The following sad story appeared in the Daily Mail of 21 May 2001:

“When offered contract work, my firm went through the costings, cashflow and forecasting exercise. We judged  there would  be a fair return  on the investment and decided to go ahead. However, the figures starting going through my mind and the following emerged : net profit to the firm — £18,598; net profit to the government  — £24,767.

Why?With National Insurance, PAYE,  VAT, fuel tax, insurance  tax, land fill levy, road fund licences, operators’ licence, personal tax liabilities, loss of interest on cash flow and other hidden taxes, the government will gain more from this investment than the company. In addition, ifwe took on three employees for this new job and they came off benefits, it would save the government another £23,400 a year, leaving the government a gain of more than £48,167  in the first  year — 259% more than the  risk-taker.

Why should I risk everything for a government that has accepted contract prices 30% lower than last   year?

I  am not going  ahead with the investment,  have sent  back the contract and ten people have lost the chance of a job. It’s not worth employing anyone because even if I make a decent  profit the red tape leaves me less than 60% of my time  to  make any money.

If l shut the firm down I would come out with enough money to invest and gain more from  the interest  than take a wage and dividend.”

Sad story, indeed; because it must be typical of many small new businesses that back out of taking risks because of tax and other government policies. What follows then is increased unemployment, reduced income for government, and — above all — the sacrifice of enterprise. What is surprising, and welcome, about the above account is that the writer understands — as so few entrepreneurs do — the fact that it is the employer who pays the taxes. He gets carried away by “red tape” but the essential perception is correct, that the disincentive to employment lies in taxation. Yet the health of the nation depends on new small businesses springing up and flourishing and giving opportunities  for work.

Schumacher wrote(1): ‘If a man has no chance of obtaining work he is in a desperate position, not simply because he lacks an income but because he lacks this nourishing and enlivening factor of disciplined  work which nothing can replace’.

Yet by virtue of his being a member of humanity, he is entitled to work. That is why he or she was given  birth on this planet:  to  make use of his particular  talents,  however high or humble, for the benefit of others.  The scriptures  of mankind  support  this view: the Geeta  says(2):  ‘But thou  hast  only the right to  work;  but  none  to  the fruit  thereof.’ And  St Matthew  says(3):  ‘Let your  light so shine before men, that  they  may see your good works, and glorify your Father which is in heaven’.  Both quotations look to  the work itself as being sufficient recompense. In a way, that must  be so: the reward,  the fruit, is how the other  members  of society  value the talents thus demonstrated.

The Right to Work most valuable 

In the cornucopia of ‘human rights’ now available to mankind, the most practical and useful must be the ‘Right to Work’ It appears in the Universal Declaration of Human Rights, the American Declaration of the Rights and Duties of Man, the International Covenant on Economic, Social and Cultural Rights, the European  Social Charter  and even the draft Charter of Fundamental Rights of the European Union (but not the European Convention on Human Rights and Freedoms — perhaps with unemployment so high in the EU it was conveniently  omitted!)

(1).Small is Beautiful, (Blond & Briggs 1973),  p.51

(2).Shree Purohit Swami (Faber 1935), 16

(3). Chap. 5, v.16

This ‘Right to \Vork’ must be properly understood. So frequently it is considered  to  be just a matter  of providing the training for skills,  in a society  which  may or may  not want  them. Education  is, of course,  important;  but the Right  to  Work  is much  more than that. Often it is misinterpreted as meaning only a right to employment which, since jobs may be scarce, government is afraid of what it would entail, in guaranteeing paid work.

I conducted a survey of Ministries and other organisations with a view to establishing whether they would support the introduction  of the right  to  work  in the Human Rights Act of 1998. We now  have a Department  for Work  and Pensions which,  you  might think, would be keen to develop this approach. They wrote back in answer to my suggestion that ‘many factors  need to  be taken into account  and  possible long-term effects carefully considered before any single measure is implemented’.  Quite true; but not enthusiastic. The CBI wrote: ‘While we believe that governments have profound responsibility to  create the economic conditions for full employment,  we do not believe that they should step in as an employer of last resort where markets do not deliver jobs for all. A better approach is to  ensure that all individuals  have the opportunity  to develop skills which will be saleable to employers’ [italics added]. Lord Lester QC, the progenitor  of the Human Rights legislation,  was worried  that  the insertion  of the right to  work  ‘would  give the  judiciary the  power  to  overturn  Government  decisions  in areas which involve complex questions of economic and social policy that are seen as within the remit of Parliament  and Ministers,  not of unelected  judges. ‘  Curious this, as it is now too late to prevent Judges having oversight, for example on property matters, involving  economics,  since this is what  the Human Rights  Act  decrees .  And Lord Lester admits that the right is included in ‘many international human rights conventions which bind the UK in international law ‘ [italics added]. Presumably this law is administered   by unelected  Judges of the International  Court of Justice!

No replies were forthcoming from the TUC, the Federation of Small Businesses, and Mrs Mary Robinson,  the UN High Commissioner  for Human Rights.

What the Right to Work actually means 

As explained, it is not just a question of finding work for people to  do within the  existing   employment  situation.  Nor  is it  government  acting  as  ’employer  of  last resort’. It is much more fundamental than that: it means not impeding anyone,  through red tape  or tcaation,  from creating new small businesses.  It is simply government getting out of the way,  acting only to  restrain improper activities.

Lifting the burden of taxation from the margin (by definition new businesses are marginal) may be the key to unlocking  the rent ofland for public purposes, for where  else can the incidence of taxation then fall than directly on the economic rent ofland? Since the margin cannot  yield an economic rent of land, the taxation which formerly kept  the margin  out  of operation  (see the story  in the Daily Mail) must  fall  on locations which can afford it. I am thinking in particular of the illustrations afforded in Don Riley’s  recent  book,  Taken for a  Ride,(4)   of the effect  of the  Jubilee  line extension in London’s Underground. He writes: ‘the Jubilee extension cost £3.5  billion and it delivered an increase  in the capital  value ofland  of the order of £13 billion.  A 10% annual return on that £13 billion would yield £1.3 billion. A charge of 25% on that revenue would yield an annual flow of £325  million into the Exchequer,  so the cost of the Jubilee could have been paid back over 20 years, while leaving ample rental income to  fund other  public services’.

He should  know: Mr Riley is a property developer!

**************

(4)   published  2001 by Centre for Land Policy Studies