Will global big wig businessmen help improve Britain’s Productivity?

By Neil Behrmann

London:- British Chancellor of the Exchequer Gordon Brown has announced that a dozen elite businessmen will be members of an International Business Advisory Council to advise the Treasury.

The council will meet once a year and advise the Chancellor of the Exchequer over the next three years on how to respond to the challenges and opportunities of globalisation to ensure the UK continues to be one of the top locations for international companies’ high value-added activity, said Mr Brown.

Mr Brown could not obtain better business advisors, noting that he has already recruited former Federal Reserve Chairman, Alan Greenspan as a sage on global business as well. The list of luminaries is a who’s who from global business. The twelve Band of Business Brothers are Bill Gates, Microsoft, Robert Rubin, Citigroup, Lee Scott, Wal-Mart, James Wolfensohn, former World Bank president, Sir John Rose, Rolls-Royce, Lord Browne, BP, Jean-Pierre Garnier, GlaxoSmithKline, Sir Terry Leahy, Tesco, Bernard Arnault, LVMH, Meg Whitman, eBay and from Asia, Sir Ka-Shing Li, Hutchison Whampoa and Ratan Tata, Tata Group.

Members of the Council will opine how Britain can reverse its sliding productivity, attract foreign investment, improve research and development, increase trade with fast growing emerging nations such as China and India and boost London’s already thriving financial sector.

This is a public relations coup for the man who has been waiting several years to succeed Tony Blair as premier. It shows the British electorate that Mr Brown has the global connections of an international statesman. This is vitally necessary to counter the growing popularity of David Cameron, the new leader of the Conservative Party. Polls have begun to swing in favour of the Conservatives because the Labour Government’s popularity has waned considerably. It has been in power for nine years and Western electorates generally become tired of lengthy incumbents. The British public are increasingly concerned about the Iraq quagmire, tax increases to meet burgeoning government spending on health, education and policing that are not meeting delivery expectations and unsatisfactory pension provisions. Moreover the government is mired in sleaze. The latest example is that several businessmen have become Lords after donating and lending money to the Labour Party.

The big question, of course, is whether a Big Wig Advisory Council will achieve much. Will Mr Brown accept the advice, which is bound to include recommendations for tax cuts, incentives and deregulation to boost UK productivity, investment and competitiveness. Mr Brown has already put in place numerous consultative groups, which have failed to achieve these ends and economists and businessmen are sceptical. Sir Digby Jones, director-general of the UK Confederation of British Industry encapsulates this view: “The practical test will be whether the advice is acted on, not just regarded as politically-helpful window-dressing. This government has previous for being good on the talking but not making the walking effective.”

The CBI believes that the government had done well in delivering macro-economic stability, including giving the Bank of England independence, but that credit has been banked. There are also tax incentives for research and development. For small businesses, with profits up to pds 300,000, the tax rate is only 19 per cent, rising to 30 per cent for larger businesses. For individuals, tax rates are a sliding scale up to 22 per cent for the first pds 32,400 and then 40 per cent for income exceeding that, while individuals must pay up to 12 per cent on national insurance, which goes towards pensions and free health care.

Mr Brown became Chancellor in 1997 and was helped by a sound and growing economy, the legacy of the Tory Chancellor Kenneth Clarke. Inflation and growth, both of which are around 2 per cent are on target but are well below the faster growing lower tax Asian nations. According to the latest Global Competitiveness

Report of the World Economic Forum, however, Britain has slipped to thirteenth place from eleventh and is well below Finland, US, Sweden, Denmark, Taiwan and Singapore. The US and Asian countries have much lower tax regimes than the Nordic countries, but the Scandinavians are competitive because of far superior educational systems that the UK and public institutions that are highly transparent and efficient, with a highly motivated labour force.

No doubt the global business panel will put forward ideas as well as platitudes on how Britain, with an aging population of more than 60 million and a wide income divide between the wealthy south of England and the poorer industrial north. Problems are considerable. A huge increase in spending of the Labour Government over the past few years has been accompanied by considerable waste and dominance of the public sector. According to stockbrokers Williams de Broe, surging public sector inflation and a decline in productivity is costing the UK economy around pds 56 billion (S$162 bn) a year . Including doctors and academics and sub contracted people to the public sector, the numbers of people earning money from the State have risen by around 13 per cent to 6.8 million since Labour came to power in 1997.

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