We’ve already noted that the words ‘competitive’ and ‘competitiveness’ (as applied to whole nation states) are backed by a supportive cast of various other weasel words and terms. One of the commonest is ‘anti-business’ – a term that we’ll dissect in the near future. This UK-focused article highlights prominent usage of the term, in the run-up to next May’s General Election, focusing on the case of Stefano Pessina, boss of the retail pharmacy giant Walgreen Boots Alliance. As Matthew Watson argues, voters should check the evidence on both sides of the argument for tell-tale signs of self-serving use of such competitiveness mantras.
The Two Sides of Speaking Up for Business
By Mathew Watson, Professor of Political Economy and ESRC Professorial Fellow, University of Warwick. An earlier version of this post appeared on the Speri Comment blog in March 2015. Permission to re-post is very gratefully acknowledged.
As the UK General Election approaches in May of this year, it seems that there are some things that it is possible to find easy access to say and some that it is not when trying to persuade people how to cast their votes. It also seems that there are some people who can speak their own prejudices with impunity whenever they want to make their opinions known, but others for whom the burden of proof is so demanding that they have their right to democratic participation, in effect, revoked.
Take the recent case of Stefano Pessina and his plea to the British electorate to take care when voting if they value the competitiveness of the British economy. He is privileged in the access he enjoys to speak his mind, and the fact that his words occupy a competitiveness frame immediately seems to make him newsworthy. By inadvertently returning a Labour Government headed by Ed Miliband, he says, voters run the risk of imposing a ‘catastrophe’ on the British economy.
The Sunday Telegraph was unsure that it had a genuine story, being careful to tell its readers that Pessina had been unwilling to specify which of Labour’s allegedly anti-competitive economic policies he found particularly distasteful. But the decision was nonetheless taken to run with the feature anyway. The credentials of the speaker, it seems, convinced the paper’s editors that their readers would identify authority in his words, despite the fact that they were uttered without accompanying explanation or evidence. Moreover, his message chimed with Conservative politicians’ continual invocation of Britain being in a ‘global race’ that only its policies can win. If the Sunday Telegraph had chosen not to hand Pessina a soapbox then presumably another Conservative-supporting newspaper would have done so.
So, who is Stefano Pessina? And what significance can be read into the fact that he was given such a notable platform for expressing his purely personal opinion that a Miliband government would be ‘not helpful for business, not helpful for the country’?
Exhibit #1. He is one of the world’s richest people, with a personal fortune estimated at around £7.5 billion.
Exhibit #2. He has made his name in the world of corporate mergers, coming to prominence in Britain through the merger of Alliance ChiChem and Boots Group to form Alliance Boots, which itself has subsequently merged with Walgreens.
Exhibit #3. His ever-expanding corporate empire enables him to claim that he is one of Britain’s largest private-sector employers.
Perhaps this was all the Sunday Telegraph needed to know to invite him to intervene in the UK General Election campaign. After all, this was a ‘businessman’ speaking up for ‘business’ in a political context in which some of the dirtiest mud you can throw at your opponents is to accuse them of being ‘anti-business’. Here the Conservative-supporting press had found a fabled ‘wealth creator’ and wanted him to show how much people like him were concerned about anything, let alone a Labour Party victory, that might undermine the country’s competitive position.
As ever, though, there are two sides to the story. For so many people in Britain, when they hear a ‘businessman’ speaking up for ‘business’, the first image that comes to mind is not that of a benevolent bringer of jobs who selflessly spreads around the wealth that he (because it is almost always a ‘he’) alone has created. This image might be crucial to the ostensible authority to be found in business executives’ pronouncements. Yet it has a notable counter-image.
There have been far too many revelations in recent years of global brand businesses exploiting the grey areas between their multi-jurisdictional presences for large parts of the electorate simply to turn a blind eye to their self-serving use of competitiveness mantras. When a ‘businessman’ speaks up for ‘business’, the company’s interest in eroding its tax payments is often a close companion. The House of Commons Public Accounts Committee has worked hard to unmask thriving and potentially lucrative operations that promote companies’ tax-switching activities. Under changes introduced by the UK’s Conservative/Liberal Democrat Coalition Government to the rules concerning Controlled Foreign Companies, firms now have far greater scope to establish subsidiaries in tax havens that have nothing but accounting roles. They charge fees to their own operating companies to transfer profits from the jurisdiction in which they are made to the jurisdiction in which taxes on those profits are to become due. This, of course, always means transferring profits from a higher-tax to a lower-tax country.
FG: A report in October 2013 by War on Want, Unite and Change to Win showed that Alliance Boots had avoided over £1 billion in tax since it went private through taking on excessive debts, profit shifting and corporate restructuring.
So: how does Pessina stack up on the other side of assumptions about what it means for a ‘businessman’ to be speaking up for ‘business’?
Exhibit #4. None of the journalists reporting on the story have so far found evidence that he pays any income tax in Britain. This suggests an important inversion of the principle of ‘no taxation without representation’ whenever he is given a newspaper platform from which to air his views.
Exhibit #5. Recent research has suggested that Alliance Boots has used subsidiaries in tax havens to change the balance between its British cash and debt holdings so as to avoid over £1 billion in taxes. Public protests against the Boots brand have subsequently ensued.
Exhibit #6. Alliance Boots also took advantage of changes introduced to corporation tax by Conservative Chancellor of the Exchequer, George Osborne, to more than offset the £90 million it paid in tax in Britain in 2014 with a very large tax credit note. This revolved primarily around a recalculation of its deferred tax bill to reflect future tax bands and not the bands in operation when the profit was made.
Which pieces of evidence are therefore more indicative of the direction in which the political wind is currently blowing in the UK? Pessina will be one of many people of his kind who will be invited to have a say on their preferred outcome of the May General Election on the presumed authority that derives from Exhibits 1, 2 and 3. They will almost certainly do so by citing threats to national competitiveness if they do not get their desired result.
Thankfully, though, that result will eventually be decided not on the basis of who has the most money to defend in the current system, but by people exercising their rights as citizens. Those rights, as every student of politics knows, come with associated responsibilities. And it is precisely on the issue of responsibilities, as Exhibits 4, 5 and 6 show only too well, that Pessina and his like consistently fail the British electorate.
When business executives are invited by newspapers to pontificate on matters purportedly affecting national competitiveness, ask yourself whether this is not in fact a front for seeking to extend privileged treatment within the tax system.
FG Box: Excerpts from The Great Tax Robbery, by Richard Brooks (Oneworld, 2013)
“. . . Stefano Pessina and US private equity manager Kolhlberg Kravis Read teamed up for an £11 billion takeover of the new Alliance Boots. The new owners quickly capitalized on the ample tax possibilities open to a Swiss-headquartered group that was ultimately owned by a Gibraltar holding company and a series of offshore funds but with around three-quarters of its business in Britain.”
Brooks then gives details about the functioning of some of Boots’ tax gymnastics, and notes that from 2010-2012 [before the tie-up with US-based Walgreens], Alliance Boots enjoyed an effective tax rate of under 9% on pre-tax profits of £1.8 billion.
“When in 2012 I called on the Swiss company, Alliance Boots GmbH, at its 94 Baarerstrasse, Zug address, it turned out to be one of around fifty unrelated companies dealt with by a local business service company, the proprietors of which were none too pleased with the visit, and had no Boots personnel present. It was a far cry from the ‘common hopes, common sympathies and common humanity’ that enlighteneed businessman Jesse [Boot] espoused a century before.”