It was only in June 2008 that the governor of the Bank of England had to write his grovelling letter to the chancellor explaining why UK inflation was above 3 per cent when the target is 2 per cent. But inflation is galloping ahead so quickly that July’s figure will already be over 4 per cent - and it is heading quickly towards 5 per cent.
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Of course business objects to the threat of a windfall tax, but if politicians have to collect revenue from someone, companies making windfall profits are an easy place to start.
With public finances collapsing, the chancellor may think this the last time to give away money. But it is because tax revenues are falling that he can afford to waive the taxes he is not receiving anyway.
Alistair Darling has been forced to scrap his proposals of taxing foreign profits but the problem has not gone away. The probability now is that the chancellor is so dizzy from performing U-turns he chooses to sit back and do nothing.
We should not expect the government to stand guarantor to every company in Britain – whether manufacturer or investment vehicle. Yet that is effectively what the financial ombudsman is expecting in demanding compensation for the policyholders of Equitable Life.
French president Nicolas Sarkozy and Britain’s lorry drivers are unlikely bedfellows but they have something in common: they have both got it wrong in demanding cuts in fuel tax to compensate for rising oil prices.
The problem is that demand for fuel exceeds supply. The rising oil price is the mechanism that will bring those two into equilibrium - encouraging more production and discouraging consumption. Cutting the tax on oil and thus reducing the price to the user will merely stimulate demand and push the untaxed price higher still.
Alistair Darling flips his 10p coin and instead of tails, 5m people lose, it is heads, 22m win. Yet Darling emerges as a loser either way. He has dug a large hole to get himself out of a small one and he now needs to dig an even bigger one to extricate himself from the latest tax changes. And despite his largesse, he has received no glory.
The UK Treasury may not be able to match Ireland’s 12.5 per cent corporate tax rate, but sooner or later it is going to have to make concessions on company taxation to ensure there are companies to tax.
The drip of British businesses re-registering abroad, especially to Dublin, is turning into a steady stream and the more that go, the more acceptable and the easier it is for others to follow. United Business Media and Shire are showing that the brass plaque can be moved offshore while leaving the business and management exactly where it always has been.
Remember the old woman who ate a spider because she had swallowed a fly? Next she swallowed a bird to deal with the spider – then a cat. The government would do well to study the nursery rhyme as it tries to extricate itself from the mess of the 10p tax band.
Ministers started by wanting to cut the 22p income tax rate. Abolishing the 10p band was the spider to deal with that. Now it is considering invoking a bird in the form of the minimum wage. At some point it must realise that each solution is worse than the problem it is designed to overcome.
Two questions for Royal Bank of Scotland about its much-leaked record share issue: why pay the final dividend, and why underwrite the rights? They are questions that should concern any finance director planning to raise capital this way.
First the dividend. Normally the argument is that the dividend must be maintained to encourage investors to buy the new shares. But why pay cash to shareholders so that they can pay tax on it and then ask them to pay the money back to the company?
Treasury Matters by Joergen Jensen
Insider by Michael Pawley
Eco-Finance by Peter Wognum
