Why we can be sure of Shell – Labor should think about how proposed tax raids fit with its efforts to win city and commerce, says ALEX BRUMMER
The lightning-fast reaction to Shell’s soaring profits in the third quarter and the prospect of £34.5bn income by 2022 is to tax the oil company until the pips squeak.
Shell isn’t going anywhere. So raising the average tax level by 65 percent in these turbulent fiscal times is an easy hit for Labor and the LibDems, who like to claim they invented the windfall tax.
A sure sign: The knee-jerk reaction to Shell’s soaring profits in the third quarter and prospect of £34.5bn income by 2022 is to tax the oil company until the pips squeak
There are critics who argue that the only reason Shell escaped a more brutal tax bill is that Liz Truss once worked there. But so did LibDem great Vince Cable, who is a former chief economist.
Wael Sawan, the incoming CEO of Shell, could solve the perceived problem by spending a much larger share of income on renewable energy sources or by buying a British green pioneer such as SSE.
Buying FTSE 100 assets is not a bad thing, as we saw when current boss Ben van Beurden bought BG Group in 2016.
In an era where 86 percent of the private sector workforce is enrolled in some form of pension fund, there are reasons to be thankful for Shell.
The distribution to shareholders this year, in the form of dividend payments and share buybacks, is £22.4 billion. At a time when pension funds are under severe strain due to the liability-driven investment scandal, rising oil company capital values and dividends at Big Oil appear to be a blessing in disguise.
Labor should think carefully about how the proposed tax raids fit in with its efforts to win over City and commerce with a coffee morning offensive.
Euro catching up
Christine Lagarde and the European Central Bank have long held the line at higher interest rates. Now they are doubling with a second increase of three-quarters of a percentage point in as many months, from zero to 1.5 percent.
Crushing inflation, which stands at 9.9 percent in the eurozone, 10 percent in Germany and 12 percent in the Netherlands, is now a priority. Frankfurt has decided that the 19 eurozone countries do not need a British-style bond drama.
So the ECB also wants to end its bank bailout plan, which has provided £1.72 trillion in cheap money to the region’s banks. The impact of the change on Italian and Greek lenders in particular could be polluting.
On consecutive days, we’ve seen the Bank of Canada sit back from tightening with a smaller-than-expected rise of 0.5 percent and signaling the end of its tightening cycle. By contrast, Lagarde admits there is more to come from the ECB, despite the recession.
In the US, the Federal Reserve sees the 2.6 percent increase in GDP in the third quarter, after two negative periods, as the green light for the next three-quarter percentage point to 4 percent.
Much of the recovery is largely technical and the result of a narrowing trade deficit as a result of declining consumer demand.
Logic points to a similar increase of three-quarters of a percentage point by the Bank of England next week.
But we should never underestimate the embarrassment of the Bank’s monetary policy rate-setting committee.
Unilever does not like the suggestion that fast moving consumer goods companies should share more of their margin with consumers and less with shareholders.
Input costs increased by £3.6bn last year. Despite a record price increase of 12.5 percent in the last quarter, margins have recently shrunk from 18.2 percent to 16.2 percent.
Chief executive Alan Jope tells me that consumers around the world are as excited about the Persil-to-Ben & Jerry’s group’s core brands as ever. There is little evidence of trading in any of the major markets, including the UK.
In fact, customer habits are changing, with South Africa’s preference for saving on multi-packs and smaller products catching on in other emerging markets.
The popularity of well-known beauty and nutrition brands suggests that not all consumers are in as much pain as the gloomy people think.
A brave friend who works with Citizens Advice reports heightened stress levels among clients in debt.
Good to see Amanda Blanc and Aviva addressing a need by pledging £7million to Citizens Advice over the next two years and another £2million to Money Advice Trust’s Business Debtline service for small businesses.
Helping with the little dramas of life.