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Can Maude deliver billions of pounds of revenue to small businesses?

Robert Peston | 00:00 UK time, Friday, 11 February 2011

The coalition government's programme for government includes an "aspiration" that a quarter of government contracts should be awarded to small and medium sized business.

Francis Maude

 

Now according to the report carried out for the Cabinet Office by Sir Philip Green on waste in government, what he called an "efficiency review", public sector procurement on IT, travel, consultancy and so on amounts to £166bn a year.

So if a quarter of this was channelled to small and medium sized businesses, that would amount to a colossal £41.5bn of turnover for them. Which, to use the ghastly management cliché, would be transformative.

To be clear, the programme for government isn't exactly clear on the definition of "government contracts", so I am not sure whether the aspiration applies to the whole £166bn.

I asked the Cabinet Office how much government business would become available for smaller businesses. This is what an official said:

"We don't have accurate data to show the current value of spend with small companies, but we can say for certain that moving towards 25% of government contracts being awarded to SMEs will open up billions of pounds worth of contracts to these companies.

"And to make sure the government can be held to account, every department will publish accurate data by April which can be used to measure progress."

The Minister for the Cabinet Office, Francis Maude, seems pretty fired up about it all. He complains that there is a "procurement oligopoly, where innovative small businesses and organisations are too often shut out of contract processes early on because of ridiculous rules and unnecessary bureaucracy".

He describes the dominance of big companies in supplying government as not only bad for small businesses but "bad for government as it stifles competition".

So what is he actually proposing to do to break the big company oligopoly?

Well later today he will announce three reforms which may make something of a difference - and which are a response to a large number of the complaints made directly by businesses to the government here.

The changes all relate to the forms which businesses have to fill in, a so-called pre qualification questionnaire or PQQ.

Small businesses hate these because they are time-consuming and onerous to complete. And some of the stipulations in these questionnaires - for certain levels of indemnity insurance, for example - are simply too expensive for the small businesses to take out, unless and until they win the contract. But they are not allowed to bid for the contract unless they've already met these legal and financial conditions (a classic bureaucratic Catch 22, which delivers enormous advantages to big incumbent providers of goods and services).

So for central government procurement worth less than £100,000, PQQs will be abolished altogether - allowing government purchasers much more freedom to determine the most efficient way of buying stuff.

If this, for example, were to end the practice highlighted by Philip Green of civil servants paying £2000 for laptops that can be bought commercially online for £500, all taxpayers should cheer.

The second reform is create a central database of PQQs, so that for so-called commodity goods and services, a supplier would only have to fill in a PQQ once and forever, rather than having to submit a new PQQ for every single government tender.

Finally, there will be moves towards more open bidding procedures in general, giving government purchasers more flexibility to talk to a range of potential suppliers - small and big - about what they can offer, without eliminating all the small suppliers right at the outset because of the financial and legal hurdles imposed by too-rigid PQQs.

It all sounds a bit like common sense - although whether it will lead to the kind of cultural and commercial revolution desired by Francis Maude cannot be taken for granted.

Apart from anything else, it will work only if the civil servants involved in procurement become comfortable taking greater personal responsibility for their purchases. Because the great advantage for bureaucrats of PQQs is they automate the decision-making process to a large extent, by screening out all sorts of small, young, interesting businesses with little track record.

So if the government really wants to deliver contracts to smaller businesses, it is going to have to somehow persuade civil servants to be more comfortable taking risks and exercise personal judgement when awarding contracts. Which won't happen overnight.

One final thought. Mr Maude has already squeezed the profit margins of many of the big companies which supply government by renegotiating their contract terms. Those companies have persuaded themselves that the pain is worth it, because of the potential growth promised by the government in outsourcing and privatisation of public-sector services.

But if much of these new contracts go to smaller companies, then perhaps there isn't a Con-LibDem silver lining after all for the likes of Serco, Capita and the rest.

Comments

  • Comment number 1.

