Thursday, 4 December 2014

Looting and pillaging with the Tories

In September, Ed Miliband announced his intention of looting tobacco companies with a windfall tax, a policy that I described at the time as being the essence of arbitrary and capricious government. Tax companies, by all means, and tax products too, but you can't just point at things and tax them (© Myleene Klass). Medieval kings sometimes seized the loot of anyone who seemed to be doing alright for themselves, but that's not how we do things in advanced democracies. And yet it is increasingly common for politicians to decide that they'll grant themselves a windfall by grabbing cash and assets from anyone who is unpopular - bankers, energy companies, land owners, people who have a bit of wealth - and now tobacco companies.

John Kay wrote a nice article about this worrisome trend ('the rule of the vigilante') in the Financial Times recently:

There are good reasons for state action in areas of business misconduct. Financial abuses should be punished. Tax avoidance by multinational companies is at unacceptable levels. Tobacco companies behaved badly; their products have caused great social damage.

But announcing ad hoc measures against companies in the news is the wrong way to deal with these issues. The amounts extracted appear arbitrary. The random incidence of penalties and the distant relationship between the sums obtained from the corporation and the individuals responsible means that the deterrent effect on future conduct is weak. The process increasingly resembles an armed gang roaming the streets, picking on unpopular individuals and extorting money, with strangers particularly liable to assault. The gang justifies its bullying by handing some of the proceeds to needy friends.

The tobacco smash and grab is a classic Miliband policy in that it targets an unpopular but lucrative industry, is said to be justified - as all policies must be in this day and age - by the 'need' for more NHS funding, and it doesn't worry about unintended consequences. There was no indication that the Conservative party saw it as anything other than a populist gimmick and yet, tucked away on page 62 of the Autumn Statement - but never mentioned in George Osborne's fifty minute speech - are these two sentences:

Smoking imposes costs on society, and the government believes it is therefore fair to ask the tobacco industry to make a greater contribution. The government will shortly launch a consultation on introducing a levy on tobacco manufacturers and importers.

Oh great, yet another public consultation for the state-funded anti-smoking leviathan to bombard with misinformation. Speaking of which, it's no surprise to find that those perennial tax-spongers at ASH are behind the whole scheme:

Deborah Arnott, chief executive of the health charity Ash, said: “For months, Ash has been calling on all the main political parties to include a pledge for a levy on the tobacco industry in their party manifestos.

“It’s almost like Christmas come early to have the government launch a consultation on how to make the tobacco industry pay for the damage it does.”

She seems to be as surprised as anyone to find her latest brainwave being taken seriously by the government. And so she should be. This is Labour territory in every way, just as plain packaging was Labour territory (and even they rejected that). The very language used in the Autumn Statement sounds like something from the Fabians ("it is therefore fair to ask the tobacco industry to make a greater contribution." Asking or forcing? What's "fair" about it when the government already makes vastly more money from the sale of cigarettes than 'Big Tobacco' does. The whole industry is essentially a privatised tax collection agency. And don't get me started on the implicit claim that smoking's costs exceed the £12 billion that is extracted from smokers every year.)

What are the Tories playing at? Have they not realised that once you set up a public consultation, single-issue campaigners make it very difficult for you not to go ahead, regardless of the result? Having got bogged down in the plain packaging issue - which they could have brushed aside in 2010 without anybody even noticing - why on Earth are they stirring up another hornet's nest?

The obvious answer is money, but whatever else you might say about BAT and Imperial Tobacco, they are based in Britain and pay their taxes here - not something you can say about every large corporation. Considering how many ridiculous and draconian laws have been enacted in the name of tobakko kontrol in recent years it's a wonder that they haven't moved abroad already. This act of daylight robbery could well be enough to tempt them to Bermuda or Switzerland. It would certainly be enough for me.

And then there is the reference to looting 'importers' as well as manufacturers. Even Miliband did not, I think, suggest this. How will that work? What other statist policies are the Tories going to borrow from Labour before gold plating and claiming as their own?

You can see why Osbourne didn't mention any of this in his speech. Aside from it being unpopular with many of his free-market colleagues, the Labour benches would have howled with laughter when they heard the Chancellor blatantly stealing a policy which they announced less than three months ago.

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