UK To Expand The Remit Of Financial Services Compensation Scheme

There has been much ado recently about financial remuneration and Gordon Brown has hopped on the bandwagon by announcing in the Financial Services Bill, outlined in last week’s Queen’s speech, that the Government will seek to “expand the remit of the financial services compensation scheme to [take] action, nationally and internationally, on remuneration.”

“Let me give you a tip on a clue to men’s characters: the man who damns money has obtained it dishonourably; the man who respects it has earned it.” (Ayn Rand, Atlas Shrugged).

All of the fuss regarding remuneration was recently labelled as the “reddest of herrings” in Niall Ferguson’s latest report for the CPS and he is no doubt correct. The idea that the financial crisis arose due to greedy bankers is laughable, but what is more interesting and damaging is the current siege on the very concept of the profit motive.

Denigrating the profit motive is implicit in allowing an institution of government to abrogate a contractual agreement regarding, and on the basis of, profit on what would be no more than an arbitrary decision.

It’s not just about the potential to lose money though: those who cared that their income was being cut started to plan their departure with the initiation of the 50p tax rate (see CPS publication). What concerns me is encouraging and incubating a cultural milieu where profit is seen in a negative light, where profit becomes a byword for greed (and not in the good way either).

It is this, much more than the material impact of taxation, that will drive away those who generate profits and thereby tax revenues and growth. These developments seem, unfortunately, to be a natural segue from the attack on risk creating activities that we have seen since the financial crisis.

By rejecting the profit motive and entrepreneurship as virtues we have begun to undermine the innovativeness that has made Britain such a great nation.

Of course it is the case that we reject certain activities that lead to profit; drug dealing for instance, and I agree they do deserve condemnation. There is though a clear difference between condemning the activity and outcome: it is not the profit we denigrate but the method of producing it.

That is not true in this case; the government is specifically targeting the notion of profit

We must reward success and we must allow our citizens to define what constitutes success; that means allowing the profit incentive to operate freely. If we as a nation decide that an activity results in more harm than good then we must seek to prohibit that act.

But we must understand the difference between condemning the means and the end – the consequences of rejecting the virtue of the profit motive will be dire.

Topics: 50p tax rate, Britain, economic development, economic growth, Economy, England, entrepreneurship, financial crisis, Financial Services Bill, global recession, Gordon Brown, Governance, innovation, profit motive, remuneration, revenue, taxation, taxes, UK, United Kingdom

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