The Treasury trots out its Budget bogey this time, we're right to be scared
This is the time of year when the Treasury puts out scare stories. Beware of the Budget, they say. Just look at all the things we
may be planning to tax. Land, for example, or fuel for aircraft, or chocolate chip cookies, because they make you fat. and thus impose an additional strain on the National Health Service. We intend to tax pre-owned assets, whatever they are. As yet the Inland Revenue remains as baffled as the rest of us, but if you thought you had done the right thing by your heirs twenty years ago, prepare for a tax demand now. These tactics are meant to reduce expectations in front of the Budget. Then it may come as a relief, of a sort, on the day. Blessed are they who expect little, as the Army says, for they shall not be disappointed. Unfortunately, we may be right to be scared, because this year's must be the most difficult Budget that a Chancellor has had to face for the best part of a decade — and, to make matters worse, this is very much his own fault. His expenditure has gone soaring away and his income is now falling short. This was a problem familiar to Mr Micawber. but Gordon Brown has to adapt to it. He has been borrowing, he plans to borrow more, he is over the limit set by the Stability and Growth Pact — what a good thing that we never signed up for it — he needs all the revenue that he can get, and he will have to look for it where he can find it. In the past he has turned to the nearest deep pocket, raiding the pension funds and the privatised utilities. Now another deep pocket must tempt him.
Picking a pocket
The big banks, certainly, show signs of running scared. HSBC and the Royal Bank of Scotland have just announced profits which tot up to £14 billion, so surely their pockets are lined, and aren't they exploiting their customers, and shouldn't they have to cough up? In its own defence, HSBC pleads that most of its profits are earned overseas, and that most of its shares belong to the pension providers, which, under their new tax regime, need all the help they can get. Customers who still feel exploited can always (as HSBC does not say) move to Abbey, which has lost the National from its name and last year lost £686 million, too. This must mean that Abbey's customers are exploiting it, so shouldn't we all join in? Already the Chancellor dictates to the banks how much (or how little) they may charge small businesses. If he now has another expensive favour to ask them, he would have a threat to back it up.
Morse's code
There is a precedent for picking the banks' pockets, and a Conservative Chancellor set it. Geoffrey Howe was facing a desperate Budget and his mandarins hit on a novel idea. What about all this subsidised credit for exports, which cost the public finances so much? Why shouldn't the banks take it on? He dispatched the Financial Secretary to the Treasury, a promising young chap called Nigel Lawson, to negotiate with Sir Jeremy Morse, the cerebral chairman of Lloyds. The banks could do as they were asked, said the Financial Secretary politely, or suffer a tax on their windfall profits. Thank you, Sir Jeremy told him: if we have to pay up we would rather be taxed. Any student of Nigel Lawson's form would have guessed what was to happen next. He socked them. All the same, he never did it again, so Sir Jeremy was right. His successors may care to consult him.
Clearing out
Partners of Goldman Sachs complain of losing millions of pounds because they left such matters of petty cash to their secretary. I am not quite in their league, so I was startled this week by a telephone call from my bank: was I moving to Bristol? No plans to move anywhere, I said. 'Well, we've had this correspondence come in' — with what purported to be my new address on it. This sounded to me like a try-on, and the bank seemed to agree: 'Our systems are pretty robust.' Thank goodness for them — but can those Nigerians who ask us to help them in getting money out of their country have found a new way of siphoning it out of our bank accounts? Be careful. Perhaps they have all moved to Bristol.
Golden oldies
Now here's a blast from the past: shortages. Old-fashioned shortages of Old Economy building blocks, like shipping space and iron ore and petrochemicals. The great greedy Chinese economy and its suppliers just can't get enough of them. Even oil, with its price stuck above $30, is not coming out of anybody's ears. This must be dispiriting news for Imperial Chemical Industries, which went to such trouble to get itself out of its Old Economy businesses. Petrochemicals, which for so long were ICI's first division — all those miles of pipes bubbling away at Billingham-on-Tees — found themselves relegated to the out-tray and put up for sale. A new chairman who came in from Unilever knew better. From his former employers he bought a bundle of businesses, to put ICI into exciting new products like flavours and fragrances: Quest, this division was called. The clearance sale misfired and so did the purchases. ICI this week admitted that Quest was so unprofitable as to be almost unsaleable, but has found a taker for its food ingredients. Time to get back to the old economy.
Fast track, slow lane
I am no expert on Delaware law — how different it seems to be from our own dear Companies Acts — but the courts there certainly go in for fast-track justice. When Hollinger International, The Spectator's parent company, fell out with its chairman, Lord Black, the row came to a head in November. By February it had reached a court in Delaware, where Judge Strine heard evidence for three days. A week later he reeled off a 36,000-word judgment and, although Lord Black respectfully disagreed with it, that was the end of that. What a contrast with Three Rivers Council's case against the Bank of England. Ten years in the making, it now looks set for two years in the hearing: an alarming prospect, says the judge who will have to sit through it. Meanwhile, the Bank has been told by the Court of Appeal to disclose even more of its documents, and is off to the House of Lords. It could save time and lawyers' fees by reincorporating in Delaware.
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