Will there ever be a better moment to signal the end of the wretched Triple Lock? This crowd-pleaser for geriatrics guarantees that the UK’s old-age pension will rise each year by the greatest of the Consumer Prices Index, average earnings, or 2.5 per cent. Introduced in 2010, it got the rickety coalition government round the next political corner and has cranked up the relative value of the payment no end. Now, though, there’s a roadblock ahead, as wages bounce back following the lockdown. The figure for the relevant annual rise in average earnings could be as high as 8 per cent as employees come off furlough and employers bid up for staff.

That would not only be ruinous for the public finances – adding about £5bn a year to spending on top of a 2.5 per cent increase – it would be a statistical freak following last year’s plunge in wages. More to the point, it looks like a grossly unfair windfall at the expense of the rest of the population who were forced to make personal sacrifices to try and protect the people who are getting the money. A more cynical calculation might conclude that we are still a long way off the next election, and even without Jeremy Corbyn, old (conservative) voters are unlikely to defect to Labour in large enough numbers to upset the sums.

If the political cost of a clear breach of this manifesto commitment is still considered too great, then future payments could be frozen until the CPI catches up with this year’s jump in earnings. If the pessimists are right, this might not take very long, as inflationary pressures are clear to see, from building materials and commodities to second-hand cars and electronic components. Pubs, restaurants, hairdressers and businesses which have had to borrow to stay alive will raise prices, otherwise they are simply working for their creditors. The labour shortage will also drive up their costs. The history of UK inflation shows that it is slow to get going, but once started requires crisis measures to stop.

So has Rishi Sunak the confidence and clout to end the iniquitous lock? Even arch-inquisitor Andrew Neil was unable to force a definitive answer from him on GB News this week, but breaking it would reassure those of us who fear that, working for a prime minister who has no idea about finance, the chancellor is powerless to bring public spending back to stability. An acid test, if you like.

Just don’t ask

Dangerous things, referenda (we know, we know). A month ago, polls showed that voters in Switzerland were 60 per cent in favour of approving the changes to their lifestyle needed to get to carbon neutrality by 2050. Nearly all the newspapers, commentators, politicians and the middle classes were on board. After all, they said, without action to curb global warming, the Alps would have no snow on them by then. This week the vote took place, and 51.6 per cent voted No.

It was the Swiss equivalent of the Brexit vote, and will cause as much trouble, so what happened? The few dissidents pointed out just how painful the move would be, especially for those outside the major cities. There would be no more oil or gas home heating, motor fuel and car purchase costs would rise punitively, flying would be restricted and expensive, and a ruinous carbon tax would be applied. The pain would fall on those least able to bear it.

Nothing that was being proposed is much different from what the citizens of the UK are being asked to bear, in our merry dance to the energy poverty that cutting back hydrocarbons entails. The difference is that the UK government dare not spell out the true costs, and it double-dare not ask us in a referendum. The Treasury is working on a document to give us some idea of the necessary extent of our sacrifice on the green altar, but no realistic assessment will ever see the light of day. It’s too painful to publish.

How very Wise

Pricing companies coming to the stock market for the first time is an art dressed up as science. The bankers do due diligence (or say they do) prepare detailed reports, go round big investors to assess the appetite for the stock, and collect fees, but this only disguises the fact that they often have hardly a clue. Too many recent flotations have left the sponsors looking silly, either because they were far too optimistic, (Deliveroo) or because their estimate of demand was hopelessly inadequate (Darktrace).

One answer is a direct listing, where the company is not raising money. It produces the numbers and then invites interested buyers to find a price at which some existing shareholders will sell. In the old days of the Stock Exchange it used to be called an introduction, and was rather frowned upon, particularly by those hoping for a cut of the action on launching a new issue. Now the irritatingly-named Wise, which grew up with the perfectly serviceable name of TransferWise, is trying the direct listing route.