    And yet I seem to recall that it was Philip Green's main point in the review you cited that government should be looking to bulk buy wherever possible, to hammer down the prices they are paying? That the hundreds or thousands of different kinds and prices of, for example, paper or printer cartridges government is buying, are examples of an apparently outrageous culture of inefficiency.

    And yet if the government really were to make a policy of awarding contracts to small and medium businesses, this would by definition lead to many different orders for different products at different prices. Which to me amounts to either an admission by the government that Green was barking up the wrong tree, or this being a policy they have no intention of ever adhering to, that is purely for the press.

    I always thought, mind, that it seemed an odd suggestion by Green - that the British Government should use its position to drive its suppliers - British businesses - into a corner where they have to accept brutally unprofitable business terms. Presumably taking inspiration from the way the supermarkets buy milk for less than it costs the farmers to produce milk.

    Government has a responsibility to nourish businesses rather than screw them. This for me is a fine example of why businessmen will never understand government. It's not about profit and costs in the same way that private sector businesses are. There are other priorities as well.

    If they do what they said they will, great. But I doubt it.

  • Comment number 2.

    Incidentally, that report took him all of two months. Exactly how much can you actually understand about the reasons and processes involved on purchasing across thousands of sites in many different services, in two months? Alongside your day job running Topshop?

  • Comment number 3.

    when has it been possible to depend on civil servants to get value for the taxpayer one only has to look at at the ministry of defence to see how incompetent they have been

  • Comment number 4.

    There are three points in all this. Robert makes the first, namely that the current forms ensure that no-one in authority takes any risk of being criticised when puchasing something provided they comply with the rules and fill in the forms. Will they now take more risks? I guess they might provided they are not criticised when things go wrong.

    The second, made in 1 above, is that this liberalisation could work against the economies of scale that are possible with bulk buying.

    The third, is that most of these forms first came into existence to prevent fraud and misallocation of funds. I'm not suggesting for a minute that if tey are taken away then everything would go to pot: au contraire, I expect that the vast majority of purchases would be completely above board. But there are always some people who are on the make. How many scandals will it take before there are calls for rigid, bureaucratic procedures to be introduced?

  • Comment number 5.

    Robert, it's not just pre-qualification questionnaires that need to be reduced drastically in number but also the full panopoly of other pre-assessment, interim, final and other questionnaires, checklists etc that the ever increasing number of public sector procurement specialists issue that all need to be simplified dramatically or eliminated! Procurement specialists have invented needless complex steps to funnel requests to eventually reach a standard short-list of two or three bidders that they usually already know well.

    I'm one of many people who have spent considerable time in the last few years filling in such forms for public sector procurement bodies. You are right to imply that a change of culture is required amomngst public sector professionals but this is not really a case of asking them to take a few risks. Rather, it is a case of asking them not to ask an ever increasing number of questions that do not pertain to what is being purchased or where the information is readily available elsewhere. The increasing number of procurement specialists has radically increased the cost of public sector procurement as each specialist has vied for fame in recent years by the mistaken belief that each extra step they introduce into a procurement process and each new question they ask somehow makes the process of buying things better when, in reality, every new hurdle increases the cost of purchasing and eliminates ever more potential bidders who cannot afford the increasing cost of bidding for work that they may not win if they do not have the requisite army of staff to fill in the ever increasing number of purchasing questionnaires.

    Examples: when public bodies started asking for online procurement responses why has this often become simply an extra requirement (itself with innumerable demands about online typefaces, pagination, indentation etc) with multitudinous hardcopy sets still often required to be delivered? Why are multiple hardcopies of published company results still requested when these are in any case publicly available documents with more readable company financial analyses widely available at the click of the mouse? I could go on...

    Surely, the starting point for a public sector procurement should be to look at how the private sector undergoes the same process, then do likewise whilst following the standard set of EU rules regarding the publication of bids and timescales for responses?

