Daily Telegraph: Not much point in detail if you can shift boundaries: “With petrol prices still 20p a litre above the price two years ago, the oil companies are the easiest hit. Still, a doubling in the tax on North Sea oil production is a £6.5 billion raid over three years and a swingeing blow only three years after the last grab in 2002. Brown is banking on no one shedding a tear for a sector where the two biggest companies, Shell and BP, made almost as much in just three months.”: Tuesday 6 December 2005
By Tom Stevenson (Filed: 06/12/2005)
Gordon Brown has made such a habit of pretending the economy is growing faster than it actually is that it came as a shock to hear him bite the bullet and forecast a worse outcome than everyone else. Growth of 1.75 per cent this year and between 2 per cent and 2.5 per cent next year means he's propping up the consensus rather than flying off the top of the scale.
When you consider that he was claiming growth of up to 3.5 per cent in the spring and 2.5 per cent in the summer, it is a spectacular climbdown. Not that you would have divined that from the Chancellor's body language. He doesn't do sorry.
After eight years of Gordon's bluster, however, we've learned to spot the signs - the more uncomfortable he is with the words coming out of his mouth, the faster the salesman's patter.
So we were treated to the now familiar machine-gun delivery of what George Osborne rightly likened to old-style Soviet tractor production figures. As usual nothing so grubby as an explanation was offered as to how a fiscal deficit of £10 billion this year will miraculously turn into a £13 billion surplus in five year.
Not that there's much point in providing detail if the cycle can simply be shifted by a couple of years until the numbers add up.
In the summer he retrospectively moved the start of the cycle back from 1999 to 1997. Now he says the end point won't be reached until 2009. By then it will be someone else's problem.
This was a vintage Brown performance. Fiddling around the edges, from gap years to roof insulation, to disguise the grim nature of the underlying situation. Brown is not the first Chancellor to take the credit when things are going his way and blame others when problems emerge. But as any parent will know, there's nothing quite so trying as things constantly being someone else's fault.
And who easier to blame than Johnny Foreigner. The Chancellor tells us, straight-faced, that the slowdown is due to the sky-high oil price and weak overseas demand. This does not wash. The 17 out of 25 EU countries which are growing faster than us face the same pressures and many are growing robustly.
Our problems are largely home grown. Rising taxes and a slowing housing market have persuaded the consumer to do the rational thing and stay at home. If you rely on the consumer to drive your economy you must accept the pain when their flexible friend just won't flex anymore.
This was the speech the Chancellor did not want to have to make, the one he has been lucky to avoid for eight years. He has taken his first tentative step towards reality by admitting the truth on growth. That's going to be easy compared with what he will surely do next, which is to raise taxes to fill the ongoing structural gap between extravagant spending in the unproductive corners of the economy and the revenues he needs to pay for it. At some point you have to pay the tab. No surprise about the Chancellor's first port of call in his fiscal whip-round. Having assaulted the consumer with previous tax grabs, that kitty is empty and he can hardly dip too deeply into the pockets of business if it is to provide the growth and investment that will fill the gap left by the refuseniks on the High Street.
With petrol prices still 20p a litre above the price two years ago, the oil companies are the easiest hit.
Still, a doubling in the tax on North Sea oil production is a £6.5 billion raid over three years and a swingeing blow only three years after the last grab in 2002. Brown is banking on no one shedding a tear for a sector where the two biggest companies, Shell and BP, made almost as much in just three months.
Having dipped into this pot before, we don't have to guess the consequences. In 2002 the impact of the corporation tax hike was immediate. Investment dropped, new entrants disappeared and production and tax revenues fell.
One of God's jokes at our expense has been to put the most abundant oil reserves underneath the world's most unstable and dangerous political regimes. Britain doesn't have huge amounts of oil any more and it's not easy to get at, but it has until recently had a predictable tax system.
It would be wrong to underestimate the impact of this kind of fiscal caprice on the investment intentions of multi-national companies that can just as easily tow their rigs to lower-cost regions with greater potential reward.
This at a time when gas production is running down faster than expected and the government is scrabbling around for supplies to take us through the winter. The easy option is rarely the right one.
• The property sector got the news it wanted on REITs - they're happening - but it is right to be concerned. The devil is always in the detail and the Treasury has made it clear that it is only happy to proceed if it maintains the overall tax take from the commercial property industry.
That means it is going to levy a conversion charge at a level which compensates it for the unrealised capital gains tax hidden in property companies' existing portfolios. But the government isn't going to let on what the charge will be, or even how it intends to calculate it, until the actual date of next year's Finance Bill.
The property sector's problem is that its gains are calculable while the potential benefits for the Exchequer of better property investment, more activity and higher (taxable) distributions are harder to predict. The industry is right to demand proper consultation by the government before the rules are set in stone.
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