Jeremy Hunt is having a good election campaign in difficult polling circumstances. He has forced Shadow Chancellor Rachel Reeves on to the back foot on VAT.
His approach, however, to the impending disposal of the Royal Mail owner International Distribution Services (IDS) to Czech billionaire Daniel Kretinsky is wrong-headed.
It is encouraging that overseas investors are interested in the UK and free markets are allowed to operate. But plainly the sale is not in the public interest.
Privatising Royal Mail in 2013 was a good thing but it is a pity that the Con-Lib coalition did not retain a golden share.
By shifting responsibility for the pension fund to the Government, honouring a crown guarantee, it made the postal network an easier target.
Blinkered: Chancellor Jeremy Hunt has signalled that he will not stand in the way of Czech billionaire Daniel Kretinsky’s takeover of Royal Mail
It would be nice to think that Vince Cable’s decision to award shares to the Communications Workers Union (CWU) would be a bulwark against an overseas deal. But we can’t be sure.
Hunt has made the same mistake as Philip Hammond when Arm disgracefully was sold to Japan’s Softbank in 2016.
A similar mistake was made when George Osborne welcomed the proposed bid by Pfizer for AstraZeneca, which fell apart.
Aside from the heritage of the Royal Mail, one of our oldest institutions, the financial structure of the deal will be deleterious to investment and the future of the service.
There is £1.7billion of debt on the balance sheet. The ‘Czech Sphinx’ proposes a further £2.3billion, financed by international banks, at a time of elevated interest rates.
The only way that such a debt burden can be financed is by axing staff (are you listening CWU?), slashing investment and disposing of assets such as Royal Mail’s valuable property portfolio.
Moreover, imagine the row when Kretinsky starts siphoning off dividends to support his glamorous lifestyle and other interests.
It is deeply worrying that Labour’s trade spokesman Jonathan Reynolds seems incapable of saying boo to a goose and has bought into the myth that it will be protected by meaningless guarantees.
The National Security & Investment Act was turned into law to prevent travesties such as Arm, Thames Water and much else happening again. Our naïve politicians are proving as feeble as the IDS board of nodding dog directors.
Taxing times
Rachel Reeves was quick off the mark to assure voters that: ‘Labour will not be increasing income tax, national insurance or VAT.’
How impressed should they be? Not terribly. Labour is already committed to imposing VAT on independent schools, so her pledge is not entirely watertight.
There are many VAT loopholes which could be closed without increasing the rate. Financial services are exempt whereas business services, such as telecoms, qualify for VAT. Various foods such as gingerbread people and flapjacks are excluded.
There are reduced rates for children’s clothes and domestic fuel although these would be tough targets for Labour on distributional grounds. Beyond the big three tax groups mentioned by Reeves there is no shortage of other targets.
Carried interest, the profit made by private equity, is thought to be in Labour’s sights. Raising capital gains and inheritance taxes may penalise enterprise but would appeal to Labour’s base.
In the past, private sector pension tax breaks have been an easy target.
Reeves has no shortage of revenue-raising options without breaching pledges.
Wrong-footed
Sandals or boots? Germany’s Birkenstock is going great guns with strong sales of its cork-based sandals – boosted by Margot Robbie donning pink Birkenstocks in box office hit ‘Barbie.’
In contrast, quirky UK bootmaker Dr Martens is suffering from dwindling demand and the perceived high cost of its £136 classic boots. Turnover is set to tumble by 20 per cent in the first half.
It is counting on an autumn revival when it boosts marketing spend. All brands know there is no accounting for fast-changing tastes.
A damp Glastonbury might help.