    Procurement specialists typically trumpet their success in terms of claimed 'savings' which anyone involved as purchaser or supplier knows to be phoney. Perhaps we should instead have a competition whereby public sector procurement specialists are measured on how low they can make the cost of procurement as a percentage of what is being bought? Now that might inspire some radical improvements!

  • Comment number 6.

    IF this concept works it will be a small step in unravelling the bureaucratic jungle. I shall reserve comment until I see it actually happening. However, I do fully agree with tFoth (#5) as it does appear that civil servants have reinvented hot water!

  • Comment number 7.

    Given that Whitehall has probably been swollen with staff it did not need for years it's really doubtful if government knows what being efficient and being effective means.

    They have made an absolute shambles of organising the expenses arrangements and even now MPs are still trying to circumvent the restrictions laid down so that they can continue to do what they did before knowing that if they do get caught doing wrong they will only get a token prison sentence which would normally put an ordinary citizen behind bars for a lot longer.

    The most competent government department seems to be the National Audit Office which often publishes reports commenting on the bad spending by government. It's a pity that all ordering is not done via that department and then we could save money before it is wastefully spent.

    Maybe too we could save money by adopting some of the cost cutting practices of the Swedish government, which seems to be able to give their MPs the tools to do their job while minimising the expense to their electors.

    Voters are fed up hearing overpaid MPs complaining about their expenses when most people are living on a quarter of their salaries or a lot less.

    Government can be a lot more cost-efficient if those in it really put the needs of the nation before their own.

    My real concern is that they are unable to do that and the scenes in Egypt remind us all that when voters become aggrieved to that degree our democracy, safety and security is threatened.

    I'm hoping some integrity, honour and common sense will permeate the walls of Parliament and return us to being the first class nation we used to be.

  • Comment number 8.

    Forms, databases, bidding......

    Any news on regulation of interest rates or fees yet?
    I can't help thinking these might be more important to a small business person when deciding whether the additional capital can earn him or her return after the bank has taken their cut.

    I suspect many will steer clear and see this for what it is. Just more bluster.

  • Comment number 9.

    When I used to work at a division of a large multinational company we had a hierarchical purchasing system which seemed to work well. I used to see a number of salesmen when considering various products. I wanted technical excellence at an affordable price. All orders had to be placed by our purchasing department. They often intercede and placed an order with another supplier. They had a system of preferred suppliers (about 100 or so). It was cheaper for them to deal with a preferred supplier even if the unit cost was not the cheapest. All company purchasing departments within the UK got together to get the best price for commonly used goods. If I ordered A4 paper it would not come from the company I ordered it from because purchasing would divert the order to a company centrally negotiated. On the other hand if I ordered a left hand widget extractor (not widely used in the company), it would come from the company I specified on the order. It all seemed to work well most of the time.

  • Comment number 10.

    In the IT world there is an old adage.... "Nobody every got fired from buying from IBM". In short it would take a "brave" manager in either a commercial body or a large public sector organisation to decide to buy from a smaller outfit. They would have a tougher time defending their jobs if things went sour, particularly if they rejected a deal from a bigger firm. Incidentally all the big firms know this and hence their rates go up significantly (effectively their size and reputation acts as an insurance premium).

    If the government is to start buying from smaller firms then they will need "braver" civil servants. I would argue that a stronger level of technical understanding by the civil servants doing the procurement and oversight would certainly help this process. They would be better able to evaluate the work being done and the likely risks. It would also enable more meaningful oversight and the government to switch providers if a small firm doesn't seem to be delivering.

    Unfortunately what seems to happen is that the government tries to outsource everything en mas using "procurement specialist" (as described by a previous poster). Once the contract is handed over the firm then discovers that the small print enables them to get "additional value" out of the contract and there are no levers that the government can use to stop it (being now complete dependent on the incumbent)

  • Comment number 11.

    Dear Robert Peston,

    Please could you comment on George Monbiot's piece in the Guardian on the removal of UK taxes on money earned by companies in their foreign branches?

