The attacks on David Cameron over his family’s tax planning seem wildly excessive. His father set up an offshore investment fund to invest in dollar based shares without incurring the risk of double taxation. David did hold some of the units but subsequently sold them. His mother gave him £200,000 after his father died, with the probability (not certain) of that being outside inheritance tax if she lived for another 7 years. That is not exceptional tax planning, it’s just common sense using the rules that apply.
Indeed the Daily Mail spelled out the issues in this headline which I just happened to read in a coffee shop this morning: “Enough of this madness. Instead of grovelling before the politics of mob envy, the Prime Minister should be arguing that, for most people, Inheritance Tax (IHT) — by re-taxing income that has already been taxed — is unfair. He should also be shouting from the rooftops the moral case for low taxation.”
Those who have reached a certain age (and this writer recently passed his 70th birthday) and have assets (in share portfolios or otherwise) should pay close attention to the inheritance tax rules and take some professional advice on the matter. But to do so is certainly not unethical.
But when the heads of FTSE 100 companies are being paid many millions of pounds per year, and David Cameon has to get by on a measly £143,262 per annum as Prime Minister, you realise there is a lot of hypocrisy being spouted on this subject. We have just issued a press release on the disgraceful amount paid to the CEO of BP (about $20 million) which is here: https://www.sharesoc.org/pr73bpremuneration.html
Indeed one of the key things to learn from the disclosures of the tax returns of David Cameron, George Osborne and Jeremy Corbyn is that one way to ensure you have a high tax bill is to make your living by earning a salary. The sooner you invest in a business (listed or unlisted, your own or other people’s) and get some income via dividends and capital gains the better.
Tata and the UK Steel Mills
The other hot political topic of the day is what to do about Tata and their wish to exit from UK steel making at Port Talbot. The latest news is that Industry Secretary Sajid Javid told the Commons that the government was working very hard to find a buyer for the South Wales plant, which is being sold by Tata Steel. Among options being considered was “the possibility of co-investing with a buyer on commercial terms”, he said.
Tata seem to be looking for a way to duck out of their potential liabilities to support the pension fund of steel workers and to avoid site reclamation costs if the site closes.
Now I am reluctant to put forward the following remedy because I have campaigned against pre-pack administrations in the past, which are frequently used by small companies to evade their debts and other liabilities. But clearly there is a financial construct already available to Tata and the Government to duck all the historic liabilities (a.k.a. the “bad stuff), and start with a clean slate. It just requires a good PR man to spin this story the right way.
Me, I might prefer it to go bust because one thing is now clear. Port Talbot is not competitive, is probably overmanned, and is in essence worth nothing at this point in time. Any suggestion that the Government should put public money into it, as an “investment” or otherwise is extremely dubious.
Roger Lawson
Well said Roger and so good see a balanced article on these three issues.
Roger,
I have seen no evidence for your assertion that Port Talbot’s woes are due to inefficiency and overmanning. This article from the FT, sets out the issues: https://next.ft.com/content/4cc97566-f72a-11e5-96db-fc683b5e52db
They seem to be, primarily, unfair competition from state subsidised Chinese steelmakers – where our government has resisted EU moves to impose higher tariffs on such dumping; and energy costs that are higher than in any other EU country. If they wanted to our government could do something about both those issues.
Mark
Mark, there were a number of other press articles that suggested Port Talbot was the least competitive of major steel producers in Europe, let alone in the world, and where past investment had been insufficient to maintain competitiveness. Tata clearly want to concentrate on their other operations in Europe because they are more economic. Now when business gets tough, the weakest go to the wall. You are no doubt right that Chinese competition has not helped and UK energy costs are too high (although I am not clear why the steel industry should get any special hand-outs in that regard) but as it might be difficult to change these last two factors in the short term, the key question is whether anyone would buy Tata at any price with the potential liabilities associated with it. If they won’t then the UK Government should not be buying any part of it either. Over the years we have been over similar arguments before many times – about the coal industry, about shipbuilding, about the motor industry, about the computer industry, about photovoltaic cells, etc. If foreign countries wish to subsidise their industries to produce goods below cost, or at least cheaper than our companies can, then I fear we have to let them and concentrate on things which can be economically viable. The past experience of “interventions” to maintain employment is not positive. At best all I would support is very major restructuring and/or downsizing unless the Government can figure out some other way to make them viable.
Roger Lawson
As a postscript to the comments on Tata, there was a very good article on the problems of steel companies in this weeks Investors Chronicle by Bearbull headlined “Decline and Fall”. It pointed out that there are lots of listed steel companies that are going for a song and indicated that the Port Talbot affair was a timely reminder of the dangers of investing in declining industries.
Roger Lawson
Hi Roger
A couple of questions:
1. Is the steel industry a declining industry worldwide or just in the uk?
2. Is there any evidence that if it had not been a nationalised industry that the steel industry (or ships or cars or even coal) in the UK would have survived/thrived. I suspect it/they might have done.
KR
Michael
Basic steel making is declining in the sense that it has been unprofitable for some years – the IC article explains more.
It is surely the case that nationalised industries show less ability to cope with difficult economic conditions. Private companies have to adapt to survive. Nationalised industries can rely on the Government to keep them alive with subsidies and hence management has less incentive to tackle the difficult problems. That is why nationalised industries keep moribund businesses going and tend not to face up to reality, and hence turn out to be bad investments for the Government and the public as investors.
Roger Lawson