Ed Miliband wants to help “producers” and not “predators” through the tax system. And through regulation. This was one of the driving messages of his speech.
At face value it’s hard to argue with that. But where things become far from crystal-clear is when you start to think about the detail of how a government would go about doing this.
Firstly, how do you separate hundreds of thousands of companies into “good” or “bad”? And how, in practice, do you penalise or reward them?
Miliband and his team know what a bad company looks like. It resembles Southern Cross, or Enron, appparently. This is obvious. And they know what a good company is: it manufactures things and invests for the long term.
But what about the majority of companies – which are in a grey area of neither “good” nor “bad”; or a mix of both.
In his speech the Labour leader contrasted the virtuous Sir John Rose, chief executive of Rolls-Royce, with pantomime villain Sir Fred Goodwin – who was paid three times more.
Sure. But did anyone notice at the time? Could they have done? And if ministers had suggested that RBS was a disaster waiting to happen – would anyone have listened?
Equally pertinent is this question: If many hedge funds and private equity groups and “asset strippers” are based offshore – how do you use the tax system to punish them?
I’m told that this is all “direction of travel” stuff and it’s too early to have any details. I don’t get the impression, however, that any of them have the faintest outlines of a palette of alternative options – let alone their most likely choice. (Equally on more fairness in the welfare system there is no detail; the idea of tightening the criteria for social housing allocation is not new.)
Meanwhile my colleague Andy Bounds asked Alistair Darling, former chancellor, what he thought about this. His answer: “If I build in a city centre am I good for investing or bad for speculating? Businesses are there to make money.”
Jim Pickard
Kiran Stacey