The folly of raising taxes

There are a screed of caveats surrounding the fast improving state of the public finances. Not least is the fact that borrowing this year could still come in at, or above, £200bn.

Nevertheless, as the Chancellor puts final touches to next week’s Budget he is in a better position than expected with an undershoot so far of £43.5bn from the March forecast.

Some of this is down to better husbandry of government spending and the speed with which some of the Covid-19 outlays, notably furlough, fell away as the jobs market improved. What is really significant this year is how tax receipts climbed with both income taxes and vaT revenues bouncing as the economy unlocked.

The undershoot on borrowing makes the case very strongly for striving to keep enterprise running at full speed rather than slamming on the brakes through new Covid rules. Free market think-tank the Institute of economic affairs notes the ‘whopping’ improvement in the public finances in the first six months of the year already has seen the stock of national debt to total output fall from 99.7pc in June to 95.5pc now.

This begs the question as to whether it is wise for Chancellor rishi Sunak to stick with Treasury orthodoxy and bake huge tax increases, including the national insurance surcharge, higher corporation tax and frozen personal allowances, in the cake.

One doesn’t have to be a swivelled-eyed believer in supply side economics to recognise that the NIC increase is a tax on jobs and the higher the UK’s corporation taxes (on current plans they rise from 19pc to 25pc in 2023) will make Britain less competitive than many of its counterparts.

Far from being Singapore in north-western europe, Britain is in danger of becoming a higher taxed nation than the social democracies of Scandinavia.

That is not how Brexit was meant to work. The Treasury makes the case that the Chancellor cannot possibly bank the war chest, built up as a result of undershoots on deficit and debt, because of the threat of higher interest rates.

If the Bank of england were to lift bank rate to one percentage from the current 0.1pc, the cost over the forecast period to 2025-26 would be £25bn.

That’s just a fraction of the likely deficit and debt improvements, especially if approved tax rises are not reversed. Don’t be bamboozled by Sunak’s spin machine.

Health kick

alaN Jope has shot the fox of the analysts calling for changes at the top of Unilever because of a lacklustre performance.

In spite of global price pressure for vital ingredients such a palm oil, Unilever managed to resist pressure on profit margins by efficiency gains in the supply chain in the third quarter of 2021.

There are a couple of inflation-affected quarters to come before higher costs for ingredients and logistics peak, so there are still questions as to how much can be absorbed and passed on.

The concern of analysts is that Unilever is more exposed to emerging markets than some of its peers, with Indonesia among the more difficult territories.

In its key markets of the US, China and a lesser extent, India – where Covid has lingered longer – growth has been delivered. There is no intention at present to seek full control, or dispose, of quoted hindustan Unilever in spite of unsolicited advice to do so.

Unilever continues to seek newer, more exciting products and its purchase of what it calls ‘digitally native skin care brand Paula’s Choice’, better described as beauty online, fits that description.

One cannot dismiss the thought that in a determination to conquer the health and beauty space, Unilever might be a potential buyer, or joint-venture partner, of GSK’s consumer health care brands. even for a big beast like Unilever that would be a huge transaction. Stranger things happen.

Fee fever

INveSTOrS who backed Jes Staley when he was under siege from New York activist ed Bramson did the right thing.

as other UK banks struggle to find fresh streams of income, Barclays’ decision to twist rather than stick on investment banking has paid off with the lender booking profits of £2bn for the third quarter, boosted by 59pc year-on-year jump in fee income from M&a and the like.

Casino banking largely was frowned upon post-financial crisis. When it is good, it is very good.