18 April 2016
Capitalism is under attack. We must defend it before it’s too late.

Tax evasion is an unacceptable practice. It must not just be condemned, but must be rigorously investigated, charges brought, and proper punishments handed out.  We all pay taxes, at rates and in ways set out in law, in order to provide roads, hospitals and prisons; police, doctors and carers; and soldiers, pilots and submariners. They are what we pay for protection, security, and a civilised society.

I am sure that the Panama Files will provide HMRC with interesting reading – but the focus came upon on our Prime Minister, despite it being clear that he had done nothing that comes anywhere near what could be described as tax avoidance, let alone evasion. Sadly, a complete lack of evidence is not enough to discourage insinuation.

David Cameron has now released his tax returns, and other politicians around the UK have followed suit. But for those who believe that all politicians are corrupt, providing evidence to the contrary will not sway them – it will merely lead to dark mutterings about the levels at which the establishment will go to cover things up.

Some were also outraged by inferences that that inheritance the Prime Minister received from his father appeared to be just below the inheritance tax threshold. Even mentioning that tax is due on the entire estate, not individual bequeathments, has again not been enough.

People still want to be outraged. It has become clear that the reason is not tax avoidance, or tax evasion – but that Cameron and his family are wealthy.

There is absolutely no correlation between talent and accumulating wealth, many of the most talented people in the world have no wish to do so and have had wonderful careers doing amazing things. And making money through ill means, via corruption, unfair competition, or through patronage should be condemned; at least partly for bringing capitalism into disrepute.

But we cannot start to question whether people should be able to make money. If someone makes money because they have a brilliant idea or a clever investment, and if they have that bit of luck, combined with the hard work, passion and commitment to make it a success, then it should not be condemned.

This success do not just benefit individuals, it benefits the whole country. If people did not create wealth, our entire system would collapse. The left have a caricature of what only they term ‘trickle down economics’. But this is not about celebrating individual wealth or even the personal taxes they pay – it’s about economic growth, and the extra tax this provides.

If someone builds a company, their contribution to society is not just the tax they pay on their profits or the VAT paid by those who purchase their products and services. When new ideas come along they fulfil previously unmet needs of consumers and businesses. The world today would be poorer in every sense without Microsoft, Apple or IBM. Their contribution to society is not just their own products, but the products that others were able to provide because of them. They make some companies more competitive and allow others to be created; their growth and success enables more growth and more success.

But the benefits do not stop there. When a company succeeds and hires more staff, they pay employers’ national insurance and contribute to their pensions. When these employees earn their paycheques they pay income tax and their own national insurance contributions. They then use what’s left over to buy goods and services of their own, pay VAT and support businesses and workers that they buy from.

And still the process continues. If anyone involved decides to save the money they make, then their bank will use the money to provide loans to businesses or to give a family a mortgage. Anyone that has enough savings will then pay tax on their interest. If anyone decides to invest in shares instead, they will be providing a company with the capital required to hire more staff, to design a new product or to build a new warehouse. Then they pay tax on income from dividends, or the profit when the shares are sold.

As a by-product of this system, the individual who builds or expands a business may get rich. Those that invested to provide the finances to get the business off the ground may get rich too. They should pay tax on this success, but that is only one way in which they benefit the country and this contribution should be celebrated.

Peter Mandelson once said, “I’m intensely relaxed about people getting filthy rich, as long as they pay their taxes”. Too many are moving away from this view, and now don’t care about the taxes – they don’t like people getting rich, and they don’t like capitalism.

But through the spread of capitalism, the world has become better, safer, and freer than it is has ever been. It is richer than ever, but also fairer than ever. Across the planet, millions have been saved from malaria and millions more have been relieved from hunger because of funds released by economic growth and the extra taxation this provides.

Poverty, relative or absolute, must still be fought all over the world, but huge and undeniable progress has been made.
Capitalism is not just for the rich, it has been the best provider of better lives for all in the history of the world. Millions have benefitted from better jobs, better housing, better public services and better consumer products. According to the ONS, in 1972 42 per cent of homes had no telephone and 34 per cent had no washing machine. In 2011 86 per cent had a mobile (a figure that is surely now much higher) and in 2015 78 per cent of adults accessed the internet every day.

We stopped talking about how much better capitalism has made the world because it appeared the argument has been won. But it has not, the arguments need to be made again, not for the benefit of rich people but for the benefit of everyone in the UK and around the world. It’s for the benefit of those who want ever improving products and services, ever better technologies and ever lower prices. It’s for the benefit of those who want a well-paying job.  It’s for the benefit of those who need a strong economy to provide them with a strong safety net.

As Fraser Nelson said in the Spectator earlier this year, capitalism’s worldwide onslaught against poverty is “still the greatest story and it’s still not being told enough”. We all must start defending capitalism, loudly and confidently, because this is a battle that no one can afford to lose.

| First published at ConservativeHome