The illusion of windfalls: A one-off tax on energy giants will hit pensions, jobs and Britain’s green future, says ALEX BRUMMER
BP knows more about political risk than any other FTSE 100 firm.
Its clash with President Obama and the US courts over the 2010 Deepwater Horizon explosion in the Gulf of Mexico almost proved an existential event and left shareholders £50billion poorer.
After Vladimir Putin invaded Ukraine, BP – a big shareholder in Rosneft – lost no time in pulling out at a cost now confirmed to be £19.2billion.
Russia exit: After Vladimir Putin invaded Ukraine, BP, as a big shareholder in Rosneft, lost no time in pulling out at a cost now confirmed at $24bn (£19.2bn)
Chief executive Bernard Looney may be best known to the British public as the boss denigrated by broadcasters and politicians for his description of BP as a ‘cash machine’ in an age of high energy prices.
But he has also been the leader of the pack among oil majors in redirecting his company towards a greener future with demanding zero-carbon goals.
He is behind an extraordinary plan of £18billion investment in UK climate change projects ranging from hydrogen production to a network of electricity charging points for motor cars.
One might have thought that the bullying of BP by Obama and Russia might have dissuaded British politicians from engaging in the same.
Yet after it reported underlying earnings of £5billion for the first quarter, opposition leaders couldn’t restrain themselves from demands for a windfall tax.
Sir Ed Davey, of the Lib Dems, has attacked the Tories for raising taxes (even though they are intended to pay for the sacred NHS), then demanded a fresh tax on excess profits. He also criticised dividend payouts and share buybacks.
Never mind that almost all of these gains will accrue to the 76 per cent of private-sector workers automatically enrolled in pension funds. Davey doesn’t have to worry about this as he will benefit from a gold-plated, unfunded MP’s pension.
That other knight of the realm, Keir Starmer, also rattled on about the cost-of-living crisis and windfall taxes. There was no recognition that such levies cannot fund anything permanently. Energy market volatility means excess profit taxes are usually a one-off.
Also glossed over is the fact that BP is among Britain’s biggest taxpayers and faces a surging corporation tax charge in 2023.
Not much integrity in the criticisms from virtue-signalling party leaders.
When it emerged in 2020 that SoftBank boss Masayoshi Son intended to sell Cambridge chip designer Arm to rival Nvidia it was clear that the best course of action for UK plc would be a London float, which would reverse the error of Theresa May’s government in the aftermath of the referendum in 2016 when Downing Street laid out the red carpet for SoftBank.
It would restore one of Europe’s few tech champions to London.
The chief executive of the London Stock Exchange, David Schwimmer, has told this paper he would be working alongside government in seeking to bring the £50billion-plus company to the UK.
Arm might have difficulty in meeting Nasdaq criteria for a New York initial public offer in that the intellectual property, HQ and employees are mainly in the UK.
It is gratifying to learn that the Government is taking the argument directly to Son, who was treated by the UK as a kind of conquering hero six years ago.
What is perplexing is the disclosure that among those doing the lobbying is City veteran Gerry Grimstone, the Office for Investment chief.
When interviewed by the BBC in August 2021, Grimstone dismissed opposition to overseas takeovers of key strategic and tech enterprises. ‘It would be a sad day for Britain if we pulled down the shutters so that we weren’t a mercantile and entrepreneurial country,’ he opined.
His comments came when several UK engineering and defence companies were under siege from private equity opportunists and foreign competitors. Recent research by fund manager Schroders found the FTSE has been badly diminished by this foolish approach.
Perhaps Grimstone should step aside from the Arm negotiations.
Among the next frontiers for Elon Musk is the Boring Company, valued at £4.6billion after a fundraising last month.
Its aim is to ease congestion on US roads and speed up rail journeys by burrowing into what is trendily called the subspace.
Backed by Silicon Valley venture capital group Sequoia it is already worth six times its early valuation. As was the case at Tesla, no one should count on a quick payback.