Are we open for business or shutting up shop?

"Let it be heard clearly around the world — from Shanghai to Seattle, and from Stuttgart to Sao Paolo: Britain is open for business.", George Osborne proclaimed rousingly in last month’s Budget. But what does this say about how Osborne views the UK? Unpick the assumptions underlying the rhetoric and the language reveals an intellectual wasteland beneath.

 

"Let it be heard clearly around the world — from Shanghai to Seattle, and from Stuttgart to Sao Paolo: Britain is open for business.", George Osborne proclaimed rousingly in last month’s Budget. But what does this say about how Osborne views the UK? Unpick the assumptions underlying the rhetoric and the language reveals an intellectual wasteland beneath.

The Reductionist's reductions

There are two arguments against this world view. The first is that it is a highly reductionist view of any country, particularly one as culturally and socially rich as Britain. The second is that it is equally reductionist in its view of business. Why? Well, what message is Osborne sending with these corporate tax cuts? Essentially, that, as a nation, we can only compete at a discount.

Let's say, for the sake of argument, that Britain is the business that David Cameron and George Osborne continually claim it is. What exactly are we selling? Because, whatever it is, we appear to be doing so purely on price. Osborne's corporate tax cutting betrays a view of Britain as some tired old tart, once glorious, her charms faded, now having to drop her rates to attract passing trade.

And, barely credibly, Osborne seems to have learned nothing from his family business. What market does George Osborne's family firm, fabric and wallpaper makers, Osborne and Little, cater for?  Well, put it like this, Wickes doesn't stock them. In its 43 years of trading, it has built its reputation and grown its business on premium products. And it charges a premium for them.

Poundshop Britain?

What Osborne is offering is not even Poundshop Britain. At least businesses that trade under this banner have a clear brand and market positioning. They have a promise, they know their markets and appeal to and fulfill their needs. Even the universities understand the importance of a clear positioning better than the chancellor. In an increasingly competitive, global education market, they know they need to differentiate on quality rather than price: http://www.guardian.co.uk/education/2011/apr/03/tuition-fees-university-charge-access.

A Sorrell state of affairs

Osborne argues that this discounting is justified to keep and attract large businesses to Britain. It was quite remarkable the speed with which Martin Sorrell announced WPP's possible return to Britain after the budget. Leaving aside the impression that it owed more to PR than strategic business thinking, is this really the future for corporate tax policy in a truly global economy? Countries outbidding each other to attract companies until the next country outbids them?

The jury is out on the impact of Osborne's approach. Jeffrey Sachs argues that we're in danger of joining in the 'race to the bottom' in tax rates:http://www.ft.com/cms/s/0/8836f284-592a-11e0-b9f6-00144feab49a.html?ftcamp=rss#axzz1IRL11I80 (pay wall). Hamish McRae in the Independent, on the other hand, takes a more sanguine view: http://www.independent.co.uk/news/business/comment/hamish-mcrae/hamish-mcrae-first-reactions-to-the-finance-bill-find-both-god-and-the-devil-in-the-details-2258838.html

The wrong view not the long view

But whatever the effect, it's the wrong view not the long view. It's an approach based more on speculation than building the foundations for long term, solid growth. There's a danger that by cutting corporate tax rates and public spending rapidly you believe you're taking decisive action rather than merely reacting to events and market pressures. It's kneejerk-onomics. Because it's an approach that avoids the real question: what is it that we offer the world? Will Hutton articulated this recently in the Observer: http://www.guardian.co.uk/commentisfree/2011/mar/27/will-hutton-growth-plan-bad-for-uk. I's not just the Left's beloveds who feel like this. That stronghold of Marxist-Leninist dogma, the Economist, supports the position that growth will come not through tinkering with the corporate tax regime but with a way of attracting companies to this country through the skills of its workforce: http://www.economist.com/node/18440819

Zero zero vision

Focusing solely on the cuts is leadership by audit. We need leadership with audacity, that sets out an inspiring, outward looking, inclusive vision for Britain. A vision that articulates clearly what we offer the world. And a plan to realise this vision. Neither Labour nor the Conservatives currently offer this. Cameron’s Big Society at least makes an attempt, but is too introspective and apologetic for past Thatcherite howlers. Labour seems too confused by its recent mismanagement to develop anything coherent.

With a clear vision, we can then go to the world's bond markets and like any business, answer the question, "You want this amount of debt to do what?". With a clear vision, like any business, we can invest in what we believe is most important and judge that investment on its return (ROI). And that ROI will be defined more broadly and deeper than a narrow business view.

When businesses choose to come to Britain and, as importantly, to stay, they decide on a host of not altogether exactly calculated grounds: education, culture, healthcare, transport, what one could describe as 'quality of life'. Because businesses are run by people. And the families of those people have a say in where they'd like to live. So the businesses work out if they can afford what we offer. Like our universities, like Osborne and Little, I believe that should be something of quality, rather than a poorly defined price point.

A country is far greater than the more narrowly defined value companies place when choosing where to operate. But if you are shouting you're open for business, it helps to know what business you're in.