Clayton Hirst: The windfall tax on oil companies should be blown out of the sky

Here we go again. An oil company announces a decent set of profits and there is talk of a one-off windfall tax on the industry. It's been suggested before, but this time there are signs that it may be an idea the Chancellor is seriously considering. If so, it sends a deeply worrying signal to British business, not just to oil firms.

BP, the country's largest company, should be the pride of Britain. Well-run and a big player on the international stage, it is hardly surprising that its profits should be "bumper" – £5.58bn for the first half of the year.

The opponents of BP, which includes the Dump the Pump brigade, prefer to use the more racy £1.3m profit-an-hour figure. The number smacks of greed and profiteering, especially when it is combined with claims that the UK has the highest petrol prices in Europe.

This is nonsense. First let's deal with the facts. Yes, the UK does have high petrol prices, and rightly so. This is mainly due to the high duty the Treasury levies on a litre of petrol. If the Government is serious about encouraging people to drive less (an aim that sadly seems to have been quietly dropped by Labour) then this is the right thing to do.

BP has made whopping profits, but this has very little bearing on the price of petrol at the pump. BP profits, for the record, were due to an increase in the wholesale price of crude oil and BP upping its production by 2 per cent.

A windfall tax would have a potentially devastating effect on British business confidence. Just think of the message it would send to business leaders. Gordon Brown may well as say to companies: "If you are British, successful, well-managed and efficient, we will slap a great walloping tax bill on you, willy-nilly." (He also would probably use the word "prudent" a couple of times and widen his lips in an attempt to give one of his strained smiles.)

But take the argument one step further: City fund managers, whose job it is to pick cash-generative, well-run businesses, would be scared off from the oil sector, hitting not only the share price of the companies but the pension funds that invest in them. While it may be popular with the loony petrol protesters, a windfall tax would be a very retrograde step indeed.

Florida can't kick the habit

From one dirty old-economy sector to another – cigarette companies – in a tale which proves that when governments aren't driven by votes, they are ruled by greed. All good conspiratorial stuff.

I don't smoke. But the "you smoke, I choke" attitude in much of America always seems a contradiction in what is supposed to be a liberal country.

In Florida, however, things are different. Before the election, the state was one of the biggest scourges of the tobacco industry. It provided the stage for a group of cancer victims to sue the country's biggest tobacco companies.

Before the case, the state's pension funds sold all their holdings in tobacco stocks and the class action caused the share price of those shares to plummet worldwide.

After the election, and with a new Republican governor running the show, the state decided it could no longer stand the cold turkey, and bought tobacco shares again at a lower price than that at which it had sold out – so making a tidy profit.

All this boils down to greed. Companies such as Philip Morris and RJ Reynolds are fantastically defensive stocks to hold. While IT and telecoms companies are dropping like flies, the good old-fashioned tobacco firms just keep trundling on, selling the weed to new and emerging markets.

Florida's state pension funds couldn't ignore this. Out of the window went its high morals for the sake of the dollar.

When it comes down to it, the average American politician knows that the average American citizen would rather have a few extra dollars on retirement than stick to his or her trumpeted beliefs.

News blackout at ITN

Touchy! ITN executives are getting more and more stroppy about commenting on its bid to remain ITV's sole news supplier. An innocent call to the company last week about viewing figures resulted in a short interrogation from a press officer. Why did we want the information and how would it be used, we were asked (see The Loop column on page 8 for the answer).

Under threat from the Channel 3 News bid – whose members include BSkyB and Bloomberg – ITN is understood to have lopped around £10m off its £46m fee. So, if ITN wins, where will the £10m savings come from? ITN won't say. It won't talk figures, revenues or strategy.

But here's a guess: its internet and 24-hour channel are certainly fancy, but not making much money.

clayton.hirst@independent.co.uk