The chief executive of Pfizer failed to dispel the impression that tax, and tax alone, brought him here

He failed to persuade the impartial observer that his company’s promises were credible

Editorial
Tuesday 13 May 2014 20:41 BST
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

George Osborne, the Chancellor, has changed his tune. When it was first reported that Pfizer wanted to launch one of the world’s biggest takeover bids for AstraZeneca, a British-based pharmaceutical company, he thought it a great vindication of his corporate low-tax policy. But Chuka Umunna, Labour’s astute shadow Business Secretary, stung the Government by branding it the “cheerleader” for a merger that was being pursued for many of the wrong reasons. Since then Mr Osborne and the Prime Minister have emphasised the assurances they have secured from Pfizer to preserve British research and development and British jobs.

Today, the two companies had the chance to make their cases in Parliament, in front of the Business Select Committee. It has to be said that neither Ian Read, chief executive of Pfizer, nor Pascal Soriot, of AstraZeneca, was impressive. Mr Read managed to avoid a repeat of last week’s answer to the question of whether he wanted to break up AstraZeneca: “We will conserve that optionality.” But he failed to persuade the impartial observer that his company’s promises were credible. His problem is Pfizer’s record. Even if the merged company kept 20 per cent of its combined R&D workforce in the UK, as it claims, it would be 20 per cent of a shrinking number.

On the other hand, Mr Soriot’s main argument against the takeover was that it would distract his employees.

That said, the case for a merger is weak. Indeed, many of the biggest takeovers fail to add value. They tend to be driven by the egos of corporate empire-builders. And the main rationale for this deal seems to be tax rather than the logic of wealth-generation.

Doubts about this possible merger are not grounded in mere economic nationalism. AstraZeneca is barely a British company. Its connection to the old Imperial Chemical Industries is tenuous. Only 14 per cent of its workforce is employed here; its chief executive is French and its chairman Swedish. Mr Osborne is right to argue that the national interest requires the Government not to try to promote “British” companies but to support science education, commercial links for universities and a culture that is open to business. In general, this Government’s record in these areas is creditable.

There is a separate question of whether UK corporate law could or should be changed in such a way as to discourage big mergers, which so often fail to produce the economies of scale, synergies and other business-school jargon that their advocates promise. Legislating for a “public interest” test decided by politicians would be unsatisfactory. As the law stands, that kind of test can be applied only in defence of media plurality and national security. To add “the nation’s science base” to that list of special cases would be arbitrary.

Yet Mr Osborne should realise that creating a culture that is supportive of business does not simply mean low taxes. It is one thing for Britain to be supportive of business. It is quite another for the Chancellor’s obsession with low taxes to have paved the way for the asset-strippers.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in