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Home News Mark Ellse: Will Cameron ever make the case for business profits?

Mark Ellse: Will Cameron ever make the case for business profits?

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In most company, there are two groups of people it is safe to pillory. There are the teachers, of course. White working-class kids underperform and it is, of course, the teachers’ fault and nothing at all to do with the kids. And, too, there are the businessmen. We know what they are like. All they are interested in is profit and becoming rich. They will do anything they can to avoid their responsibilities, particularly that of paying tax. Apple, Google, Amazon, Starbucks are the big bad boys but everyone knows a businessman that they can take pot shots at.

I had the delightful opportunity of combining these two much-criticised roles when I bought a school twenty years ago and, as a parallel operation, set up a transport company.

In an essentially Labour area, independent schools are already suspect. But when one finds that someone actually owns one, an even wider spectrum express disdain. ‘You mean you run schools for a profit?’ is the question. It’s as though everyone else involved in education does it for free.

I kept a low profile with the local Labour councillors. Some were friendly and helpful: others openly hostile. When engaged on one expansion project, the local councillor told me that he didn’t think there should be any independent schools and that I wanted the planning permission only to make money. It mattered to him not a jot that I was providing well over a hundred jobs in the area.

Those who run SMEs (Small and Medium Enterprises) have many things in common. Most of us have put everything we have into our businesses, mortgaging or selling houses along the way. One pays staff (from which they pay their income tax and Employees’ National Insurance), Employers’ National Insurance, sick pay, maternity leave, VAT, business rates, council tax, climate control levy, etc) – the major and substantial contributions that businesses make to taxation.

Sometime after the end of the year, one adds up what came in, takes away what went out, and works out the profit, at which point the government dives in and takes a fifth of the remainder – corporation tax.

That taxed profit, by the way, is all you have to grow your business, expand the premises, purchase new machines or computers. And, certainly in the early stages of a business, often all the profit goes straight back in while the managing director and his family work harder than anyone else for much less financial reward.

If businesses are successful, there is no doubt that their owners end up sitting on substantial capital: warehouses, machinery, teaching premises, buses, whatever. At one level, one is a rich man. At another, these are simply the tools of the trade, the things needed to do a specific job. A business may make someone rich, but along the way it will pay millions in tax and create hundreds of jobs. We know that the post-Blair Labour party can’t say such a thing but surely the Conservatives can?

A few years ago, there were newspaper murmurings about Starbucks who, as all companies do, took the entirely reasonable step of lawfully arranging their affairs to pay minimum tax. It was the opportunity for the leader of the Conservative Party to look wise. David Cameron could have confessed, as is the case, that it was the government’s fault for sloppy law, not Starbucks’s. He could have pointed out that corporation tax at £40 billion per annum is only a tiny fraction of government income: even National Insurance raises more than double that amount. He could have made the case for business, pointing out the taxes that every business, Starbucks included, pays. After all, it us, the businessmen, who create the wealth which pays for every other part of our social fabric – schools, hospitals, and all those welfare payments.

Over the Starbucks affair, I suspect many business owners felt as I did when David Cameron said businesses that think they can pay no tax in Britain need to “wake up and smell the coffee”. It was a cheap and popular dig. The recent fuss about Google’s taxation position is the same story again. It will be used by a group of politicians, most of whom have never had a wealth-creating job in their lives, as an opportunity to slag off the business community in general, or someone will make the proper case for business in the UK, as the Conservative Party used to do.

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Mark Ellse
Mark Ellse
Mark Ellse is a physicist and author. He is a former headmaster, independent school inspector and A level chief examiner.

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