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Port Talbot, Panama and Parents. Yet again it appears that truth seems stranger than fiction. If you had put these somewhat varied tales into a novel, you probably would have been told by the publisher to go and rewrite it into something more credible. As for the Prime Minister, whatever your political views, I think most of us would be feeling somewhat pressured if we had to go through all three of them.
Political View 1 – The steel issues around Port Talbot (and the other areas around the UK) have been a storm waiting to break for more than a year now. The problems over the costs of producing base steel have been known about for years, and so the sudden crisis in the past few weeks should not have come as a surprise to either the politicians or the companies themselves. Part of this has been caused by oversupply, not just from China, but also through our own inefficiencies due to our inability to provide power in terms of capacity and (low) cost.
Sadly, the media generally lump all our steel manufacturing into a single group and ignore our very significant capabilities in specialised steel and other metal manufacturing and development. There are many of these steel companies that still operate very successfully and profitably (especially in Sheffield).
However, what the country has to decide is whether strategically we need to have a steel production capability or not, and not just to have the recycling of scrap. If we do then we have to treat the rump of the Tata operations as a manufacturing version of RBS. The idea being that we can invest in it to see it through the current rough patch of poor pricing and overcapacity and sell it back into the private sector later.
Equally, we have to accept that areas like Scunthorpe and Port Talbot are not going to able to continue in the same way. Single industry focused areas need to diversify, but that is easier said than done. Nonetheless I would like to see considerable effort being put into regenerating those areas, just as we saw happen with Consett and Corby. Merely pouring in huge sums of redundancy funds is not the answer. That rarely solves the underlying issues. No, we should look to foster new business opportunities in these areas, investing in new technology where we are still seeing significant opportunities for growth and retraining.
Political View 2 – Panama. The Prime Minister probably hadn’t expected his Panamanian connections to be brought to the fore again. Last time it was washed over and ignored but not this time. Politicians should in my view apply the ‘sniff’ test to their financial affairs – that is to say – what does your nose tell you? Frankly, any politician having to admit to offshore accounts should consider their sense of smell! Anyone with a connection to Panama should be hearing a warning claxon and suffering from a nose bleed. After all, what does the man in the street think? The answer is that you must have something to hide. Whether this is true or not, and in Mr. Cameron’s case everything was quite legitimate and legal, by the time the populist press has dealt with you then any saving you may have made will have been cancelled out by the negative media commentary.
As for Panama itself, well it will need to open itself up to full regulation and complete transparency if it is to try and regain any of its reputation as a reliable financial centre. The only way that this is likely to be achieved will be through international action against such centres, for example withholding any international support until they start to fall in line with the rest of the world’s financial hubs.
Political View 3 – Parents. Well you don’t get any choice when it comes to them and so we have to deal with them each in our own way. The point coming out of the Prime Minister’s issues relating to his family’s financial affairs is that good estate planning should be recognised for what it is – legal, legitimate and only a prudent decision taken to protect the family assets. The frankly childish comments by certain papers about his mother’s transfers of fund
only serve to underline the levels of ignorance of many journalists, as well as opposition politicians.
Inheritance tax should be moved away from the mass-market middle class as an easy earner for the government. The tax exemptions around private property are to rise soon, but nonetheless it will be the new entrepreneurs who may well find themselves being penalised for their success, especially when it comes to passing it on. Time here then for some more radical common sense. We want such families to reinvest in both existing UK businesses and start-ups. It would be far more beneficial to allow people to pass on assets as new investments rather than just provide tax to the government or as cash to the beneficiaries. We would then move inheritance away from being a negative reducer of wealth and transform it into an affluence generator and a source of more investment for our economy.