    Mods - please remove this link if necessary.
    http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-century?CMP=twt_gu

    After reading it myself, I cannot understand how this tax policy could benefit the UK. It just seems like it would encourage movement of jobs out of the UK, where taxes are lower. I thought the Tories wanted to encourage the UK private sector to create jobs.

    It would be really good to get another persective on this.

    Thanks,
    Dave

  • Comment number 12.

    Gone are the Promises, gone are the Pledges, because the ConDems know they can't keep them, now it's "Aspirations".

  • Comment number 13.

    1. At 00:32am on 11th Feb 2011, amos2000 wrote:

    > Philip Green's main point in the review you cited that government should be
    > looking to bulk buy wherever possible,

    Certainly, bigger discounts can be gotten if you buy a lot of the same thing at once.

    > if the government really were to make a policy of awarding contracts to small
    > and medium businesses, this would by definition lead to many different
    > orders for different products at different prices.

    The clue is in the words you use yourself - many different orders for different products at different prices. Bulk buying is good when things are the same, and stupid/impossible for a myriad of different things. Green, whatever we might all think of his penny-pinching tax avoidance manoeuvres, is right.

  • Comment number 14.

    Probably this could be one of those stories that just slips under the carpet or on the other hand it could be a weapon of mass destruction for Ed Balls, The headline in the FT reads;

    "IMF admits wilting under Brown Treasury"

    It goes on to say;
    "In particular, the constant sparring over the public finances between the IMF and Gordon Brown’s Treasury, when Ed Balls, now shadow chancellor, was a key figure, contributed to fund officials being insufficiently robust with the Bank and the FSA."

    The report makes interesting reading....

    http://imf-ieo.org/eval/complete/pdf/01102011/Crisis_BP5_UK_Bilateral_Surveillance.pdf

  • Comment number 15.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 16.

    If you want thousands of cheap laptops you will not get them from an SME round the corner. The problem has been having a central purchasing organisation that can negotiate on behalf of the public sector these excellent deals available from mega suppliers. What happened to OGC they are still going! The impending fragmentation of the NHS will ensure sub-optimal solutions and you do not see Tesco's letting their store managers procure the supplies locally.

    Of course procurement should as a process be efficient and effective but a fact of life is that for standardised product supplies bulk buying will be obligatory. SME's are good at supplying the more specialised bespoke requirements which inherently does require more time in the procurement and post procurement process. So by all means review the buying processes but the cost reductions to the public sector will be largely found in the aggregation of requirements where this makes sense e.g. in the NHS where a recent study found trusts buying absurd ranges of standard products (paper, surgical gloves). The government should make is efficiency ideology mind up when they are telling council to aggregate their back office functions into ever larger units.

  • Comment number 17.

    Robert, efficiency and government are well recognised oxymorons. As for government purchase of laptops the question is why? For many companies the modern approach is BYOL - buy your own laptop.

    This is yet another example of how government thinking is locked in the 20th century. Another example is telecoms and home working. We do not need huge government buildings that cost the earth or millions of commuting civil servants. Make them home workers and get them using Skype/Livemeeting - it is free BTW to do their work and meetings.

    Maude needs to think openly and seriously. As for engaging small business; "do me a favour" - makes for good headlines but will never ever happen. There are too many vested interests.

  • Comment number 18.

    1. At 00:32am on 11th Feb 2011, amos2000 wrote:

    "I always thought, mind, that it seemed an odd suggestion by Green - that the British Government should use its position to drive its suppliers - British businesses - into a corner where they have to accept brutally unprofitable business terms"

    That's how he made his millions - that's how most 'kings of corporate briatin' make their money. It's not surprising he was so unimaginative he simply tried to apply corporate solutions to public problems.
    The surprising part was that he was asked in the first place.

  • Comment number 19.

    The cynic might observe that 25% of contracts by number probably account for a lot less than 25% of the total value of contracts. Given the obsession with paper clips in Government rhetoric, they may be able to meet this target without doing very much at all.

