“It shows that if you shout loud enough and long enough, the chancellor will hear.” This was a response to Gordon Brown’s budget – not from the trade unionists who fund the Labour Party – but from Miles Templeman, director general of the Institute of Directors.
Brown’s budget lays down his credentials as Tony Blair’s natural heir. His only difference is an extra bit of Thatcherism thrown in for good measure.
“Britain must champion open markets, flexibility and free trade – an open and inclusive globalisation, not protectionism,” said Brown in his budget speech.
Continuing New Labour’s commitment to war, Brown announced £400 million extra for British armed forces engaged in the occupations of Iraq and Afghanistan. He also promised an extra £86 million for the spooks in the intelligence and security services.
The New Labour chancellor confirmed another huge boost for the bosses. He will cut corporation tax – the tax that they pay on profits – from 30 percent to 28 percent.
He boasted that the new corporation tax rate would be “the lowest of all the major economies”, including the US, Germany, France and Japan.
Boost for banks
Stephen Green, chairman of HSBC, Britain’s largest bank, said, “The news on corporation tax is a very welcome boost for business and one which serves to further enhance London’s competitiveness.”
To get a sense of the scale of those who are being rewarded it is worth noting that the largest 100 companies on the stock market made a staggering £140 billion in profit in 2006 – and that is after they paid tax.
That represents a 28 percent rise in profits compared to last year. Meanwhile public sector workers are told their pay will be cut by 2.5 percent in real terms.
In the weeks leading up to the budget, Ed Balls, Brown’s key ally at the treasury, organised a series of meetings with business leaders and bankers. They got their way – big business is the real winner from Brown’s budget.
Not satisfied with handing over cash to the rich, Brown is also engaging in asset stripping. He is selling off some £18 billion of public assets to the private sector – doubling the extent of privatisation in the public sector.
Disgracefully, Brown has decided to sell off the “student loan book”. All the debts students run up from their loans at college will now be handed over to the private sector to collect. This was an idea promoted by the Tories in 2004.
Nor should anyone be fooled by promises of “more cash for schools and hospitals”. This money will be linked to PFI deals and further privatisation – ensuring that the cash goes in lining corporate profits rather than boosting public services.
Despite intensive lobbying from the unions, Brown declined to announce any measures to hold back the private equity firms that gobble up and asset strip other companies.
Shriti Vadera is an adviser to Gordon Brown and a former investment banker.
The day before the budget she met senior executives from private equity firms Apax, BC Partners, Blackstone, Permira and 3i to discuss how they planned to deal with unions, and how to portray their industry in a better light.
The treasury was apparently concerned that vocal attacks from unions on private equity companies as asset strippers who sacked thousands of workers were placing it under political pressure to act against the industry.
The Financial Times quotes one of those attending these talks saying, “Shriti Vadera has been trying to remove a political problem from Gordon Brown’s plate [because he] does not want to be seen to be caving in to the unions.”
In February the treasury put it more bluntly. “Gordon is not going to have his leadership ambitions up-ended by a bunch of rabid trade unionists,” said a senior treasury official.
Among those attending the meeting were Martin Halusa and Adrian Beecroft, Apax chief executive and deputy chairman respectively; David Blitzer, a top European executive of US group Blackstone; Damon Buffini, managing partner of Permira; and Philip Yea, the chief executive of 3i who also sits on the Gordon Brown’s so-called “high level group”.
Private equity allows the rich to use the capital gains tax system to cut their taxation rate on profits to just 10 percent.
The other action from Brown is a very limited review by treasury secretary Ed Balls of certain types of borrowing.
In 2002 Brown was under pressure to deal with the super wealthy using tax havens to avoid paying tax. Brown announced a similar review led by business leaders and tax experts – and nothing has been heard of it since.
Behind the headlines about a 2 percent cut in income tax, the reality is that this a budget for the well off.
Brown has scrapped the 10p lower rate of income tax, which means many poor people will be worse off.
But the income tax cut means those on higher incomes will get far more in their wage packets.
One in five taxpayers will be losers. According to figures from the Institute for Fiscal Studies, they are concentrated among single people on low incomes – those earning between £12,000 and £18,000.
Brown wants the poor to rely on tax credits. But only 40 percent of those entitled to tax credits claim them.
And among the low-income single workers who are losing the most from the budget, the take-up of working tax credits is just 25 percent.
Low-income workers have their benefits withdrawn with each extra pound they earn. And tax credits are also an attack on young people – you have to be over 25 to apply for working tax credit.
In the last ten years, Brown’s budgets have moved a very small amount of money from sections of better paid workers to the very poorest.
Even then, they only benefit if they can navigate their way through the maze of forms that must be filled in if they are to claim what they’re entitled to.
This time he didn’t even bother pretending to redistribute income to the poor. Instead he attacked them.
A right bunch of bankers
Last March Gordon Brown set up an 11-person panel to help devise a “code of conduct” for the private equity industry. Here is the list of people he expects to rein in the City fat cats that are asset stripping companies.
- Sir David Walker, ex-chair of Morgan Stanley International
- Lady Hogg, chair of private equity firm 3i, Tory peer and adviser to John Major
- Lord Hollick, former chief executive of United Business Media
- Adrian Beecroft, deputy chairman of Apax
- David Blitzer, executive with The Blackstone Group
- Anne Glover, chief executive of Amadeus Capital Partners
- Robin Hall, managing partner of Cinven
- William Jackson, managing partner of Bridgepoint
- Sir Michael Rake, chairman of KPMG International
- Dwight Poler, managing partner of Bain Capital
- Rod Selkirk, chief executive of Hermes Private Equity