Some sacrifices will be more equal than others at the behest of the Taxmaster-General
CHRISTOPHER FILDES
The City editor of the Times awaited the Budget with apprehension: The expression "Equality of sacrifice" has an ominous ring for the investing classes.' The severe Mr Mill was writing seventy years ago, but Gordon Brown's Budgets have the same effect on me. As they approach, my heart sinks. I never look forward to that sledgehammer delivery, those thumping repetitions and encores for Prudence. All the fidgety micro-incentives that swell out his Budgets — there is no joy in picking the bones out of these, or in searching the small print of official releases for the bad news that he has omitted to mention. His arithmetic, too, is a challenge. Every chancellor likes to add apples to pears but this one creates a fruit salad, or macedoine. Tax credits are his speciality: they are benefits in all but name but do not count as public spending. By this time next year, on David Willetts's reckoning, he will have introduced five new tax credits for families, scrapped four of them and then introduced two new ones. Most depressing of all is the realisation that each Budget day marks the return of Gordon Brown in the Puritan hat and boots of the Taxmaster-General. Directly or indirectly, we are paying £4 in tax for every £3 that we paid when he came into office, but this no longer satisfies him. Having set us working for him for the first five months of each year, he now seems to think that five-and-a-half months would be more like it. Some of these sacrifices, of course, will be more equal than others.
Out of pocket
THE auditors are always the nearest deep pocket, so Equitable Life is suing. If the board had been told what a mess the business was in, so it claims, Equitable could have been put up for sale while someone still wanted to buy it. Nice try. Arthur Andersen was the nearest deep pocket to Enron, though not, as events have proved, bottomless. Merrill Lynch has been successfully sued for not making enough money for a client whose funds it was managing when the markets were going up, and may now be in trouble for tipping shares which fell when the markets came down. The only sure winners from this litigation are the advisers who never seem to get sued. Lawyers must have a mutual pact, like the one that precludes merchant bankers from taking bites out of sharks.
Directors decoded
WE need a new boardroom code as much as a moose needs a hat-rack, and I urge Derek Higgs not to give us one. Do I have to warn him that the Financial Times has already called for a code of codes? He is the old City hand who has drawn the short straw from Patricia Hewitt at the Department of Trade and Industry and is conducting her inquiry into non-executive directors. I can guess what the axe-grinders and corporate conformists will tell him. Non-execs, they will say, should be more professional, better trained, better qualified and, naturally, better paid. Only thus can they discharge all the duties that all the codes now heap upon them, and only they can save us from the next Maxwell, the next South Sea Bubble or whatever. Where can such paragons be found? On the boards of other companies. Most of them will have executive jobs to do, though a few happy pluralists just flit from meeting to meeting. Who is to choose these directors? A nomination committee of other directors. Who decides what they get paid? A remuneration committee. What is the textbook solution? More of the same and at greater expense. The awkward truth is that shareholders get the directors they deserve.
Harvard shows how
SHAREHOLDER democracy is now an oxymoron. Go to an annual general meeting and watch it in action. The directors' elections go through on the nod. The voters are offered a slate of candidates, one for each vacancy. The board has drafted the list, and anyone who might be rash enough to contest it has the company's resources ranged against him. They do these things better at Harvard, as my friend James Grant observes in his Interest Rate Observer. Harvard's board is elected by the vote of all graduates, on a ballot. The rules provide that there must be at least one-and-a-half times as many candidates as there are vacancies. The committee that chooses nominees has no incumbents on it, but candidates can, of course, be proposed without its blessing. The result is a genuine, contested election, complete with campaign promises, which can usefully come back to haunt the winners. From his pulpit on Wall Street, Mr Grant recommends this for American companies. It would fit British companies, too. Directors, he says, would find it easier to remember whom they represent: 'Hint: it isn't the guy at the top who gives them an $830,000 payday.' Derek Higgs should make a note of it.
The Captain's warning
THERE have been no such shrieks of pain since Lloyd's of London backfired on the gentry. They thought it was there to pay school fees, just as the football clubs thought that digital television was there to pay transfer fees. Shock, disbelief and a reflex demand that the government ought to do something about it have been the clubs' response now that their money machine has run dry. My racing correspondent, Captain Threadneedle, sees a lesson here for his friends on the turf. They all think that the bookmakers should be their money machine. The negotiations have been racked with rows and stand-offs, and now the screens in the betting shops are due to turn blank at the end of the month. The Captain advises his friends to sign up and look happy and hope that the bookies, unlike ITV Digital, do not go bust.
True to form
LOOK what's for sale — a licence to print money, and in Nigeria, too! The producer of the nation's coins and banknotes is being privatised, and the Bureau of Public Enterprises can offer a controlling interest. I wonder whether the presses can do forged $20 bills, which tend to command a premium over Nigeria's own-brand currency? Prospective investors must lodge a deposit of $15,000, which is non-refundable. That sounds true to Nigerian form.
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