Wise is no market minnow. Its owners expect it to be worth as much as £6bn, or a mere 55 times last year’s earnings. At that value it hardly looks a snip until you look into the price gouging on an epic scale that the banks practice on retail international money transfers. Not only do they charge commission, but there’s usually an uncompetitive exchange rate to start with. Wise specialises in these transfers. It has $75m of this $2tn market which is overdue for disruption. It may be that this upstart will force better behaviour onto the banks. Unless and until it does, it will warrant the eye-watering valuation that fashionable tech companies find themselves awarded.

So, farewell then, Dungeness B. Its French owners finally threw in the nuclear towel this week, admitting that after spending £200m finding out, the power station is just too expensive to fix. Thus another miserable chapter in the story of Britain ‘s adventure in nuclear generation draws to a close, at least as far as output is concerned. The workforce will be engaged for years trying to dismantle it safely.

The Advanced Gas-Cooled reactor (AGR) at Dungeness was hailed as a British triumph 55 years ago when the Minister of Power (sic) Fred Lee, told parliament “we have hit the jackpot this time.” It is only 35 years since the subsequent financial disaster was chronicled brilliantly by Walter Patterson in a pamphlet called “Going critical.” Readers today would not know whether to laugh or cry, as the latest version of a world-beating design rises like an incubus on the Somerset coast.

It may be possible to build a nuclear power station to time and at an affordable cost, but neither the British nor the French (at Hinkley Point) have yet worked out how to do it. This matters quite a lot. Covering the English countryside and all possible offshore locations with windmills will not get the UK even close to carbon neutrality by 2050. Without oil and gas, only nuclear power can possibly fuel the Brave New Green World.

The problem is as much one of perception as cost. Nuclear power is astonishingly safe. Even when the Fukushima plant in Japan was overwhelmed by the tsunami, only three people suffered high levels of radiation. Yet the regulators in the UK keep raising the safety bar, adding to the cost and complexity of plant design. At present, rising safety costs are outpacing design improvements.

As usual, the UK is tempted to put public money into fanciful solutions. The latest grand plan is for mini-nukes (coming to a site near you) perhaps building on Rolls-Royce’s (experience with nuclear-powered submarines. Rolls’ new chairman is confronted with a balance sheet choked with debt and a business case in vendor finance that Covid has destroyed. She might well conclude that playing with terrestrial nukes is a gamble too far.

Whether or not the minis can be made to work, the legal obligations self-imposed by the Climate Change Act 2008 are practically impossible to meet, almost regardless of how much money is thrown at fossil-fuel alternatives. If wishing could make it so, the government might just as well legislate for continuous sunshine in May – starting in 2050.

Gasping for a fag

Shares in BATS got a little cheaper this week, even though the price barely twitched. With the sort of upbeat statement that would have reassured shareholders in, say, Unilever, CEO Jack Bowles went on about “creating brands of the future and sustainable value for all our stakeholders” before concluding: “The momentum across the business is strong, and I am excited about the future for BAT.”

The missing word in his statement was “tobacco”. This missing word is why the shares are getting steadily cheaper. Tobacco is a truly resilient business, with BAT’s sales expected to rise by 5 per cent this year, while the yield at £28.50 a share on the last four quarterly dividends is 7.8 per cent. The next payments are not expected to go down.

The problem, of course, is that fund managers everywhere – aside from the trackers, who have a convenient excuse – find that it’s just too much trouble to explain why they should hold tobacco shares. It’s so much easier to cross the industry off the list, or if the terrible weed is there in a freshly-managed portfolio, to simply dump the stock. This approach has allowed a polystyrene cup baron called Kenneth Dart to build up a stake of 6.6 per cent without anyone noticing.

