Belfast Telegraph

Saturday 30 August 2014

Rolet may help Osborne get the balance right

Who knows which of our business leaders the Chancellor George Osborne listens to as he looks for fresh thinking to boost growth, but he could do worse than have a chat with Xavier Rolet, the head of the London Stock Exchange.

It might seem odd to suggest Rolet as a source of inspiration, with stock markets crashing around our ears, but the exchange boss has many interesting ideas on how we should be rebalancing the economy away from debt and back into equity.

The timing couldn't be better for the Treasury to look again at how we shift the balance - even Osborne admitted last week that he's prepared to tackle subjects which get parked in the "too difficult" box in calmer times.

Rolet's starting point is that a more level playing field for equity investment could be a great boost to jobs - if each of the UK's 4.8m small and medium-sized enterprises (SMEs) employed one extra person, they could create 48,000 jobs overnight. He would like to see stamp duty dropped for share transactions, particularly on buying shares in SMEs - the very firms that find it hard to get bank loans or are lent money at penal rates - and estimates the benefits would far outweigh any losses to the Treasury.

The Government should also reconsider why debt is tax-deductible for most companies and private equity firms, yet investing in shares is taxed four times - through corporation tax, capital gains tax, stamp duty and income tax.

Providing new finance is essential to small businesses, but, as we saw last week, bank lending is down, again. Bashing the bankers is not going to make them lend more, we need new sources of finance - hence Rolet's suggestion that tax be relaxed for venture capital trusts investing in small start-ups; that there be a more favourable capital gains tax regime for investing in quoted companies; that VCTs be allowed to invest in the secondary market; and that ISA investments can be made in small quoted companies.

Yet the UK's biggest firms have masses of cash that's earning very little in the bank. If they were encouraged to reinvest in themselves or other businesses, there would be an immediate boost for new jobs.

All the politicians I talk to agree that we have become too debt-reliant and that a move towards securitisation is a must. So why don't they take action? As the dreadful riots have shown, there are far too many people in this country who feel alienated from society - providing them with a great education first, and then with jobs, is the most responsible response. And it was these events which reminded me of what Rolet told me a few months ago: "Is there ever a bad time to do a good thing?

"It's not capitalism that people dislike so much, but the booms and bust that go with it. And the booms have nearly always been caused by a build-up of debt, of leverage in the system."

It's worth noting that the Frenchman has a pretty good record of getting things right - he predicted in these pages last year that France would be the next eurozone country to wobble.

All hail Apple genius Jobs, as he snatches Exxon's crown and looks set to keep it. Apple became the most valuable group in the world last Tuesday.

The computer company has been in second place since taking over from Microsoft last year, and most US analysts reckon chief executive Steve Jobs could be holding on to this new crown as his company is still showing tremendous growth potential.

Apple's rise to the top is fascinating because it's not so many years ago that the company was on the brink of bankruptcy. How has Jobs done it? What makes this company? And can we learn from its strategy?

It goes without saying that Jobs and his team have the right technology; but their genius has been to seamlessly update and create new products faster than any of Apple's competitors. These products all match each other rather than replace or compete with each other. So, people who have the Apple laptops also want the new iPhones as well as the iPad; they are not bored by the fact that it's the same company.

Jobs is a brilliant leader - ahead of his customers and smart at picking some of the greatest designers. In so many companies that become big, it's the grey men in suits who take over and close down the sparkle. All credit to Jobs for not letting this happen.

But who will succeed him? He's too clever not to have that in place, too - but prefers to keep quiet.

It's not a word I use often - and one that is frowned on because of its overuse - but Apple is, quite simply, iconic.

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