50% discussions are overrated….

There has been a lot of talk recently about the 50% tax rate and its impact on entrepreneurs and building businesses. In my view this is a total red herring. The 50% rate has always been symbolic and has had little impact on either revenue raising or wealth creation. Constant focus on this is a waste of time and a diversion from discussions about the real needs of a wealth creating economy.

Very few business plans that I see include salaries for entrepreneurs pitched at anywhere near £150,000 (and if they do these salaries don’t last long as funders will not wear them). Indeed the plans in which I do see such salaries are invariably prepared by ex-corporate types who have not quite grasped that life is a little different in Enterprise Britain to what they have been used to

Most real entrepreneurs and wealth creators have a long term view of financial gain. That is why the various reliefs available that reward investment in growth businesses, such as entrepreneurs’ relief and the enterprise investment scheme (EIS), are so important. They are real incentives that encourage the building of the sustainable businesses that the UK economy will need in future. These incentives, coupled with a business friendly regulatory environment, will create more jobs and wealth than any tinkering with the top tax rate.

Far more pernicious in my view is the effective tax rate of 60% levied on incomes between £100,000 and £112,000, the result of the gradual elimination of the personal tax allowance. This can have a potentially negative effect on the individuals who may not have the entrepreneurial spark necessary to grow a business, but are vital lieutenants, providing necessary back up and support as it moves beyond the start-up phase. It equally cannot be “managed away” as easily as the 50% rate can. I suspect that a FOI request will reveal that this is much more lucrative that the 50% rate is, and as a consequence is unlikely to be changed anytime soon.

The only way that the 50% tax rate is likely to get in the way of entrepreneurial activity is if it distracts politicians from doing what is really required to get such activity moving. Talking about tax can sometimes be as damaging as the tax itself.

P.S. Apparently Belgium has now broken the world record for not having a government. During this time it seems that its economy has grown unhindered. As one would have it in twitter world #justsaying…

The Duke does have a point…….

They tell you when blogging that the first sentence is vital in attracting attention and encouraging the reader to continue. Oh dear. But bear with me please.

While on holiday in Wales I came across an interesting letter that was allegedly sent by the Duke of Wellington during his campaigns in Spain in 1812. The letter concludes as follows.

“This brings me to my present purpose, which is to request elucidation of my instructions from His Majesty’s Government so that I may better understand why I am dragging an army over these barren plains. I construe that perforce it must be one of two alternative duties, as given below. I shall pursue either one with the best of my ability, but I cannot do both:

1. To train an army of uniformed British clerks in Spain for the benefit of the accountants and copy-boys in London or, perchance,
2. To see to it that the forces of Napoleon are driven out of Spain.”

Put simply, do you want me to provide you with all the information and paperwork that you say you need or do you want me to do my job?

You have probably heard similar sentiments from CEOs, COOs and managers everywhere, although probably expressed in earthier, less flowery terms than used above.

Finance departments do have a knack of rubbing up operations people the wrong way. Personality and culture do come into but fundamentally it is a lack of understanding and communication. Finance does have compliance responsibilities but it has to also be able to contribute commercially to the success of the business.

It is pointless tying up the top person with an endless stream of bureaucratic requirements. That is often where corporates get it horribly wrong with their teams of head office personnel whose sole purpose is to process numbers received from location A and then send them off to location B. Performance suffers and the end result is often the departure of a talented but frustrated individual.

Whether the letter is genuine or not is a moot point, as the sentiments expressed by Wellington 200 years ago are still very relevant today. Finance functions that want to retain their credibility should bear them in mind. Ultimately they are there to support the business and drive it forward, not take it over and smother it.

Not such a load of old rubbish after all….

2011 has seen those seventies green icons, The Wombles, come back into the limelight. In the clean-up that followed last month’s riots, some participants revelled in the soubriquet of “The Riot Wombles”. Then there was their comeback appearance at this year’s Glastonbury festival which had attendees young and old dancing and singing in unison.

Lest it be forgotten the musical Wombles were actually extremely successful, achieving numerous top twenty hits, and being the most successful pop act of 1974. Songwriter Mike Batt’s clever pastiching (or recycling) of various musical genres meant that they were many cuts above the average novelty act. They were even the interval act at the Eurovision Song contest held in Brighton.

Speculation has abounded as to who was really wearing those Womble costumes on stage. A number of top session musicians did obviously, but some rumours have persisted that pop impresario and Labour peer Lord Levy’s influence might have led to one or two soon to be Labour ministers strutting their stuff on stage disguised as Bungo, Tomsk and Wellington and co…..

Of course in these environmentally aware times it was only a matter of time before Wimbledon’s original eco-warriors would be given their due. Mind you they sorted and reused the rubbish they collected in a simpler time, a time before politicians and lobbyists hijacked the green movement and ensured that, rather than willingly embrace a more sensible way of dealing with their waste, the UK population had to be coerced and threatened into doing so.

As a finance director it has always made a great deal of sense to me to conserve resources and minimise waste. It is an economic and financial no brainer. Businesses that operate in an environmentally considerate way not only gain Corporate Social Responsibility brownie points but also actually save money. However nobody likes being hectored, and the innate suspicion that surrounds anything uttered by politicians has arguably set back the cause of recycling by a number of years.

However change we must, so next time you hear a politician go on about climate change and how we must do this or that to save the planet, don’t switch off. Think Womble. Then you will realise that it is not such a load of old rubbish after all.