We don’t know what he expects, since he has not talked publicly to the press since 1993, but perhaps he has noticed a remarkable market anomaly. The fashion-conscious fund manager may eschew the shares, but the bond market is still smoking. Last September, for example, BAT raised $1bn for 30 years, paying 3.984 per cent. As the analysts at Ash Park group pointed out recently, since us shareholders seem so ungrateful for the dividends, why not spend the same money buying in the shares instead? At today’s price, that would buy the entire company in nine years. Long before then, Mr Dart might find himself the owner of one of the finest cash-generating businesses on the planet.

Are you incandescent or just cross?

The UK government is fiddling with the light switch again. This time, it’s off with those flickering compact fluorescent lights (CFL) and time to turn on the light emitting diodes (LED). Governments of various hues have form interfering in the light bulb business. In what was spun as a way to save electricity and thus the planet, the old incandescent bulbs were outlawed from 2007 in favour of the slow to light, twisted strip light that is the CFL. Never mind that the old ones cost pennies apiece, while the new ones cost pounds, chancellor Gordon Brown could polish his greenery.

This little triumph has cost consumers perhaps £2.75bn, and it turns out that the money has been entirely wasted. LEDs were about to displace the old bulbs anyway, while the hated CFLs never lasted as long as the makers claimed. Today, LEDs have two-thirds of the market, and would have displaced everything else as the technology advanced. Virtue-signalling at maximum luminescence, DEFRA is now banning halogen bulbs and the CFLs it forced us to buy last time, trying to take credit for something that is happening anyway. Easier than dealing with real problems, of course.

It is, as I know from personal experience, no fun being a shareholder in Royal Dutch Shell. The shares are cheaper today than they were at the start of the millennium. Still, there’s always the dividend. Oh, hang on. The board cut that for the first time in half a century in March last year, betraying all the signs of collective panic by the directors. This year they started repairing some of the damage, raising it at a rate which will take a mere 29 years to reach the previous level.

That self-inflicted wound was bad enough, but last week things got a good deal worse. A judge in charge of a lower court in The Netherlands decided that she knew better than her own government and commanded Shell to cut its emissions of carbon dioxide by 45 per cent by 2030 from the 2019 levels. Shell’s goal of zero by 2050 – an aspiration, really – was considered inadequate. She did not explain why 45 per cent is a magic figure, or how she could make up new law on the hoof. Apparently Shell has a “duty of care” for the environment, whatever that means.

The company is appealing, of course, to overturn the idea that any judge can rule that any company’s plans do not comply with her idea of a better world, regardless of what the law actually says. Given the way the windmills are turning, it seems perfectly possible that the superior courts in The Netherlands will endorse her ruling. After all, just think of the warm, green glow the judges could give themselves by confirming it.

Shell would have no choice but to comply. Or rather, it would have no choice but to comply in The Netherlands. The question of whether to damage the interests of the shareholders more widely is trickier. Shell is an Anglo-Dutch company, and the last time the Dutch tried to dictate terms to a similarly structured company, the whole thing blew up in their faces. The attempt to ambush the Unilever shareholders into going to Rotterdam (sic) ended with it decamping to become a unified UK-based company. The process of moving to London, the obvious HQ for both companies, turned out to be quite straightforward. Shell should study the playbook.

That is not all the board should study. Ben Van Beurden, the (Dutch) CEO has signalled his departure. He is unlikely to be much mourned by the shareholders. BG Group, the key acquisition of his reign, was designed, he told us at the time, to safeguard the dividend. That sounds like a cruel joke today, as the company struggles with the debt beurden (sorry) taken on to pay for the deal. He should have gone last year when the failure of his strategy became apparent with the dividend cut.

Andrew Mackenzie took over as chairman in March, so he has a one-time opportunity to reshape the board and jolt the executives out of their complacency. He promised to “profitably accelerate Shell’s transition into a net-zero emissions energy business”. The key words here are “profitably” and “net-zero”. The long-suffering Shell shareholders might look at the share price and conclude that the two goals are mutually exclusive.