  • Comment number 20.

    If they believe taking on more subcontractors and suppliers driving competition. The company I worked for did that in the technology business with the outcome that to manage the number of suppliers and bids the high cost management team expanded rapidly. E sourcing brought down the initial price, but ended with suppliers not being able to deliver for what they quoted and in some cases going out of business creating more cost to supply the end customer. Finally what stops the large companies then buying up all of the small suppliers to retain the business volumes? other than doing what Phillip Green's businesses do and placing all of their contracts overseas, not a good idea for government trying to sustain business and tax revenues in the UK, lets not look to drive all of our businesses offshore.

  • Comment number 21.

    The next little gem in the FT is the head line;

    "All aboard for a new two-speed Europe"

    This I fear is all too close to the truth with Germany and France looking to set a two tier EU. However I feel that it misses one important point and that is instead of all 17 Euro-zone members being part of the high speed EU economy there will be other casualties along the way.

    Who is to say which of the 17 will fall by the way, the PIIGS are most at risk but are there any of the others that will be jettisoned to save the floundering currency? The big question is also how will the EU cope if this does happen, could we see a smaller EU as a result?

    Quiz of the day, select which countries will be in and which will be out.....
    My guess is;
    Belgium In
    Germany In control
    Greece Out
    Spain Out
    France In
    Ireland Out
    Italy Out
    Luxembourg In
    The Netherlands In
    Austria In
    Portugal Out
    Estonia Out
    Finland In
    Cyprus Out
    Malta Out
    Slovakia Out
    Slovenia Out

    So 17 could well be 7, there are a few marginal countries that would not effect the new currency one way or the other so they may decide to include to add numbers and thus think they have more credibility. But what of the EU, could it take such a change, the bureaucrat's in Brussels would have to manage out and out civil war which could end up with a much smaller EU and result in the formation of the Federal States of Europe and so it will all begin again....

  • Comment number 22.

    This has to be a good thing if it can be made to work.
    My company has all but given up even bothering to bid for Government contracts because you spend so much time and money jumping through hoops to qualify, and if you do win projects, the time it takes to pay invoices is abysmal. A project done last year for the Welsh Government took over 6 month to get paid from completion of the work. A large consultancy can absorb this. A SME cannot.

    Ultimately, the use of consultants by the public sector is so high because it gives a perfect get out if things go wrong. When I was in the public sector, we used to call it "MAP", or "Ministerial A$$e Protection".

    Civil servants aren't stupid and the sector is full of extremely clever people, but the most simple things were put out to consultants rather than dedicate a bit of internal resource to finding things out internally. It used to drive me mad. £40,000 would be spent on a project with a consultant and a highly polished report would be the result, but really, the content was often pretty flakey. Ask for more, and a request for more money would invariably result.

    But that £40,000 spent on a small project team internally to do the work would lead to much more time being spent on it and the knowledge and expertise gained from getting involved would be retained by the civil service to their benefit.

    A polished report from a consultant only provides an excuse to say you were acting on the advise of experts, rather than taking responsibility for your own decisions.

    Small specialists are highly valuable resources however. If particular expertise is needed then the civil service should be better able to go out and find it and not be beholden to the 'generalist consultancies' who are great at pre-qualifiying and understand the rules of the procurement game very well, but really, aren't particularly sepcialist at anything.

    Of course, the EU rules on procurement are a key underpinning reason why the system is the way it is.

  • Comment number 23.

    Small company gets lucrative public sector contract over a large company.

    Large company misses out, large company buys small company, large company gets public sector contract.

    It can even happen with larger companeis. A local authority outsourced one of it's main services to a company who weren't the favourite to win the bid.

    Winner ran it for six months, then guess what? The favourite - a huge mutinational company bought out the winning bidder - great strategy.

    They then renegotiated the contract every year and ended up with millions more being paid to it, yet it still failed to deliver!

    The service is coming back in house.

