WHEN you think of a wealth-creator, don’t think of a tycoon in a glass tower – or so David Cameron will tell the Tory party conference today.
Think instead of a window cleaner, or a female entrepreneur who spends every night balancing her books, he will add. The Prime Minister is right to celebrate those who have the courage and vision to set up on their own. But while small businesses are fantastic, as are entrepreneurs, big firms are equally vital sources of innovation, jobs, investment and tax receipts, as long of course as they operate in a free market. This idea that one can be pro one kind of wealth creator but anti the other is intellectually weak.
Anybody hoping that the coalition would back down from its relentless anti-big business and anti-City message will therefore be disappointed. A new financial activities tax (Fat) looks likely to be imposed on banks soon, on top of the existing tax on balance sheets. This would include an additional levy on profits and on remuneration (even though bonuses are already mostly taxed at 51.5 per cent, and their continued payment is now essential to the exchequer).
Previously, the government has said it would only introduce a Fat if it could secure international agreement, due to fears that banks could relocate some of their operations overseas. This is no longer the case – signing up France and Germany will be held up as enough, which is nonsense. Slowly but surely, activity, jobs and tax receipts will migrate to other financial centres. London’s gradual decline now looks inevitable: word at the conference in Birmingham yesterday was that the coalition wants to “slap the bankers” and “not to allow them to get away with it”.
So there you are: if you happen to work in a glass tower or in finance, you know what the coalition thinks of you (though if you are married, you may get an as yet undefined tax break in 2015, to compensate for the botched reform to child benefits). It is extremely important to promote entrepreneurship and to encourage a flurry of new small businesses – but denigrating those that have already made it is not the way to go.
STRONG SERVICES SHOW EXPANSION
In both Britain and America, the services sector is enjoying renewed signs of life. Growth remains meagre but positive; we are still expanding, despite the gloom. In the UK, the services sector’s purchasing managers index enjoyed a rise to 52.8 from 51.3. It was nothing to boast about – but any reading above 50 suggests expansion. The rebound in the US ISM non-manufacturing index to 53.2 in September, from 51.5, was even more reassuring, even though the index is still at a level consistent with sluggish GDP growth.
The other key improvement comes from China, where the manufacturing PMI – that country’s most important indicator, for obvious reasons – rose to 53.8 from 51.7. The sharp slowdown in the Chinese economy appears to be ending, suggesting world trade is improving again.
So what does all of this mean? I have, of course, only focused on the better news; there is plenty of bad stuff too, with the Eurozone continuing to slow and renewed sovereign default fears from Ireland to Spain. Manufacturing is still slowing. But in the case of Britain, America and the emerging world, there are still no signs of a double-dip recession.