Amigoing down the drain

Amigo Holdings, the company tells us, is “a provider of guarantor lending services.” It is also on the brink of insolvency, for which the rest of us should be profoundly grateful. Guarantor lending is the polite description of a business which lends to you because some creditworthy friend or relation will step in if you fail to keep up the payments, which accrue interest at 50 per cent APR. The scope for moral blackmail is plain.

Yet Amigo was valued by the market at £1bn when it came to market at 296p less than three years ago. The share price is now twitching around 9p, as the company staggers under the weight of claims for compensation from borrowers. Their claims are effectively “You shouldn’t have let me borrow the money” mixed with “I didn’t realise that I had to pay up if my mate didn’t”.

Many are driven by the almost equally odious claims managers who take a cut of the compensation. As consumer protection is progressive, with ever more rights and fewer obligations, these managers are having a wonderful time. The Financial Conduct Authority is leading the charge, most recently opposing Amigo’s plan to cap compensation payments.

The Amigo case has distracted attention from the underlying problem of what is delicately referred to as sub-prime credit. The poor, or those with poor credit records, sometimes need to borrow and need an alternative to advances from unsympathetic men with baseball bats. Some legitimate players in this tricky industry are convinced that the FCA has it in for them, lowering the bar for compensation and encouraging the ambulance-chasers. None of us would mourn the passing of Amigo, but squeezing out the law-abiding players is hardly in the interests of those who the banks won’t touch.

Now there’s an idea…

Do not confuse Scottish Investment Trust with Scottish Mortgage Investment Trust, although the long-suffering shareholders in the former must wish they had. Scottish Investment has been such a miserable underperformer for so long that even the board has noticed. The in-house managers were determined not to follow the crowd, but unfortunately they have picked the wrong stocks for the £700m at their disposal, and the game is now up. So the board is inviting proposals from outsiders which are “designed to deliver, over the longer term, above index returns through a diversified global portfolio of attractively valued companies with good earnings prospects and sustainable dividend growth.” A brilliant idea. Why did nobody think of it before?

If you have not heard of Engine No1, you soon will, It’s not Thomas the Tank Engine, but a somewhat opaque group which has inflicted structural damage on ExxonMobil, once the world’s most valuable company. Engine’s proposals at the annual meeting this week may have looked like tilting at windmills, with its $50m stake in a $500bn company, but it spent over $30m soliciting support, and despite Exxon matching that, the company lost.

The dissidents have won dramatic board changes to bounce an oil company into cease looking for oil. Exxon’s board might have thought it could stall the Engine, but it has been blind-sided by an unintended consequence of the rise of tracker funds. Three of them hold a fifth of Exxon shares between them, while other big pension funds and the UK’s Legal & General, running before the wind, are sympathetic to greenery.

There is an interesting twist here. The managers of trackers couldn’t care less about the performance of individual shares, but actual shareholders care greatly, and oil shares have been lousy investments for a decade. As a disappointing part of your active portfolio, you might think some of the blame should fall on the extremely well-paid directors, and that a good kick up the greenery is just what’s needed.

Trackers are the extreme example of the rotten core of fund management – managers are rewarded by the quantity of money in the pot, not how well they do with it. These (also well-paid) executives have no incentive to fight the green tide. Rather, they hope to pick up a few billions more to manage from starry-eyed investors by displaying their commitment to “fighting the climate emergency”.

The pension funds may have a longer horizon, but by the time the shortfall from lousy investment decisions impact their funds’ solvency, today’s managers will be long gone. If they can be tracked down in their comfortable retirement, they can always point to this week’s most bizarre document, the Damascene conversion of the International Energy Agency. From having been a cheerleader for hydrocarbons, it has suddenly decided that the game is up. Apparently, oil is yesterday’s fuel, the price will collapse as we embrace the brave new green world, and energy companies must adapt or die.

