(Evening Standard (London) (KRT) Via Acquire Media NewsEdge) Sep. 5--The Prime Minister delivered his speech last night to the Scottish CBI in Glasgow against a continuing chorus from his left-wingers that he should impose a windfall tax on the currently high profits of the energy industry. This within days of a number of British companies -- among them the fund manager Henderson -- announcing that they were to move to Ireland, where they believed the tax regime was more favourable.

The connection between the two is inescapable to every one of us except our politicians. Although business complains about the actual rate of corporation tax, its bigger beef is about the uncertainty.

The arbitrary approach to non-dom taxation, to the reform of capital gains tax, and to the mooted changes in the taxation of multinationals has left business reeling because it now never knows what is coming next, or how the rules concerning taxation are likely to change.

Stability, consistency and simplicity count for a lot in making tax policy acceptable to those who have to pay. Abrupt changes make a nonsense of its ability to plan.

In the context of energy companies, where the Government is also courting them to finance and build the next generation of nuclear power stations, and make further huge investments in renewables, the mismatch of strategy is even more bizarre.

Some parts of Government are clearly alarmed about the potential erosion of its tax base if more firms decide to decamp to Dublin, and are doing their best to calm things down.

At the same time, the Prime Minister allows talk of a windfall tax to gather momentum, seemingly oblivious to the fact that this is just the kind of arbitrary and capricious act that companies feel they can no longer tolerate.

If Gordon Brown does succumb to the political opportunism of such a tax, he must not be surprised if business refuses to accept his assurances of stability in the future and votes with its feet by moving to Dublin.

MAKING SENSE OF INSURANCE TIE-UP: The insurance industry decamps this weekend to Monte Carlo for its annual "rendezvous", a mass networking event that helps set the mood for the coming rating season.

This time, however, the conversation may be less about Gustav and other windstorms in what is already an active hurricane season and more about a storm of a different kind, the upheaval in the industry that will be caused by the proposed acquisition of Benfield, one of the very few remaining independent British-owned insurance brokers, by industry giant Aon.

Those not connected with the merger see it as a restriction of choice, as unwelcome and possibly as pointless as the consolidation of the accountancy industry into four big firms a few years ago, where management's desire for size is dressed up as a claim to deliver better client service.

Thus some mutter that Aon's motivation is about remaining the world's number one, a position from which it would have been toppled had Benfield fallen into the hands of rival Marsh, more than about having a driving need for the business. Others see it as a recognition on Benfield's part that as time goes on it would find it harder to stay in the premier league, and it has therefore shrewdly got a good price for itself while it still has much to offer.

The protagonists for the deal stress the upside, and not just because they are brokers. The two businesses are a good fit in geography and expertise, and should genuinely be able to develop and offer a wider range of services. In particular, they are among the pace-setters in the development of CAT bonds, in the use of derivatives as an alternative to underwriting and in attracting new capital from the likes of hedge funds.

One enthusiast even said they have created the Goldman Sachs of the insurance industry, at a time when the real investment banks, beset by their own troubles, are showing less interest than hitherto in muscling into insurance. Whether or not this is also the view from Monte Carlo, we will know next week.

BP'S ROW WAS NOT WHAT IT SEEMED: One of the interesting things about BP's long-term row with its Russian partners in the TNK-BP joint venture was the absence of support for the British major from any of the others in the oil business. normally, one would have expected that, if indeed the case were a blatant assault on BP's property and management rights, even its opponents might see an interest in helping BP preserve its position. That no one in other joint ventures with BP voiced support implies this was not clear cut.

The four businessmen ranged against BP, though they were occasionally caricatured in the British media as being in the worst traditions of Russian oligarchs, were in fact far from that. Three of the four were already wellknown in the West, have extensive business connections here and are seen as among the progressives in terms of corporate governance. So again there was more to this than met the eye.

Clearly, there were personality issues but at root the row was probably a clash between profits now and profits later -- one side wanting to maximise production now, the other wanting to leave the oil in the hope that it will be even more valuable a few years hence. But if that is all it came down to, it ought to have been resolved with less brinkmanship.

The terms of a likely settlement, which were leaked yesterday, should be welcomed. BP seems to be holding on to most of its half share. That certainly did not look possible a few weeks ago.

To see more of the Evening Standard, or to subscribe to the newspaper, go to http://www.thisislondon.co.uk.

Copyright (c) 2008, Evening Standard, London
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

[ Back To TMCnet.com's Homepage ]

Discussions: