CITY AND SUBURBAN
Harassed by alligators, Kenneth Clarke forgets to drain the swamp
CHRISTOPHER F1LDES
The feeling is familiar. You set off to Florida with a challenging job and high hopes. You give it your best shot but some- thing eludes you. The fact is that when you are up to your neck in alligators, it can be hard to remember that your original inten- tion was to drain the swamp. Kenneth Clarke has this trouble. Two years ago, new to the Everglades, he was telling the House of Commons Treasury committee what he thought about taxes. He liked them to be simple, with a low rate and a broad base and few exceptions. Since then he has made them more numerous, more complicated and higher. With a quick defensive reflex, he brushes another alligator off his collar. It nips him and disappears into the swamp, which seems to be getting deeper. What looks like a drifting log turns out to be a mortgage protection policy — taxable? Yes, squeaks his assistant, a gormless baronet called Young. No, cries the Chancellor, bat- ting it away and making room for the next log. Government stocks? He wades in, stir- ring up a furious submerged population, which has to be flooded out with tax exemp- tions. Share options? Disturbed on his dawn watch, he swats at them and gets bitten all over. The baronet has now been eaten or promoted, and his successor, by the name of Jack, has much to learn. He seems to think that share options used to get a special tax break. Mr Clarke would do himself a favour if he stood back and remembered what his original intention was. The taxes on saving and investment are a swamp, full of decayed incentives, rotten schemes, deceptive haz- ards, clogged channels, mephitic vapours, bleary eyes and gaping jaws. His desperate improvisations will do nothing for it. What it needs is draining.
Reclamation project
THE LAST Chancellor with that idea was Nigel Lawson. Eleven years ago in his first Budget he set out to drain the swamp of company taxation. That, too, was a dank morass only navigable by accountants. The tax rate came up to your neck, but they could lower it for you, often by doing things that made no economic sense — like buying plant or equipment that you did not need and hop- ing that someone else would hire it from you. Then the drainage contractor cleared out any number of these fatuous devices and brought down the tax rate by one-third. It paid him: his revenues rose. The same bud- get set out a tax regime for share options that lasted until Kenneth Clarke's dawn raid. The regime taxed gains when they were turned into cash. Nothing special about that. A later Lawson Budget brought the top tax rates for income and capital gains into line. The novelty in Mr Clarke's regime is that it taxes options when they are turned into shares — prompting the holders to sell their shares to pay the tax, unless they work for companies which have no market in their shares. In that case the holders are in the swamp along with Mr Clarke. If he wants to lever himself out, the best way would be to proclaim a general review of the taxes on savings, with reform to follow. I have long belieVed that the Treasury has a suitable green paper in its filing cabinet, wait- ing for a Chancellor to ask for it. This Chan- cellor should dive down and fish it out.
Don't know, didn't look
CHEMICAL PLANTS, like banks, go pop unless carefully watched, and the results can be devastating. At Imperial Chemical Industries, the first question put to a man- ager when something has gone wrong is a simple one: 'Did you go down and look?' It is evident that Barings went pop because nobody went down and looked. The man- agers did not know what was going on and took no trouble to find out, and the Board of Banking Supervision so concluded. It is a test that the Board stops short of applying to the supervisors in the Bank of England. Did they understand how Barings was being run? Did they go down and find out? I like the mordant comment of John Rathbone, watcher and adviser in the money markets: `The Bank gives the impression that there is a preference for any matter that requires real thought to be swept under the carpet. This compares with matters laid on top of the Governor's carpet, which does bring a fairly instant response.'
No customs, we're Spanish
ONE DISAPPOINTMENT after another for Yves-Thibault de Silguy, the elegant French placeman put into Brussels as mon- etary commissioner. First he finds that Europe will not, after all, have a single cur- rency as from the year after next. Now he complains that countries with cheap cur- rencies can sell cheap cars. This is how the ruthless Spanish undercut the poor defenceless French. The single market is in danger, says Mr de Silguy — and so it must be, for what has a single market to do with competition and choice?
Advice by appointment
ON TO my desk flops a disturbing picture. Does John Major wear a hairpiece? Has the cat got at it? No, this is Adair Turner, the latest model from McKinsey, the con- sultants — as supplied to the Confedera- tion of British Industry. His two predeces- sors as director-general were also from McKinsey, which seems to have refined its anonymous styling and two-tone matt grey finish. I think of McKinsey as a sober post- war corporatist fashion, but it must be com- ing round again, for another McKinsey man is now advising Mr Major. I do hope that Mr Turner does not diminish the CBI's usefulness as a reliable counter-indicator on policy.
Rapid oh-oh
A HELPFUL management consultant (quite so) sends me Chimpanzee Politics, by Frans de Waal of the Wisconsin Regional Primate Research Center. Chimpanzees, I learn, engage in board- room politics. They address their top ape in a mode classed as submissive greeting: 'a sequence of short, panting grunts known as rapid oh-oh'. Every so often they decide that he is past it, form coali- tions, play for sympathy, offer induce- ments, fix up a chum for the deputy's job, and (with help from the females) coax the chairman into going non-executive. Greed motivates them and makes them competi- tive — when fed regularly with bananas, their aggression increases sharply. After Cadbury and Greenbury, I await the Chimpanzee Committee.
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