    Small comapneis can also not chase all contracts, they do not have the capacity so they often concentrate on what they are good at.

    The irony now is small companies who have been successful with Government and Local Authority contracts for years are now closing due to the spending cuts.

    The BSF decision (another loss in Court for the Condems I see) has resulted in small companies going to the wall.

  • Comment number 24.

    Everything to do with govt is politics. And for an SME, there are no friends. So if you must get involved think licence and off the peg. And don't expect repeat business.

  • Comment number 25.

    #11 I will try and explain although I should start by stating that HMRC and HM Treasury is completely unfit for purpose when it comes to tax principles so the reasons that they think the idea is good are almost certainly wrong - I give this proposal about 2 years from being passed before we start hearing govt ministers muttering about it being a loophole.

    1. Given the amount of losses banks have declared over last few years it is unlikely they will be paying much corporation tax in any case.

    2. As a govt we should encourage as many businesses as possible to base their head office here, as head office tends to employee the high salaried people who would therefore be paying income tax here (slight problem is that they are probably non-doms so this part of the argument is likely to be wrong) and the decisions will be made here.

    3. As we reduce corporation tax the old rules would have meant that less and less became subject to UK tax in any case (HM Treasury obviously failed to notice that we still have one of the higher corporation tax rates of the developed world)

    4. Its really rather difficult to administer old rules so changing them lets us get rid of (sorry, re-deploy) a significant number of HMRC staff.

    5. When Ireland did this everyone routed income through Ireland which increased the tax (true but Ireland's corporation tax rate was 12%).

    Sorry to be a cynic but this was a policy that was kicking around for ages under Labour. The fact that it is being passed by the new govt is mostly a function of the civil service mentality rather than Con/Lib tax policy.

  • Comment number 26.

    The coalition government's program for government includes an "aspiration" that a quarter of government contracts should be awarded to small and medium sized business. Whether or not these SMEs can handle the size of the project?
    If a quarter of the contracts was channelled to small and medium sized businesses, that would amount to a colossal £41.5bn of turnover for them, which, to use the ghastly management cliché, may be an "insight" for the Coalition Government, as in higher procurement costs, less quality of work, time delays - and no indemnity insurance.
    These contracts would have to be carefully awarded based on the capability of the company. It bemuses me to think that the capability of the company is directly related to the amount of credit they cannot seem to receive. In other words, there appears to be a horse behind the cart or a cart in front of the horse.
    To make it worse, the Coalition Government isn't exactly clear on the definition of "government contracts", so I am not sure whether the aspiration applies to the whole £166bn. Hmmmm...
    I loved the answer that you received from the Cabinet Office:
    "We don't have accurate data to show the current value of spend with small companies, but we can say for certain that moving towards 25% of government contracts being awarded to SMEs will open up billions of pounds worth of contracts to these companies" with the cart before the horse because they lack credit availability.
    "And to make sure the government can be held to account, every department will publish data by April which can be used to measure progress" or failure, or distress, or delays...or if the horse is still behind the cart unable to finance the project.
    The Minister for the Cabinet Office, Francis Maude, seems pretty fired up about it all. He complains that there is a "procurement oligopoly, where innovative small businesses and organisations are too often shut out of contract processes early on because of ridiculous rules and unnecessary bureaucracy".
    So who exactly is fixing the "ridiculous rules and unnecssary bureaucracy" and when is this being done, or is this a second horse behind the cart?
    I know there is this thing called Pre Qualification Questionnaire or PQQ, which small businesses hate because they are time-consuming and onerous to complete. And some of the stipulations in these questionnaires - for certain levels of indemnity insurance, for example - are simply too expensive for the small businesses to take out, unless and until they win the contract. Oops, another horse behind the cart.
    So for central government procurement worth less than £100,000, PQQs will be abolished altogether - allowing government purchasers that will bear no indemnity insurance?? Whoa, I think the horse just walked into the cart.
    The second reform is create a central database of PQQs, so that for so-called commodity goods and services, a supplier would only have to fill in a PQQ once and forever, rather than having to submit a new PQQ for every single government tender. This part sounds good. Who will create and maintain this data bank, volunteers?
    It all sounds a bit like common sense, even if it isn't common sense. There are just too many horses in this idea that need enabling to the front of the cart.

