The Irishman, the Dutchwoman and the Indian who put the home team to shame
It says something about how cosmopolitan the City has become that, for my money, the three winners of my personal ‘people of the year’ awards are an Irishman, a Dutchwoman and an Indian. The latter is Lakshmi Mittal, who had the audacity to take on the French establishment with his bid for Arcelor and win. In doing so, the steel magnate struck a magnificent blow for shareholder rights in the heart of Old Europe — which is still where the City’s future will be determined, regardless of its current love affair with Russian oil groups and Kazakh mining businesses. The Irishman is Charlie McCreevy, the EU internal market commissioner, whose hyperactive defence of single market principles has often seemed to be all that has stood between the EU and a descent into outright protectionism. His passionate commitment to free market principles and willingness to take the fight to the governments of Spain, Italy, Poland, Portugal and Germany, among others, puts our own vacillating, mealy-mouthed politicians of all parties to shame. The Dutchwoman is, of course, Clara Furse, the London Stock Exchange boss who is spending her third Christmas in a row fending off a hostile bid. Her spirited defence of the LSE’s independence has not only surprised all those who underestimated her, but has put to shame many of the more fêted public company bosses who so quickly succumbed to foreign bids. In a year that saw so many British stalwarts disappear into overseas ownership — BAA, BOC, BPB, ABP, P&O et al. — the Stock Exchange’s defiance stands out.
Indeed, if the City were a football or cricket team, the authorities would now be holding an urgent inquiry to work out why our players performed so poorly in 2006. Not only did we allow foreign opposition to score plenty of goals, we failed to find the back of the net ourselves. How many big overseas deals can you remember by British companies this year? No, I can’t think of any either. British bosses gripe about the lack of a level playing field and mutter about the need for government to do more to help the national team, as happens in other countries. Meanwhile, the City rolls its eyes and sniggers about reckless foreigners, bloated with cheap debt and lacking any concept of shareholder value. They got lucky in the first half, but the home team, with its greater financial discipline, will surely prevail.
I wonder. After all, the lack of a level playing field didn’t seem to bother Lakshmi Mittal. And some of the most audacious bidders — such as India’s Tata Steel and Brazil’s CSN, both chasing UK steel-maker Corus are family-controlled. The difference is that they are determined their businesses should still be around in 50 years’ time and prepared to take a long-term view on value creation, whereas British boards and shareholders take a much shorter-term view. At least, that’s one explanation. The other, I suspect, is that spiralling executive pay and options packages and elaborate corporate governance rules have created a pampered, boxticking corporate elite that has lost its appetite for risk. We used to regard heroic resistance against all odds and swashbuckling willingness to take on all-comers as British virtues. Now it takes an Indian, an Irishman and a Dutchwoman to show us how.
This time last year, I pointed out in these pages how foolish the Chancellor would be to raise taxes on North Sea oil. Strangely, Gordon Brown ignored my advice: days later, he hit the industry for another £2 billion. But I wonder if he’s feeling so clever now. In this month’s pre-Budget report he had to cut his oil revenue forecasts by £3 billion. Most commentators were too busy debating the merits of the green taxes levied to fill the hole to notice the hole itself — no doubt as Brown hoped. But this is one problem I predict is not going to go away in 2007.
Now that North Sea oil and gas production are declining, Brown’s challenge is to extract the maximum number of golden eggs without killing off the golden goose. Yet last year’s tax hikes make the North Sea’s maturing oilfields the most highly taxed place in the world to produce oil, with a marginal tax rate of 75 per cent and an average rate of 57 per cent. That compares with 45 per cent in the Gulf of Mexico. At a time when production costs are soaring, the falling dollar is hitting revenues and there is global competition for oil investment, this always looked short-sighted. Sure enough, North Sea exploration fell last year.
Brown will surely have to cut North Sea taxes next year. He’s already agreed to waive Petroleum Revenue Tax on old fields brought back into service. But this is politically very tricky for him. Just 26 North Sea oil companies provide nearly a quarter of Britain’s corporation tax receipts. And with the government finances tight as a drum, this is not money Brown can easily do without. What’s more, any decisions he makes will take place in the full glare of public scrutiny in Scotland, where the availability of North Sea oil receipts is central to the nationalists’ campaign for independence. If Scots come to believe Brown’s tax policies are harming the long-term viability of their greatest export industry, they will not easily forgive him.
On the way back from church last Sunday, we stopped at Sainsbury’s in Ladbroke Grove to buy a chicken. Just a chicken. But having two babies, we needed two trolleys. That was where it all started to go wrong. Reunited at the checkout 20 minutes later, the bill came to a horrifying £90. Back home, we convened an inquest. My role in this calamity amounted to two bottles of Bell’s, tantalisingly offered at £25 for the pair. Well, that’s just bringing forward necessary expenditure by a few weeks, I argued. What was less easily explained were the two frocks for Florence, not yet a month old and quite content in her brother’s old babygros. ‘But they’re only £10 each,’ said my wife Dilly — which may be true, but now that Sainsbury’s has started selling cheap children’s clothes, my two have more extensive wardrobes than me. My beef with capitalism has always been the confusion caused by too much choice. Now I’m also ready to take issue with the way it fuels unnecessary desires. I’m beginning to think the communists were on to something. Even so, I couldn’t imagine life without Bell’s.
Simon Nixon is executive editor of breakingviews.
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