The IEA has given itself a cop-out by predicting one last hurrah for the oil price, as short-term demand exceeds falling supply. Predicting the oil price has made every expert look foolish over the years, and for all its many sums and handsome charts, it’s unlikely that the IEA is immune. In the Daily Telegraph Ambrose Evans-Pritchard has written a splendidly satirical piece, maintaining that “slashing CO2 emissions and switching to renewable energy is not a ‘cost’ or a constraint on rising affluence: it lifts global GDP growth by 0.4pc a year over the course of this decade. World output is 4pc bigger in real terms by 2030.”

This modern variant on Keynes’ suggestion for creating employment by having one gang dig holes and another fill them in shows how far from reality the green hysteria has taken us. As no politician dare admit, trying to get the UK to net zero will involve a serious cut in living standards, particularly for the poorest in society, and make no measurable difference to the level of CO2 in the atmosphere. Perhaps before then we will have worked out how to live on a warmer planet.

A really bad idea from the OECD

In the Chateau de Muette in Paris, the well-paid employees of the Organisation for Economic Co-operation and Development had a brilliant idea. Why don’t the advanced nations of the world agree a minimum rate of corporation tax? At a stroke, the scope for companies to play off one country against another would be dramatically cut, allowing the charms of each to be properly considered. As a “first step” towards a uniform tax regime across the G7 countries, we would be on the road to raising an extra $100bn for states to spend. Joe Biden thinks it a great idea. What’s not to like?

Well, just about everything. Setting the minimum would be relatively easy at present, with most rates clustered around 25 per cent (the UK is on the way there), but $100bn is quickly spent by governments, who would then be casting about for more; an international proposal to raise it would be hard to resist. Besides, the OECD’s suggestion, despite being a decade in the making, fails to address the real problem.

The tech giants, which currently pay very little tax, would continue to book profits in places like Puerto Rico that would either laugh at the idea of an imposed tax rate, or demand permanent subsidies from elsewhere to replace their lost revenue. Caribbean countries have little offer businesses but sun, sea and low tax rates. Switzerland and Singapore would apply their own rules, as usual. Ireland and Luxembourg might be bullied into charging more, if the European unioncrats could ever agree for long enough to force them.

The UK Treasury has resisted joining in the tax’em fun. Amounts paid by the likes of Google or Amazon in the UK are derisory, and a uniform G7 rate would not necessarily raise any more. Holding out against any Biden proposals until that changes looks like a sensible strategy. No other country has the power to take the techies on, and it is highly doubtful whether the US President can get anything controversial through Congress.

Of course, as the OECD boffins do not say, they are unfamiliar with the idea of taxation themselves. A hangover from the age of the post-war Marshall Plan, the idea of an institute to study economics was a novelty. They are now ten a penny, and the OECD has long outlived its usefulness, except to the employees. As the site points out: “Salaries are exempt from income tax in most member countries.”

Rail news

A sense of proportion has never been the Department for Transport’s strong suit. This week DaFT proudly announced a suspiciously-precise £317m upgrade for railway lines in the north of England. The spending is long overdue to ease the misery imposed on travellers struggling across the Pennines, if it ever happens. While we wait, here is a pub quiz question: How many miles of HS2 does £317m buy? The answer is ONE.

Car rental is a pretty cut-throat business. Anyone with a car can play, but ask for a brand name, and the answer is likely to be either Avis or Hertz, with their global reach and the belief that they will still be in business when you bring the car back. Perhaps that is why last May, when Hertz filed for Chapter II bankruptcy, lots of small investors bought the shares for little more than $2 apiece.

They know nothing about investing, scoffed the experts. They are wasting their money, just because they had heard of the company. Then a funny thing happened. The Hertz failure, it soon became apparent, was like one of those claims following a car crash that wasn’t your fault. When the pandemic panic struck in March last year, the value of second-hand cars plummeted. The financially-stretched company had borrowed more to buy them, using their value as collateral. As that fell, the creditors demanded more collateral, which Hertz did not have. There was no choice but bankruptcy.

