Skinflint's City Diary

The full text of the Labour Party's programme for the Blackpool Conference makes a dull gloomy read, as one now expects. It is the usual rag-bag of sops to the Party's true believers though unlikely to be looked at with relish by those who count at the polls. The Labour movement once again direct their hate at the professional and less well-off middle classes whilst keeping well clear of the very rich. The very rich, of course, go unscathed — as they did under the last Labour administration with the cowardly abandonment of across-the-board Leasehold, Enfranchisement, and so on. The Labour Party's manifesto moans about recent Tory budgets, particularly the reduction of the standard rate of income tax, the increase in earned income relief, the cut in estate duty and the cut in purchase tax. Since the levellers who draft these documents are expected to come up with something distinctly nasty each time it is surprising that they have not flourished a real frightener at the rich.

Any full-blooded collectivist who knew what he was about would have dreamed up a tax directed at two areas previously overlooked by the left. These areas are goodwill and charitable trusts.

Goodwill tax

Reduced to essentials they might have paid attention to the possibility of a tax on the goodwill element on the sale of a company by flotation.

For instance, you set up a business earning from the start (an unlikely event) £100,000 profit before tax. Ignoring the hurdles of compulsory distribution, this should result in a net addition to the company's assets of £60.000 after corporation tax is paid. Should the business be floated, the stock market would probably value it at something like £1 million. This £1 million would be subject to 30 per cent capital gains tax. Fair enough. But if the business had been run for ten years, it would have a net asset value through cash flow of £600,000 but would still only be worth £1 million through flotation. The capital gains tax bill would be the same in spite of a large element of this company's ,assets being built up from retentions that have already gone through the tax net.

Being no leveller I am glad such idle thoughts have escaped the Labour Party's thick-eared team of draughtsmen.

Charitable trusts

Labour's manifesto has decided to ignore an apparently minor Conservative tax reform which might bear examination if the Labour Party means, business. Since the last budget the gift of shares to a charity is no longer counted as a realisation by the donor for purposes of capital gains tax. However trustingly benevolent you are, this reform needs a keen glance. Charitable trusts are the friendly creatures of the very rich, who have them to a man.

Just think of our friend, like the fellow above who floated his business in its early days of profitability for £1 million. He would have had to realise 25 per cent at the time of flotation which would have resulted in 30 per cent tax on this quarter of a million that had been taken as cash. The remaining £750,000 he takes as shares on which, as we all know, no capital gains tax is payable until realisation. Under Mr Barber's recent provisions it is possible for our friend to set up a charitable trust with some fine phrased objective or other to which these shares may be transferred without capital gains being paid. Once in the trust they may be sold for cash ' and since the trustees are permitted to conduct the affairs of the trust as they see fit, it is possible for the money to be lent back to the donor, used • for stock exchange support operations and whatever other purpose he has in mind. The trust, in short, is a useful tax umbrella, a bunk hole for realising and receiving taxable profits, and a personal tax-free merchant lank. It is also a painless way of appearing to be public spirited and generous when you are naturally rather mean.

Needless to say we shall not have the Labour Party or anyone else attacking this handy device. Money is expected to come into the Labour Party's bare coffers from the trusts of the very rich of left wing persuasion. Reform is simply not on. And why should it be when we all know the rich are different from us?

New-style embassies

The Foreign Office has had a real, though limited, success in its role of commercial representation of British interests abroad. It is many years since the Plowden and Duncan reports suggested that economic and commercial activities should be one of the first charges on the resources of a Aw diplomatic service, and that members should be given special training in commercial work and be helped by personnel from the Board of Trade and other departments.

Since then there has been a big increase in the size of our commercial representation overseas which has resulted in demand for bigger offices and larger embassies and consulates.

How much better would it not be to build what might be called British Commercial Centres — each the size of an Olympia — on the outskirts of capital cities to house not only the ambassador and his diplomatic staff but to be a permanent emporium for British goods and a base in which companies investigating the market might rent small offices during their early days with back-up from the embassy's commercial organisation. Such centres of political cultural and commercial activity might well be directly self-financing. They would be an oasis for British businessmen, used to groping along not very fruitfully from the local Hilton Hotel.

John Bentley

Difficult days for John Bentley, one of Jim Slater's 'bantlings who runs Barclays Securities. You will remember that BarclaY bought Triang Toys from the liquidator of Lines Bros., and has now had to admit to a flop in running the business as a toy-trader.

If Bentley brags of a profit on liquidation his sacked workers will, understandably: cry out for more. If he says for the unions ear that the company was in a state of collapse and can give them no more, he will have the share analysts knocking his shares.

The public story is: "Sorry but we have lost more than we like and Triang was a worse mess than we thought." The quiet word in city lunch rooms is. "Watch what we will get out of work in progress, stocks and plant, and just wait to see what We screw out of all that property."

On balance I suspect that Bentley wishes he had given Triang a miss. In spite of 8 disturbing taste in boutique suits and such articles as space age goldfish bowl telesion sets in the ceiling Bentley is able and gets his share of morsels thrown him bY Slater. Barclay shares are interesting for those who like investing in that sort of thing.