Man in a Shed: Windfall tax

Friday, February 01, 2008

Brown and Darling could force Shell and BP to leave the UK

There is a lot of emotional nonsense being spoken about Shell's profits today.

People like Unite and the AA ( for goodness sake) are trying to link petrol prices at garages to oil company profits. This of course not true. Even refining in general is less profitable - note BP selling Coryton recently to Petroplus.

Gordon Brown damaged the long term future of the North Sea oil industry as chancellor when he raised taxes and made clear that there was no longer going to be stability from the government. The problem is that areas like the North Sea require long term and high investment - you don't make it if you think the likes of Gordon Brown are just going to steal it when it suites them. Shell and BP have already made substantial moves to pull back from of the North Sea.

Now there's at least £8Billion missing from government revenues and making a popular so called windfall tax will look tempting to Darling. But remember its peoples pension schemes that own Shell and BP. So he's really stealing from peoples pensions when he does this ( not that you can expect left wing organisations like the BBC to explain this as the report from a garage forecourt having interviewed angry voters - I have no idea if they've done that this time, but I think they will ).

And there is a further risk Shell and BP may move. Shell completely to the Netherlands ( it is already registered there and its technical operations based there - the Dutch have for a long time got the better deal out of Shell ), BP to the US.

Then HMG will no longer benefit from taxing the profits that these companies make over seas. Less British people will work for these companies and out skills base will decline further.

But just because a decision is pig headily stupid in the medium to long term doesn't mean that Alistair Darling won't get permission from his master Gordon Brown to do it to keep them in their government jobs for a few more years.

Update: See this quote from Sunday 3 Feb Telegraph

"Shell is withdrawing from the North Sea operations because oil and gas reserves are in decline. On Thursday the company said it was planning a big increase in capital expenditure this year, using money from disposals to invest in more productive oil and gas fields around the world."

MiaS would argue that it is also because of uncertainty about operating in the UK created by Gordon Brown.

The pound in your pocket

"We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists." James Callaghan

“The trouble with theoretical economists is that they don't understand that when you have a deficit, you can only finance it by borrowing, and you've got to persuade people that it's worth lending money to you and that they'll get their money back... there's no way of escaping it.” Dennis Healey during the 1976 Stirling Crisis.

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens ... Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." John Maynard Keynes, 1920.

"To preserve [the people's] independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty, or profusion and servitude." Thomas Jefferson, President of the United States of America,1801-1809.

Inflation is taxation without legislation .. Milton Friedman