But almost immediately, car values started to recover along with the share price of this supposedly worthless company. Hertz discovered that it had unissued shares in its treasury, and asked the court whether they could issue them to the market. In a 4000 word judgement, while describing the shares as “worthless” the permission was granted. The prospectus for the sale said: “we expect that common stock holders would not receive a recovery through any plan”. The Financial Times decided: “The proposition is a fantastical one.” On the prospects of a return for the buyers, “impossibility is the word that springs to mind.”

Then the Securities & Exchange Commission stepped in and spoiled the fun. You can’t do this! You’re bust! Bankrupt companies can’t issue shares! SEC chairman Jay Clayton did not put it quite like that, instead telling CNBC that “We have let the company know that we have comments on their disclosure…in most [of these] cases they do not go forward until those comments are resolved.” The share issue was stopped.

It’s pleasing the way markets have of making fools of the experts, and as the financial crisis at Hertz passed, suddenly the business looked worth buying, and private equity wasps were round the jam jar. The winners of the auction value the business at $7.43bn, the shareholders get cash and warrants potentially worth $8 a share, and the price has rebounded to a very satisfactory $6.80. America being the land of lawyers and litigants, the next chapter after Chapter II is likely to be legal action against the board, for blundering into such a calamity in the first place.

Matt Levine, Bloomberg’s brilliant commentator, ate humble pie this week, although his original verdict was less dismissive than the FT’s. From the Pink’Un itself, now the impossible has happened, well, No FT, No Comment.

Just a Bit of a sell-off

One of the whackier free-market ideas espoused by the great F A Hayek was to tackle the idea that states should have a monopoly on issuing money. This offended his central belief that everything works better under the lash of competition, which drives innovation, keeps business (reasonably) honest and benefits the many rather than the few.

He was chided for this extension of his philosophy but now, in a funny sort of way, it seems to be coming to pass with the invention of the crypto coin. There are now said to be 9856 different versions of these things, with bitcoin being dominant (he wouldn’t like that either) as promoters have seen the chance to make what they themselves will doubtless still think of as a quick buck.

The earlier promoters of Bitcoin argued that it was both a store of value, freed from the government printing press, and a medium of exchange, two key features of a credible currency. It has not quite worked out like that. As both, Bitcoin’s value has swung violently. Even in the brief window when Elon Musk said he would take payments for Tesla cars in the coins, it was obvious that the price would be the number of coins that corresponded to the dollar price of the car, whatever that number was at the point of sale.

Now that a small cloud, no bigger than a man’s hand, marked inflation appears on the horizon, our confidence in paper money will be tested again, and monopoly governments will resort to the printing press if it seems the least painful option. It’s not hard to see why. Even inflation-wracked currencies are the most convenient medium of exchange, in ways that Bitcoin can never be, however mainstream it becomes. After all, we have had an alternative to fiat money for longer than fiat money has existed. It’s called gold.

She’s getting on with it, at least

The new broom at Aviva was busy doing more good work this week. Amanda Blanc is cleaning house “at pace” as she promised when she took over at the perennially underperforming insurance conglomerate. The latest move is to wind down its £366m UK Property Fund, which closed to redemptions as the pandemic struck, and has never reopened.

The virus trapped about £11bn in these property funds. Some have since re-opened, but many investors got a nasty surprise at the bid price. The Aviva fundholders will have to be patient. They should see 40 per cent of the current value of their investment back in July, but may have to wait for two years for the rest.

Meanwhile, the Financial Conduct Authority has launched a review of these wretched vehicles, which promise instant money back while investing in property, which as any fule kno, is a sticky business at the best of times, and can be unsaleable in a crisis. It would be tricky to ban their sale outright, as common sense suggests, but other solutions smack of square pegs in round holes.

Forcing sellers to wait locks them in to an out-of-date price, while keeping a slug of cash to cover redemptions will inevitably affect performance. Investment trusts are far more suitable for smaller investors determined to get into commercial property. Open-ended funds can close without warning, while the closed-ended trusts are always open – although you may not much like the price you are offered.