  • Comment number 27.

    'Can Maude deliver billions of pounds of revenue to small businesses?'
    .........................................

    Can Maude ... 'Buy British'? Is probably more important than scale of company as the larger company's import nearly everything from overseas?

    'Buying British' is far more important than ... buying off foreign owned SME's and non dom importers ... we must remember that many UK SME's are just off-shoots of larger foreign owned companies and foreign interests ... and so buying off SME's is not guaranteed to achieve anything.

    Another headline grabbing sound-bite that sounds good but is not guaranteed to make any real difference at all ... without intense govt purchase scrutiny ... and that can lead to a legal challenge under EU law

    If Maude cannot buy British then he should not buy at all .... Simples ... unless you're in UK govt ... but easier said than done.

    So the question should be ...Can Maude deliver billions of pounds in revenue to small British businesses?

    The answer to that question is 'YES' ... but will he do it ... probably not, as I don't think that 'he has got the bottle' (to avoid 'moderation' of the description) ... to do that.

    Another damp squib ... that avoids the real problem of the UK being bombarded with subsidised/protectionist foreign imports that ruin our UK economy and keep about 30 million Brits in need of state handouts.

  • Comment number 28.

    Thanks, Justin150,

    But I'm still struggling to see the benefits.

    "1. Given the amount of losses banks have declared over last few years it is unlikely they will be paying much corporation tax in any case."
    They'll be able to pay even less now, won't they? Besides, this doesn't affect only banks.

    "2. As a govt we should encourage as many businesses as possible to base their head office here, as head office tends to employee the high salaried people who would therefore be paying income tax here (slight problem is that they are probably non-doms so this part of the argument is likely to be wrong) and the decisions will be made here."
    Fair enough - but not so good for the UK workers who are losing out on the lower salary jobs. I can't imagine that the increased head office taxes make up for the lost tax revenues (and increased social benefit requirements) from the UK workers .

    "3. As we reduce corporation tax the old rules would have meant that less and less became subject to UK tax in any case (HM Treasury obviously failed to notice that we still have one of the higher corporation tax rates of the developed world)"
    Again, they'll be able to pay less taxes now.

    "4. Its really rather difficult to administer old rules so changing them lets us get rid of (sorry, re-deploy) a significant number of HMRC staff."
    OK, although I can't imagine that this makes a net positive either. It's also not so good for the UK workers.

    "5. When Ireland did this everyone routed income through Ireland which increased the tax (true but Ireland's corporation tax rate was 12%)."
    If I've understood correctly, we won't gain anything from the income being routed through the UK. They won't owe us any taxes.

    I'm sure there are some good reasons for this policy, but I just don't understand them. Can it really result in an increase in tax revenues? Perhaps the head office jobs count for more than I'm giving credit for.

    It just seems like a sly piece of legislation that completely nullifies and tough actions that Cameron and Osbourne are taking against the banks, and goes against their policy of encouraging the private sector to increase its share of the economy.

    Dave

  • Comment number 29.

    Speaking as the owner of a small business, the best thing the government can do for me is not lend me money nor hand me contracts, but reduce vat, stabilise the currency and interest rates and stop changing the tax regime every two years.

  • Comment number 30.

    #27

    All that will happen is that big overseas companies will just start up lots of small businesses in the UK. They have the capital. We don't.

  • Comment number 31.

    Classic case of government departments paying way over the odds for things, the central purchasing function of most local governments are paying way too much for stuff. Same with hospitals they have contracts which have poor value for money, its tax payers money thats been wasted.
    Small businesses should be leaner and offer better value, they can under cut most big operations on most commodities.

 

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