Protest and precept MONEY
NICHOLAS DAVENPORT
I am all for enlarging the frontiers of the human mind and I have nothing against the anti-material revolution going on down the King's Road, Chelsea, where bare feet and open flowered necks can be seen among the ,shoppers. But in the advanced industrial society in which we move and have our being life is becoming increasingly a business. Even a love- in has to be financed. Even the most starry-eyed socialist has begun to realise that governing Britain is also a business, especially when we have not a closed economy but a mixed economy striving to pay its way in a highly competitive trading world. And for the poor miserable governed, subject to the extraordinary Wilsonian revolution in company and class taxation (wit- ness the 10 per cent surcharge on surtax), life has become such a complicated business that it is almost impossible to cope with its daily financial problems. The SPECTATOR has, therefore, decided to enlarge its money and business section to deal more adequately with the trying business side of life.
The businessman himself is becoming in- creasingly exasperated and frustrated. As Mr F. S. McFadzean, a managing director of the Royal Dutch-Shell group, said last month in a speech at Belfast: 'The gap between the group of theoretical economists who seem to dominate British government thinking and the people pre- pared to risk investment and increase produc- tion has become alarmingly wide. In the uncertain and near-capricious environment which has been created it is not surprising that investment has fallen. It is only surprising that it has not fallen farther. We have been deluged by a host of new labels for some old and tawdry economic ideas which even the Soviet Union is in the process of discarding.' This is a very serious and pertinent comment.
The Labour government is pledged by the party's New Statement of Aims of 1960 to run a mixed economy but it cannot possibly make it work unless it gains the confidence of the capital-investing employer. This the Prime Minister has unfortunately lost by his harsh taxation, by his equivocal statements about pro- fits and profit-making and by his persistent, if well-intentioned, interference in the private sec- tor of the economy, of which the Enabling Bill is the latest example. I do not see how busi- ness confidence can be restored unless, first, the Government stops the penal taxation of the highly paid managerial elite (who are only allowed to keep 9d in the £), second, revises the lunatic selective employment tax, which en- courages the wasteful employment of labour, and, finally, proclaims a more rational and sympathetic approach to profit-making and the whole profit-motivation in business.
At least one of the Prime Minister's col- leagues, Mr Ray Gunter, has been moved to remark : 'I do wish so many of our comrades would stop equating profits with incest or lechery.' But this is probably too much to ex- pect. If you have never run a business you will never understand the profit yardstick in business efficiency. The Prime Minister calls for an in- crease in productivity and boasts that his defla-
tionary squeeze has brought this about, but, as Mr Joe Hyman of Viyella has remarked: `There isn't such a thing as high productivity without a high return on capital.' Yet Labour ministers, and even Labour businessmen like Lord Campbell of Eskan, have spoken against the maximisation of profits and in favour of limitation of the return on capital. They seem to be unaware that industrial profit is merely a question of how much you can use your plant capacity, how many shifts you can work to generate the greatest return on capital. Only by that profit yardstick can you increase produc- tivity and raise wages.
The knowledge gap between government thinking and business thinking will therefore be one of the perennial topics of this business section. But it will also try to fill the knowledge gap between the struggling individual trying so hard to build up some capital out of net sav- ing and enlarge it by judicious investment and the experts who handle the financial machine and deal unconcernedly in millions of money at compound rates of interest. Financial sophis- tication may be more widely spread in America, where the percentage of personal disposable in- come saved and invested is 101 per cent against our 6.4 per cent, but there are many thousands of British families who are clamouring to be better informed and indeed embark on life assurance and pension schemes, buy houses on mortgage and invest in unit trusts, building societies and the Stock Exchange without pro- per information or access to expertise. About 80 per cent of families with incomes of be- tween £1,100 and £2,000 are paying life assur- ance premiums and 50 per cent of them are also contributing to retirement pensions. The total of life and superannuation payments now amount to over £1,000 million a year. It is big money, but what a struggle it is for the average small-money family man to maintain his con- tractual savings contributions and build up enough capital to invest independently as well.
I do not suggest that there is any easy way out for the ambitious investor. Everyone knows how easy it is to invest £5 million, by intelligent spreading of the investment risks on this scale you are almost bound to do as well as the Actu- aries Index and how difficult it is to invest £5,000. As an old professional in this game I strongly advise the beginner to start with a modest endowment life Policy and buy a free- hold house which will appreciate faster than the value of money will depreciate. You need not wait to accumulate the price of the house out of savings. There are building societies who will lend you up to 85 per cent, and there are life companies and mutual life societies who will put up the balance provided you take out an endowment policy, for the whole amount. The interest on the mortgage will be a charge on in- come to offset tax and the life assurance pre- miums will carry, tax relief. The law so far favours the accumulation of capital. When this has been done you can go on to build up your investment portfolio and even this can be bor- rowed if you take out an equity-linked life assurance policy. All these first steps toward! invested wealth need guidance from expert hands, which this business section will hope to provide. If by your own efforts and diligent reading you can make a lot of money for your extra comfort and pleasure you can tell the Prime Minister that by God you have earned it.
Previous page
