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As fits of pique go, jacking up the banking levy by £800m beats kicking the cat or swearing at the TV news. But George Osborne’s seat-of-the-pants decision to take a full £2.5bn from the banks this year looks just as much like displacement activity. Unable to drive a hard enough bargain with the banks over the Project Merlin peace deal, Mr Osborne resorted to the fiscal equivalent of throwing his teddy.
According to City scuttlebutt, civil servants and bank bosses were administering finishing tweaks to Project Merlin on Monday evening when the chancellor lobbed “the large incendiary” of the tax increase. Painfully conscious of the accord’s weakness on bankers’ bonuses, it is said, Mr Osborne sought to bolster his virility in preparation for a Commons face-off with testosteronal Labour foe Ed Balls.
An extra liability of £800m is scarcely a blip on British banks’ compromised balance sheets. Besides, they will pass the cost on to customers. But the tax rise matters because it sends a worrying message about Mr Osborne’s debilities as a politician. Business is best served by ministers that keep tax flat across sectors and adjust its level at predictable points (annual budgets) following careful consideration.
The Conservative chancellor has flouted these conservative principles and should be trusted less by business as a result. The banking levy itself is in the discreditably selective tradition of Gordon Brown’s raid on North Sea oil producers in 2005. It is a tacit admission that the government is failing to create a robust and competitive banking market. The last-minute adjustment of this year’s rate, meanwhile, smacks of Mr Brown’s dithering over corporation tax.
Mr Osborne, to be fair, is squeezed from all sides. It is hard for him to restrict bank bonuses directly, because some banks might quit the UK. It is difficult to make banks increase net lending significantly when you also want them to build up their capital. But Tuesday’s tax announcement shows that the chancellor knows his mind on small matters, but not always on big ones. The contrast is with Margaret Thatcher. No civil servant would have dared tell The Leaderene: “There’s nothing we can do.” The ensuing thunderbolt would have left only a charred patch of carpet, by way of memorial.
To lose one broadband subscriber may be regarded as a misfortune. To lose 25,000 of them looks like carelessness, as Lady Bracknell might have said, had she been a telecoms analyst. The customers deserted TalkTalk, the broadband business spun off by Carphone Warehouse last March, partly in response to service interruptions. TalkTalk put a brave face on the defections on Tuesday. Transferring subscribers from Tiscali’s UK operations, bought for £236m in 2009, involved technical difficulties greater than removing a plug from one socket and sticking it into another. Besides, a proportion of the customers were unprofitable, TalkTalk said.
But crowing about lost business is a dangerous game in broadband, where lossmaking subscribers might be converted into remunerative ones through new technology. An example would be the introduction of the much delayed YouView internet-based TV service in which TalkTalk is a shareholder. TalkTalk lags behind market leader BT both in subscriber numbers – 4.2m to BT’s 4.7m – and share price terms. Reach matters.
It was meanwhile courageous of Dido Harding, chief executive, to commit last year to a numeric profits target – earnings before interest, tax and other gubbins equal to 20 per cent of sales. TalkTalk achieved just 13.6 per cent at the half-year stage. Third-quarter revenues at the bottom end of City estimates show how easy it is to be blown off course. At least Ms Twenty Per Cent did not set a date for meeting her margin target. The gives her some wiggle room.
How could Jonathan Davis and his would-be employer, the Association of British Insurers, ever have thought he would have time for the demanding role of investment affairs director? The job mixes high-level lobbying with pronouncing on corporate governance. Mr Davis, a sometime FT columnist, intended to combine the role with a directorship of Agrifirma, a Brazilian land business. Having changed his mind, he plugged a forthcoming book on investment in the ABI press release announcing his no-show. Oh dear. Everyone knows that the proper place for columnists to plug their books is in their columns. The Lombard Guide to Red Hot Stocks will be available in all good bookshops soon.
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