Hand of reality

Tony Blair felt the hand of history on his shoulder. Following the spending review, there is a growing sense that the hand of the coalition is closing in on our wallets.

Tony Blair felt the hand of history on his shoulder. Following the spending review, there is a growing sense that the hand of the coalition is closing in on our wallets.

Businesses face a tough time ahead on money flow, whether the challenges are in the form of reduced demand for their sales and services from government departments, the VAT rise to 20 per cent, the removal of regional development agencies and numerous sources of business aid, the increasing cost of pensions and utility bills, or just more scrutiny and menacing looks from HMRC and other government departments.

Unlike the government, businesses can’t cheat by printing extra cash, accounting tricks, or Obama-style talking up of expectations. They have to deliver – good or bad climate.

Such is the opportunity and cost of addressing the deficit and combating a decadent decade of interventions by Gordon Brown: propping up banks, creating invisible and unnecessary public services jobs, or unaffordable commitments on military equipment.

Unwinding this mess is already creating unrest. We’ve got firemen striking on bonfire night, Tube strikes adding pain to London, salary freezes across public services, and bizarre decisions to build aircraft carriers with no aircraft. Other countries avoided some of this pain by not creating false jobs in the first place, or, like Russia, building inflatable tank decoys – perhaps an opportunity for the over-priced MOD drawing pins to finally be useful.

Other countries too are targeting large foreign businesses with tax increases, such as the India’s recent $2 billion ‘gains taxes’ imposed on Vodafone for acquiring a domestic operator – retrospectively. Or the US potential charge of $34 billion on BP for clean-up operations.

Perhaps it’s time for the UK government to become similarly entrepreneurial and charge Google for breaching the UK Data Protection Act by serial capture of WiFi data from their street-view cars and ‘maverick’ coders. Given the Information Commissioner’s Office (ICO) is allowed to fine up to £500,000 per incident, perhaps a £500,000 fine for each household or street breach might add some much needed billions to UK tax coffers, or at least force the issue of whether such international companies should pay VAT on goods and services provided to computers resident in the UK.

For businesses faced with the problem of a disappearing easy market to central government, or easy mark-up as favoured contractors to local authorities, they either need to give up or adapt to the new reality. Many perhaps have, with the economy purporting a 0.8 per cent growth figure last quarter.

We could of course just pull the other leg, damage a foot to claim sickness benefit, or learn a lesson from Rooney – taking a leaf out of the banker’s book and doubling his weekly personal salary to £180,000 amongst the recessionary turmoil. No doubt such rapid compensation is justified by 35 being the allowed retirement age for footballers versus 66 now for the rest of us.

But the best opportunity of all probably remains with innovation and enterprise. Innovators such as Apple now have a capitalisation of $284 billion, and a cash pile in excess of $52 billion ready to weather any storm, and if the coalition hand ever does try and grab our wallets, they will likely find the cash has already gone and has turned into a diamond-encrusted iPhone4, with the 3G service contract helping Vodafone to pay its Indian tax charge.

Simon Daniel

Simon Daniel

Simon Daniel is the inventor of the USB battery and folding keyboard. He was also CEO of Moixa, the renewable energy group.

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