How much is Pascal Soriot worth? No, not how much has he in the bank, but how much would be a suitable reward for doing his job brilliantly well? Astra Zeneca, the company he heads, has saved thousands, perhaps millions, of lives with its Covid vaccine. With generous help from the UK taxpayer, it has produced a pharmaceutical miracle in record time. Yet this week some of the shareholders were revolting, voting against his pay packet. Talk about gratitude…

Mr Soriot would not be headed for the poor house, even if every shareholder had voted against the rem. com. proposals to add the odd couple of million to the maximum he could be paid, from £15.4m to £17.8m. It’s the principle of the thing, says the Investment Association, the fund managers’ trade body. There is a limit to the multiple of the CEO’s basic salary that is considered reasonable as a maximum bonus, and this is well past it. The members were urged to vote against the motion. Two of the IA’s larger, if less successful members, Aviva and StndrdlfAbrdn had declared their hands in opposition.

Others are not so sure. That exceptional performance justifies exceptional rewards has been a generally accepted principle in the top persons’ remuneration game. It has had the unintended consequence of producing galloping inflation in CEO salaries, as no self-respecting board wants a CEO who is not in the top quartile (by pay, and hence by ability). So it is not so much the size of the pay packet as the way the Astra directors bent the rules in his favour that has moved the faceless IA to action.

The board’s explanation is weak in the extreme, and it is hard not to conclude that the rem. com. members were simply dazzled by what Astra under Mr Soriot has achieved, and were scared of losing him to some US pharma group. This is corporately unhealthy, since it gives the CEO too much power. Making a $39bn acquisition as Astra did last December is no reason for a bonus. The work to justify that chunky investment starts now.

Even though 40 per cent of the Astra shareholders voted against his deal, the result does not oblige Mr Soriot to rush back from his Australian home and resume his duties in person. The votes are purely advisory. Yet they probably signal the beginning of the end for him at the helm. Having endured abuse from the European Union for not producing enough of a vaccine that some member states didn’t want to use, and now from the shareholders, it would be no surprise if he decided that enough was enough, and departed – taking his gleaming new bonuses with him, of course.

Full house

This being the annual meeting season, pay disputes with shareholders are everywhere. This week trades unions and the High Pay Centre have written to the big investors urging them to vote against salary packages where the gap between the CEO and the worst paid employee in a company is particularly egregious. Sadly, the writers have missed the point. Top investment managers have no motive to call for restraint, since many are beneficiaries themselves.

Still, while few disputes are on the scale of Mr Soriot’s, for sheer chutzpah the award to Mark Ridley, CEO at estate agents Savills, takes some beating. To get his maximum bonus, profits had to top £120m. The lockdown outturn was just £85m. Jolly bad luck on Mark, you might say. After all, Covid was hardly his fault, and we’re all in this together.

Except we’re not. The board awarded him £350,000, as a sort of “pluckiest loser”, claiming that the agency had increased its market share. And before you burst into tears, the committee deemed that he had made 90 per cent of his other targets, so he gets a further £500,000. No wonder the IA issued a rare “red top” notice urging a vote against. It made no difference. Four-fifths of the shares were voted in favour of the remuneration report.

Homeowners don’t do care

“Proposals on social care reform will be brought forward” said Her Maj this week, at that point probably wondering whether she had been handed a speech almost as old as she is by mistake. In a less respectful environment, Denis Skinner or his equivalent might have shouted: “No they won’t!”.

Our Dear Leader said he had a plan for social care reform when he came into office. It’s since become clear that he has no more idea of what to do than anyone else, but the mention in the Queen’s Speech has set the usual hares running. Nobody doubts that care of the elderly is both hopelessly inadequate and rapidly getting more costly, as more people live longer. Nobody doubts that any solution is ruinously expensive.

