Brexit is hang­ing like a cloud over the Bud­get

The Pak Banker - - OPINION - Jeremy Warner

THIS wretched Brexit vote is get­ting in the way of just about ev­ery­thing. Only six months ago, things were go­ing swimmingly for the Chan­cel­lor of the Ex­che­quer, Ge­orge Os­borne. Widely cred­ited with hav­ing se­cured a stun­ning elec­tion vic­tory for the Tories, he could seem­ingly do no wrong. Yet events have been mov­ing against him al­most ever since. The UK econ­omy is slow­ing fast, and not for a long time has the ex­ter­nal en­vi­ron­ment looked quite so threat­en­ing. Still, there was al­ways the op­por­tu­nity of the Bud­get in a cou­ple of weeks' time for the Chan­cel­lor to turn the ta­bles anew. An am­bi­tious dis­play of py­rotech­nics has long been promised that would es­tab­lish Mr Os­borne as a rad­i­cal re­former with ev­ery prospect of step­ping into the Prime Min­is­ter's shoes.

This am­bi­tion has taken an­other knock with news of the climb­down on pen­sions re­form. Now of course the Chan­cel­lor doesn't ac­cept its de­pic­tion as a U-turn. The of­fi­cial line is that he'd been con­sult­ing on re­form, but has been per­suaded that this is not the right time to push ahead with changes that could desta­bilise the en­tire pen­sions in­dus­try. Nice try, yet the true ex­pla­na­tion is rather more ob­vi­ous.

To be re­mov­ing key middle class tax breaks at a time when the Govern­ment is strug­gling to per­suade core sup­port­ers to vote against Brexit would be tan­ta­mount to an act of political sui­cide. All tax re­form is a jug­gling act that inevitably creates losers as well as win­ners. The abid­ing prob­lem with such re­form - as a for­mer Chan­cel­lor, Ken­neth Clarke, once wisely re­marked - is that po­lit­i­cally, you will al­ways be pun­ished by the losers while get­ting no credit what­so­ever from the win­ners. Even if it makes eco­nomic sense, it's not worth the can­dle. Thus it is with pen­sion re­form, which was to have been the big set-piece of the Bud­get.

The Chan­cel­lor has al­ready done as much if not more than any of his Labour pre­de­ces­sors in re­mov­ing the pen­sion tax breaks once en­joyed by higher earn­ers, and was hop­ing to go the whole hog on March 16 by ei­ther an­nounc­ing a sin­gle flat rate of tax re­lief for pen­sion sav­ing, or more rad­i­cally still, a "pen­sions Isa". Ei­ther way, it would make pen­sions sav­ing less at­trac­tive for higher earn­ers and more gen­er­ous low earn­ers.

By the by, it would also have saved the Ex­che­quer a large sum of money, since as things stand the great bulk of the £50bn of pen­sion re­liefs go to higher rate tax pay­ers.

For a Chan­cel­lor who, as­ton­ish­ingly, seems to be al­ready strug­gling to meet fis­cal con­sol­i­da­tion plans an­nounced lit­tle more than three months ago, this wind­fall would have been a god­send. Now he's go­ing to have to find other ways of fill­ing the re­newed hole at the heart of the pub­lic fi­nances.

In any case, it's all turn­ing into a bit of a night­mare. On top of ev­ery­thing else, Os­borne knows he must rally the Labour vote to save his hide on Brexit. Given that many of them would gladly sur­ren­der the EU just to give the Govern­ment a good kick­ing, it is far from cer­tain he will suc­ceed.

Iron­i­cally for a Tory Chan­cel­lor, Os­borne has ac­tu­ally done quite a bit for lower in­come earn­ers over the past five years while si­mul­ta­ne­ously soak­ing the middle classes to pay for it. But he will get no credit from the for­mer, and is in some dan­ger of be­ing pun­ished by the lat­ter in the ref­er­en­dum.

Given th­ese political and eco­nomic un­cer­tain­ties, it is small won­der that cor­po­rate Bri­tain has stopped in­vest­ing again. Things are not look­ing good, not good at all. One of Schroders' re­spon­si­bil­i­ties as Europe's largest quoted fund man­age­ment group is to en­sure de­cent stan­dards of cor­po­rate gov­er­nance among the many com­pa­nies it in­vests in.

Oddly, it has scant re­gard for such things it­self. Not only does it op­er­ate an ar­chaic, dual-vot­ing share struc­ture, al­low­ing the found­ing fam­ily to main­tain con­trol from a quite small cap­i­tal base, but it has now com­mit­ted the car­di­nal cor­po­rate gov­er­nance sin of el­e­vat­ing its chief ex­ec­u­tive of nearly 15 years stand­ing, the City vet­eran Michael Dob­son, to the po­si­tion of chair­man.

I am as­sum­ing Dob­son meant the fam­ily when he said that con­sulted share­hold­ers were per­fectly happy with the ar­range­ment. Did the board con­duct an ex­ter­nal search be­fore set­tling on Dob­son, as nor­mal pro­ce­dure would re­quire, or was this just an in­side job? It cer­tainly looks like the lat­ter.

What is more, Dob­son plainly had a big hand in anoint­ing Peter Har­ri­son, his suc­ces­sor as CEO. Har­ri­son was in turn par­tic­u­larly keen on hav­ing Dob­son as chair­man. It is all too cosy for words. No­body is quar­relling with Dob­son's record. He has done an out­stand­ing job, tripling the com­pany's as­sets un­der man­age­ment and pro­duc­ing an ever-ris­ing div­i­dend stream.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.