Mon 16 Apr 2018, 10:32 AM | Posted by Guest Blogger
Guest Blogger is Terry McCarthy, Brighton Unite member
International capital is giving the thumbs down to May’s economic and political strategy.
The last decade witnessed a sharp acceleration in investment in mergers and acquisitions (IMA). IMAs meant that international capital saw Britain as a safe neo-liberal haven which admired and rewarded the super-rich and international corporations.
However, there was a sharp fall in IMAs, from a high of £190 bn in 2016 to £35.3 bn in 2017. This is happening in spite of the weak pound, which makes takeovers cheaper, and in spite of incentives offered by the May government, such as the low corporation tax rate. This has been reduced and is to fall further, to 17% by 2020. There are also legalised tax avoidance schemes, such as the ‘paper box’ scheme, by which companies pay 10% on profits earned from patented inventions.
Brexit and the prospect of a Labour government are one obvious reasons for the decline in foreign investment, but we obviously haven’t seen the end of IMAs. The proposed hostile takeover of GKN is a case in point and we should be concerned at the number of takeovers that have led to asset-stripping, or exporting jobs to countries where workers receive far lower rates of pay with worse working conditions
The Trump administrations in the USA is now implementing on major tax cuts agreed by Congress, for corporations and the super-rich. These cuts will cost $143bn (0.7% of GDP) per year and a. $1trn over the next decade. The further cuts in Corporation tax, announced by British Chancellor, Phillip Hammond, will cost the Exchequer £63 billion over the next five years. Labour estimates that the public purse has lost £120 billion in tax revenues as a result of tax cuts for corporations and the very rich. These cuts will inevitably lead to drastic cuts in health social benefits and a rise in child poverty
