Politicians miss the point of business For all the toxicity of the March Budget, the coalition government's fortunes actually began to sour two months earlier. It was bonus season in the City and Stephen Hester was in line for almost £1m for leading the reconstruction of the Royal Bank of Scotland. Such private enrichment at a bank rescued by taxpayers proved incendiary. Cowed by angry voters and the prospect of a parliamentary vote on the issue, the government declined to back Mr Hester as he was hounded into waiving his bonus. This was despite his success in easing taxpayers" exposure to toxic assets, and his willingness to do it for less than market pay. Soon after, ministers gave in to pressure to relieve his predecessor, Fred Goodwin, of his knighthood. Suddenly, a government whose stomach for big and unpopular decisions impressed even those who cursed them began to look like slaves to the news cycle. Its strategic discipline has not wholly recovered, as Starbucks, Amazon, Facebook and other major companies are learning. Ministers could have confined their response to the revelations of these firms" entirely legal tax-minimising schemes by tightening the law. Instead, they reached for moral exhortation, inadvertently providing official cover for protest groups such as UK Uncut. Starbucks" decision to capitulate by volunteering £20m of tax is not merely absurd but dangerous. Imagine an economy in which businesses decide their tax bill by gauging the popular pressure on them. Revenues would be impossible for the Treasury to predict. Companies with a public face, such as a chain of coffee shops, would be harassed into munificence while those doing obscure business-to-business trade go ignored. The basic fiduciary duty that companies owe to their shareholders" economic interests would be lost. Danny Alexander, the chief secretary to the Treasury, says that taxation should not be treated like "the church plate going around on a Sunday morning" but that is where ministerial hectoring threatens to take us. The government is not even the worst offender among the political class. For Margaret Hodge, the Labour chair of the parliamentary public accounts committee, the Starbucks decision was proof that "naming and shaming works." That a senior MP takes such chest-beating pride in so insidious a precedent is its own commentary on her profession. Politicians are often accused of lacking practical experience of business. The reality is worse than that. They are beginning to lose their grasp of the very point of business. In his early years as Conservative leader, David Cameron suggested that companies had a moral duty to do good rather than merely observe the law. In perhaps the most fatuous line he has ever uttered, he wondered why shops sell "half-price Chocolate Oranges at its checkouts instead of real oranges." Labour has its own variety of thoughtless do-goodery. Ed Miliband, the party leader, sometimes gives the impression that he regards enterprise as all very well, as long as it does not result in too much money being made. Rather than just demanding legislation for a higher minimum wage - an entirely respectable idea - he is imploring companies to pay a "living wage" and threatening to expose those that do not. There are first principles that politicians must relearn. Business exists to make a profit within the law. It contributes to society by employing people and producing goods and services, not by attempting the modish fad of "corporate social responsibility." Unchecked, its thirst for profit can inflict harm on society and cause extraordinary economic inequity, which is why government must subject it to the formal trammels of regulation and taxation. If politicians would rather evangelise than legislate, they have chosen the wrong career. There is another reality that is being obscured by the moral excitement of the moment. A large part of the UK's appeal as a place to do business is its reputation for predictable and responsible government backed by one of the world's great legal systems. It matters, therefore, if politicians behave arbitrarily. It matters if the head of the Financial Services Authority announces that much of the business he regulates is "socially useless," as if such a notion were measurable or at all relevant. It matters if mobs are indulged rather than defied. British politicians chuckled last month when they read about a French minister threatening to sequester a foreign-owned industrial plant to avoid job losses there. But such reckless political caprice is seeping in to the UK. Not all politicians are equally guilty. Ed Balls, the shadow chancellor so often caricatured as a leftwinger, is a rigorous thinker who restrains his Labour colleagues" urge to treat business as a branch of social work. George Osborne, the chancellor, was never much taken with Mr Cameron's chocolate orange phase. But these grown-ups need to stand more assertively against the mob, and against irresponsible members of their own trade. It is not as if the UK's elites have done so well at running the country that they can try their hand at moral and aesthetic questions too.