Why 'grants' to multinationals are just another form of state-sponsored job creation

Nissan and Amazon are to create thousands of new jobs in Britain. But if taxpayers knew what it costs them to create these jobs, maybe they wouldn't be so pleased.

Areyou pleased that Nissan is to build its new compact car - the Invitation - at its Sunderland factory? I should think you are.

The company is going to invest £125m in the project, and it should mean 2,000 new jobs. There'll be 400-odd in the factory itself, and hopefully another 1,600 in the supply chain.

Are you pleased that Amazon is setting up a new customer services centre in Edinburgh? Again, it looks like you should be. Customer services jobs aren't everyone's favourite, but this centre is still providing 500 permanent and 400 temporary private sector jobs in a region that is far too dependent on the public sector.

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What you might not be so pleased about are the bribes you are paying to these companies to provide these jobs.

Amazon got £1.8m as a 'grant' from Scottish Enterprise to, as the BBC puts it, "help train new staff and fit out the Edinburgh centre". Nissan gets a bit more: "the government is supporting the project with a £9.3m grant".

Perhaps this is OK. And perhaps we have no choice but to join in the bribery arms race. After all, if we don't pay the likes of Nissan to set up here, France probably will. And if Alex Salmond hadn't decided to pay Amazon to employ people in Edinburgh, someone in Bristol would have done it instead.

But we do need to be sure that we think clearly about it. There has been much complaint over the last few weeks about workfare - and in particular about the provision of 'free labour' to the likes of Tesco.

Setting aside the fact that workfare doesn't exactly constitute free labour, you might want to ask quite what the difference is in bribing Tesco to take on our workers via the apprenticeship and workfare schemes, and in giving Amazon a pile of cash to do so. The delivery channel is different, but the net effect is the same: the taxes of those already in work are being handed to the corporate sector in an attempt to create jobs for those who have no work.

So if you are going to have a go at apprentice and workfare schemes, you should probably have a go at the state bribes paid to international corporates too.

And if you are thinking about picketing somewhere, you might want to start with Amazon. The company isn't short of a bob or two (I can think of many Scottish companies that could do with a bung of £1.8m more than them). But there are two other reasons to think that subsidising it isn't the best use of taxpayers' money.

The first is that it (entirely legally to be clear) has historically paid very little tax in the UK. The second is that its very existence has been one of the main drivers behind the destruction of our traditional retail businesses.

I have no particular problem with the rise and rise of e-commerce. But it would be nice if the company that has taken the business of our long-standing high street companies (HMV, Waterstones, etc) paid equivalent taxes. And as long as we aren't making them do that, we shouldn't use taxpayers' money to help them "fit out" their new customer services centres.

My point is not that you should be boycotting or picketing either Tesco or Amazon (my life would ground to a halt without e-commerce and supermarkets that deliver on time, so I'm not planning to boycott anyone). It is just that the state subsidises huge numbers of large companies in the UK in a huge number of different ways and that is something I don't think the taxpayer pays quite enough attention to.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.