FINANCIAL TIMES: Hot air about booming profits: “In the UK, profits at Shell, BP and Barclays prompted calls for a windfall tax on oil companies and banks.” (ShellNews.net) 23 Feb 05

By Brian Groom

Published: February 23 2005

Record corporate profits are provoking protests - a response that seems set to generate more heat than action.

In France, the Socialist opposition wants social partners to meet to discuss "purchasing power". Unions plan a day of action on March 10. Jean-Pierre Raffarin, prime minister, says companies should share the fruits of growth.

Gerhard Schröder, Germany's chancellor, waded into debate about Deutsche Bank's 6,400 global job losses - after record €2.5bn ($3.2bn) profits - by criticising the "brute force" of its strategy.

In the UK, profits at Shell, BP and Barclays prompted calls for a windfall tax on oil companies and banks. Such moves have happened before: Gordon Brown, chancellor of the exchequer, taxed privatised utilities in 1997 and under Margaret Thatcher banks were hit by a windfall tax in 1981. But it is unlikely this time.

Global profits have rebounded particularly strongly from the downturn. US corporate earnings have been rising six times as fast as wages, while in the euro area and Japan the shares of profit in gross domestic product are near 25-year highs. Cheap labour competition from China and India reinforces the trend.

A debate about whether, say, oil companies should pay big dividends rather than invest in new reserves seems legitimate. Less helpful are broad complaints about "obscene" profits.

Europe needs successful companies to recapture global competitiveness - one reason why politicians, whatever they say, will not rush to burden businesses. Yesterday's rise in the euro and oil prices highlights their vulnerability. And if history is a guide, profits will revert eventually to growing at the same pace as GDP.