has fallen well behind other 'advanced' countries. In only three sectors of the British economy - industry, retail and household goods - are retained profits, as a percentage of sales, higher than Europe's. Of these, industry is by far the most important as the basis of a modern economy, yet only 1% of industrial revenue is retained. European companies did better in 21 sectors and in the rest there was little difference.
Blair and Brown chatter about Britain's 'knowledge-based economy' and 'competitive edge'. Analysing the DTI figures, economist Larry Elliott wrote: "Retained profits matter because all the evidence is that almost all innovation activity is funded through profits generated in-house by the firm and that a far greater proportion of UK firms cite the lack of internal finance as a constraint on innovation than do their French and German counterparts... [There's] a possibility that it will not be possible to maintain high rates of growth with relatively low levels of investment indefinitely."
It is more of a certainty than a possibility. Elliott accurately sums up the state of the British economy: "Strip away the overblown property market, the debt-financed consumer spending and the speculative activities of the City and what's left? Sadly, the answer is not all that much." the guardian (26/2/07).
Instead of developing Britain's economic base and safeguarding its future, billionaires' super-profits have been gambled on the money markets, frittered away or stashed away in 'investments' like fine art and property.
The captains of British industry have destroyed mass industrial employment and turned many of the remaining factories into sweatshops. They are turning the national economy into a super-casino for the super-rich, and are flogging off everything they can for a quick buck. But when there is an economic slowdown and the economic cracks turn into chasms, workers will be expected to pay the price.
Socialists support taxing the super-rich and big business to fund decent housing and public services. But the bosses have a tax-avoidance racket going that makes VAT carousel fraud look like a kid nicking lollipops from the corner shop. Billions of pounds go unpaid every year and the government turns a blind eye.
It is high time that Britain PLC is taken out of the grasping hands of the bosses. Working people made all this wealth, and if they are to ever see it, we need a socialist government and a democratically-planned economy run for the millions not the millionaires.
There will be analysis of the Budget next week.