Articles and Speeches

Profit is Good in Competitive Markets
16-Sep-05, Windsor Express Column.

"I’m delighted to be involved with Young Enterprise, a charity which promotes entrepreneurial behaviour in young people in our local schools.

But some people get upset when a British-based company announces a big profit. Perhaps you’re one of them?

To some people company profits are a bad. Indeed many members of the current Government seem to share that view, which is rather odd. They believe that profit represents greed and oppression and is inherently unfair. But I’d like to present an alternate view.

In the United States and many of the former soviet bloc nations like Estonia, Latvia and Lithuania, people seem proud when companies succeed and people do well. They want to share that success and work hard to do so.

Businesses are the engine of our economy. They generate the jobs, the incomes and the taxes that make for a good society.

Consider what happens when a company makes a £1bn profit.

First, the company can invest and create yet more jobs and incomes and taxes. It is a virtuous circle in a competitive economy.

Second, the shareholders – often employees and people with small shareholdings in pension funds - receive a dividend payment. They may save some to secure their future and place less of a burden on the State, which must be a good thing. Alternatively they may choose to spend some on new goods and services (e.g. buying a fence or employing decorators), thereby boosting the economy and creating yet more jobs.

And finally, the Government takes a £300m slice of the profit in tax which pays for the good things we want in society like healthcare, education and the benefits system.

So next time a company announces a profit, perhaps we should cheer – well maybe a discrete grin! Because part of the tax burden has been paid on our behalf."

Adam Afriyie, MP for Windsor