Business View: The guillotine, the wash-up and the double-dip danger

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The Independent Online

Let's assume there will be an election on 5 May (I know it's a crazy idea, but humour me). This means Tony Blair will go to the Queen early next week - no later than Tuesday 5 April - and Parliament will be dissolved. That week is then used for what is known as a "wash-up", where all outstanding vital legislation is "aggressively timetabled". In other words, no debate - Madame La Guillotine working overtime.

Let's assume there will be an election on 5 May (I know it's a crazy idea, but humour me). This means Tony Blair will go to the Queen early next week - no later than Tuesday 5 April - and Parliament will be dissolved. That week is then used for what is known as a "wash-up", where all outstanding vital legislation is "aggressively timetabled". In other words, no debate - Madame La Guillotine working overtime.

The most important thing that will be washed up is the Finance Bill - a 482-page document, published last Thursday, which puts into force the provisions of the Chancellor's Budget 11 days ago. This hefty piece of legislation will be railroaded through Parliament in little more than a day.

As the Budget was a pretty neutral affair, a lot of what will shoot through Westminster won't be too contentious. But one particular wrinkle will be. That is Chapter 10, entitled "Avoidance involving tax arbitrage" (pages 81 to 88 of the first volume).

As we pointed out last week, this provision is getting business pretty worried. Although the Inland Revenue claims this is a targeted clause, with the express aim of stopping a couple of dozen already identified tax dodges used by multinationals, it actually goes a lot further. It says that if you have received a tax deduction abroad, you cannot claim the same deduction in the UK.

Fair enough, you might say: we don't want companies to avoid millions of quid in tax.

Leaving aside the issue of other countries allowing double-dipping, what the Revenue is saying is that you can't claim a deduction first abroad and then in the UK. But if you are claiming in the UK, and you then go and do the same abroad, it will not force you to pay the tax in the UK. In other words, all double-dipping is not equal.

Confused? You're not the only one. And, as no minister will be called upon to define the distinction in Parliament, and there will be no clause to say in legal terms what the Revenue is telling tax experts, how do we know it will not change tack and go after all double-dipping schemes?

Business does not like paying extra tax. But what it likes less is not knowing how much tax it has to pay. This wash-up is in danger of becoming a cock-up.

Right guy, wrong time

If the key to good comedy is timing, Sir David Clementi better not give up the day job. Then again, maybe the Prudential chairman was using the element of surprise when he decided to ditch his beleaguered chief executive and bring in the guy who should have been appointed two years ago.

Jonathan Bloomer, who was handed his P45 on Wednesday night, might well have believed he was a survivor. Taunted when his US expansion fell apart in 2001, slated when he failed to sell internet bank Egg last summer, rubbished when he launched a £1bn rights issue, he must have thought the worst was over. After all, he was able to point to good new numbers coming out of all three legs of the Prudential stool in the days before his dismissal, and he had just returned from a management conference in Hong Kong.

Sir David told me that the nomination committee had reviewed possible successors to Mr Bloomer at the start of the year, placing Mark Tucker at the top of the list. Then last weekend Sir David called the former boss of the Pru's Asian business, who by then was finance director of HBOS, and asked him if he was interested in returning to the Pru as chief executive. Sir David got first the committee and then the board to agree to the change. By Wednesday night the coup was completed.

But how come Sir David did not feel Mr Tucker would be a better long term bet than Mr Bloomer when Mr Tucker quit the Pru in 2003? If the board fully supported the decision to cut the dividend, to not sell Egg last year and to launch the rights issue, how come Mr Bloomer is taking the blame for these unpopular actions? And, having seen off a shareholder revolt last year, why cave in now and give the angry investors what they want when they no longer seem so bothered about it?

Mr Tucker seems a good bloke. But he better be the right bloke. Because what the Pru now needs is a strong hand at the tiller - and one that can steer it for a good few years.

j.nisse@independent.co.uk

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