By Elliot Keck, investigations campaign manager at the TaxPayers’ Alliance
The World Economic Forum at Davos is the starkest possible example of the difference between free-market capitalism, and stakeholder, corporate capitalism. In the former case, government produces and enforces a set of clear, easy to follow rules. In the latter, governments cosy up with businesses, special interest and lobby groups to stifle competition and innovation. The lines between politics and business blur so as to be indistinguishable.
The increasing politicisation of business is no secret. It’s most commonly seen in the case of “woke capitalism”, a term coined by Ross Douthat in the New York Times. But a more worrying trend is businesses openly lobbying on areas of government policy which directly benefit them to the disadvantage of others. The most recent example of this is Tesco’s chairman, John Allan calling for a windfall tax when the UK’s tax take is already at a 70-year high.
Mr Allan got what he wanted on Thursday after the chancellor, Rishi Sunak, announced a windfall tax – sorry, I mean a “temporary, targeted energy profits levy” – to help fund a series of incredibly expensive direct cash transfers.
No sooner had it been announced than Shell, one of the world’s largest energy companies, warned that the tax would create uncertainty “about the investment climate for North Sea oil and gas for the coming years.” This was precisely what we at the TaxPayers’ Alliance had been warning about.
With the effective tax rate on energy companies’ profits now at a whopping 65 per cent, after the new levy is implemented we were right to be worried. Energy security will never be achieved with these sorts of pressures on company profits. There are sensible safeguards to the policy. For example the investment allowance and a sunset clause. But far better to not implement the policy in the first place.
The likes of Tesco should not be blasé about any of this. Whatever short-term gain they may experience, the long-term impact on investment and growth will be to their detriment. Nor should they think they are shielded from similar measures. There have been calls for a windfall tax on supermarkets as well, for example.
Ultimately the windfall tax is a distraction from the real problem. However you look at it, our tax bills are astronomical and, frankly, unsustainable. The tax burden is at a record high with the average household set to pay over £1 million in tax in their lifetime.
The government must bring forward the income tax cut, scrap the national insurance rise and increase the personal allowance in line with inflation. Only with a serious programme of tax cuts, coupled with a serious reduction in government spending, can we really ease the cost of living crisis.