Isa sellers pitch it smaller

Anthony Hilton12 April 2012

INVESTMENT bankers and fund managers will tell anyone who cares to listen that markets are cheap, that recovery is just around the corner and that now is the time to buy. But they do not seem to believe it enough to put their money where their mouths are.

This time last year, it was impossible to open a newspaper, stand on a train platform or turn on a television without seeing an advertisement from some fund manager or other urging us to buy an Isa before the end of the tax year. This year they are much less in evidence. Indeed, advertising monitors say that at this point last year 225,116 centimetres of Isa print adverts had been sold. At the same stage this year only 98,887 centimetres have been sold, which is a decline of 56% on last year. Similar falls can be found in poster advertising and television.

It is all a very far cry from 2000, the year the Isa selling season coincided with the dotcom boom. It is a standing joke in the City that small investors always buy at the top. It is less often remarked on how hard the industry works to encourage them to do so.

Unfair play

IT is interesting that the Takeover Panel believes the high-profile battle for control of P&O Cruises justifies an extension of its rules to cover companies with joint listings - as one of the bidders in this case is. Even more pressing, but probably impossible, however, would be an extension of its rules to cover foreign bidders for British companies.

It is surely notable that the German utility RWE has made not one public announcement throughout its long courtship of Innogy, the British electricity generator. But when word of the talks first leaked a couple of months ago and Scottish Power was named as a possible rival bidder, the Panel stepped in and demanded that the Glasgow-based company issue a statement to clarify its intentions. Scottish Power immediately complied with the request and issued a statement saying it was not likely to bid.

There was no such requirement for RWE to clarify its position, and it would appear to have been negotiating on and off for some weeks without even having to confirm that it is in talks.

There may be nothing the Panel can do about this, given the limited reach of its authority, but it does seem to give foreign buyers a potentially unfair advantage over their British-based rivals.

Allied memory gap

I WAS amused to see in the Financial Times on Monday that the chief executive of Allied Irish Banks, Michael Buckley, reportedly called almost a year ago for an investigation into trading at Allfirst, the bank's Baltimore offshoot which subsequently was revealed to have lost three quarters of a billion dollars. He was apparently alerted last May to suspiciously high levels of trading there and wanted to know what was going on.

Readers with memories that stretch back as far as Buckley's will remember a conference call he had with analysts on Wednesday 6 February 2002, the day the losses were revealed. Fellow journalists will remember his parallel briefing that day to the Press. The Financial Times reported the following day that 'Mr Buckley said he was not informed (about the losses) until 9.30pm on Monday (4 February) when he was telephoned by the boss of the American operation.'

In other words, he was in ignorance of anything untoward until two days before. There was nothing in that briefing about being concerned with trading 10 months previously. Why did he not remember such a seminal event, or if he did remember, deem it not relevant to a discussion of the subsequent disaster?

It is possible that both comments are true. It is also possible that Buckley's investigation failed to find anything. Equally, he may have had a genuine lapse of memory.

Were AIB a British bank under the auspices of the Financial Services Authority, Buckley would be in deep trouble. After the collapse of Barings the authorities were shocked to find they had no charge to pin on the chief executive Andrew Tuckey and resolved thereafter to bridge the 'Tuckey Gap' with the doctrine of senior management responsibility. This holds that if something goes wrong with the accounting and control systems in a financial organisation, the chief executive is at fault. Buckley must be relieved that they still view things differently in Dublin.

Perhaps the time lapse between last May when he was suspicious enough to order an investigation and this February when he became aware for the first time of the losses will become known as the 'Buckley Gap'.

Treasury's losing policy

AFTER the fuss over Lakshmi Mittal, his contributions to the Labour Party and the Prime Minister's support for his plan to buy a Romanian steel plant, a well-informed report said on Monday that the Treasury was planning to close the loophole by which he and people like him live in this country but avoid paying tax on most of their overseas income. It is just the kind of daft thing it might do.

The argument for giving favoured tax status to foreigners is that the benefits from the business they bring to this country far outweigh the loss of tax on their income.

Most of the Greek shipping industry is run out of London and many of its leading lights live here. They would probably move elsewhere and take their business with them if the tax rules were changed. Realisation of this caused Labour to back off when it first came to power.

A few years ago the art market in London warned that the imposition of taxes would drive the business offshore and threaten London's position as the world's leading art market. Government took no notice and the market has migrated to New York.

A change in our tax rules would not bring more money into the Exchequer. If the wealthy foreign families closely identified with shipping and other industries left and took their business with them, it would mean more unemployment here and even lower tax revenues - a net loss to the country. But if the leaks are to be believed, this is now Treasury policy. Our competitors must think we are mad.

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