Failing to contribute to the Exchequer

I do wish that people would get this right:

The Chancellor\’s family-owned interior design business, Osborne & Little, failed to contribute to the Exchequer last year as it recorded its fourth straight year of losses.

There\’s so many nonsenses mixed up in that statement.

Firstly, the measure of success of a business is not whether it contributed to the Exchequer. That\’s not what they\’re for: the measure of success is the consumer surplus enjoyed by the customers. That\’s what they\’re for: to increase the utils of the people who use the products or services.

Secondly of course that one specific tax was not paid does not mean that no taxes were paid. There\’s economic activity going on in there and economic activity gets taxed at a number of points. The wages for the staff…OK, we could say that comes from the wages. The VAT, OK, so that comes from the consumers perhaps. No profit so thus not corporation tax: boo hoo. Bet you business rates are still an important consideration for a retailer.

Taxes are being paid, contributions to the Exchequer are happening: and that\’s not what should be the measure of the contribution being made by the company anyway.

Fun fact: long ago I was offered a job with Osborne and Little. Standing in my favourite pub, chatting away, saying I was off to uni in London in a few months. Was asked if I\’d like a summer job with them (by the MD, so I think I would have got it if I\’d said yes) leading to a part time one while at uni.

Decided to be a waiter instead, more cash in it.

9 comments on “Failing to contribute to the Exchequer

  1. Am I alone in thinking that the concept of ‘contributing to the Exchequer’ is rather strange? Being forced, screaming and kicking, to throw money into that bottomless pit, yes. But contributing?

  2. A value added statement, as distinct from the traditional income statement, would explicitly show the contribution an entity makes to the exchequer (the value created is distributed between labour, financiers and government).

    In a capitalist society, by definition, the purpose of the firm is to expand the owners’ capital. The benefit to consumers is the consequence, not the purpose.

    Consumer surplus tends to accrue to more affluent consumers. Poorer consumers may not even have the means to participate in many markets.

  3. FlimFlam (#2) said: “The benefit to consumers is the consequence, not the purpose”

    But a necessary purpose. In a free market a firm cannot benefit the owners unless it first benefits the consumers.

  4. The “purpose” of the firm is to make money for the owners. The “benefit” of the firm is to the consumers.

    That some firms produce stuff that benefits richer people is a very Eoin PhD (no more than one coffee should be available) reason for sneering at firms in general (or, frankly, in specific)

  5. @Richard

    “But a necessary purpose. In a free market a firm cannot benefit the owners unless it first benefits the consumers.”

    You may be confusing capitalism with “free markets”. The purpose of capitalist firms is to expand owners’ capital. A capitalist firm can achieve this by eliminating competition and erecting barriers to entry. A monopoly is rarely intent on benefitting consumers – it exploits its power to extract super profits from consumers.

  6. @Surreptitious Evil

    “That some firms produce stuff that benefits richer people is a very Eoin PhD (no more than one coffee should be available) reason for sneering at firms in general (or, frankly, in specific)”

    It was not my intention to sneer at anyone. I was not making a political point, either from left or right.

    I was endeavouring to clarify the meaning of consumer surplus, which is the amount that consumers gain from buying at a lower price than they are prepared to pay.

    For example, at £100, just one person will buy an item. Reduce the price to £80. induces two people to buy. So now the first person has purchased the item for which they were prepared to pay £100 at a price of £80 . Hence a consumer surplus of £20 has arisen.

    Consumer surpluses arise in many, if not all product markets. Consumer surplus is not restricted to luxury goods markets, which is the point on which you have misunderstood me.

  7. Ummm… the benefit to my customers is the purpose. They couldn’t care less if I make a profit. And in some instances I make a loss on a transaction (a 2.1kg packet where customer has paid £5 for postage as an example).
    Still got to provide the goods to the customer regardless of profit or loss.

  8. @Martin Davies

    Yes, but what is YOUR purpose? Are you running a charity?

    If not, your purpose is to make a profit Meeting customer need is the means whereby you hope to achieve that end.

    The customer’s purpose is, or can be assumed to be, to obtain goods and service that meet their requirements at the lowest feasible price.

  9. @ FlimFlam
    Perhaps Martin Davies is trying to earn an income over the longer term, in which case he is reliant upon his reputation for providing a good and reliable service; that is something that only exists in free market capitalist societies.
    The first time I worked in Eastern (now called Central) Europe I found the supermarket aisles were not crowded because you had to queue up for a basket before being allowed in and they only had a fixed, limited, number of baskets.
    The customer’s purpose in the UK is finding the service that gives the best value for money, balancing quality against cost. A taxi service that failed to turn up to drive us to the airport will *never* be used again, even though the parking fee was higher than the fare.

Leave a Reply

Name and email are required. Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>