However, the mammoth in the ice block here is the politically toxic one of home ownership. Did you slave to pay off the mortgage over 25 years so you could pass on “the family home”? Or were you just lucky to have bought with borrowed money just as prices were taking off like never before? The truth is that the mortgage might have been a struggle to start with, but inflation quickly took the sting out of it, while the house just got more valuable. You did nothing.

The other truth is that the very notion of passing on the family home is a self-deceit. With a very few exceptions, the children don’t want to live in the house left to them by their parents. They don’t want to live together, and as soon as the last oldster dies, the property is sold and the proceeds divid up between the survivors.

There is no logical reason why an inherited house should be treated any differently from an inherited share portfolio or art collection, but then logic and housing policy are distant relations, here as in so many other ways. A rational approach, using the equity in the house to pay for the care of its lucky owners, would generate enough to allow the state to pick up those who had no wealth to contribute. It is also why the prime minister’s phantom plan warranted just nine words in the speech. Perhaps the nine words in the next speech might be: “Proposals on social care reform will be shelved (again)”.

Rupert and Samantha are rushed off their feet. The well-bred pair are the only ones wearing business suits, but as the estate agency game goes critical, they don’t mind. Their biggest problem right now is finding properties to sell to the queue of buyers with their noses pressed against the agency’s window. Leaflets boasting of achieved prices bung up letterboxes everywhere. It’s an old-fashioned British housing boom, and the whole industry is on a sugar high.

While it lasts, it feels wonderful. Just look at how much our house has earned in the last year! Weren’t we clever to have bought this place when we did? It’s the brave new world of WFH, with the occasional foray up to town replacing the scramble of the daily commute. Who knows, the weather might even start to improve soon. It is hardly surprising that the year of Covid has seen so many reassessing their futures, but government policy has essentially doubled the dose of sweeteners. Coming down from the high promises to be painful.

Prices have risen at a staggering rate, the fastest in 17 years, according to Nationwide, and have added almost 50 per cent since the low in 2012. Considering the rock-bottom interest rates, buying the average house on a mortgage has been an almost unbeatable investment. If you put up 20 per cent of the purchase price, which then rises by 50 per cent, you have made 3 1/2 times your money. Considering, also, that more voters own homes than don’t, the temptation for any government to keep the party going is almost irresistible.

This administration, like its predecessors, has not resisted temptation. Help to Buy has made house purchase less of a financial stretch, at least in the early years, the stamp duty holiday has encouraged ditherers to get on with it, and the banking rules allow lenders awash with cash to treat mortgages as almost risk-free advances. Meanwhile, the cynical cartel of housebuilders used the subsidies to plump up already fat profit margins. Their interest lies in sustaining shortage, and they have little incentive to try and meet demand.

Then there is the sharp rise in compliance costs, post-Grenfell. Tougher building regulations, rigorously enforced, bear most heavily on so-called “affordable” homes, which builders hate putting up anyway. The government pledge to build back better makes a good soundbite, until it translates into actual projects, like Eton School’s plan to build 3000 (three thousand) homes on a greenfield site on the edge of the South Downs National Park. Resistance in the parts of the country where prices are highest will be a brake on development, which is locally considered as build back worse.

The only thing that is sure to spoil the fun is higher interest rates, and the key here is inflation. Thanks to the perverse way we measure it, dearer house prices do not directly contribute, so while the price of cat food is included, the price of the cat’s home is effectively excluded.

If you want warning signs of rising prices, there are plenty. The chips that power today’s economies are in short supply, most commodity prices are at or near all-time peaks, the US president has just poured monetary petrol on the flames of a bubbling economy, and small businesses everywhere need to work for themselves, rather than just for the lenders which sustained them through the pandemic. If inflation does take hold, the only known cure is higher interest rates, which would wipe out those borrowers who have stretched to buy even at today’s near-zero rates.

Roger Bootle of Capital Economics is something of an inflation specialist, having predicted the “death of inflation” when it was still very much alive 25 years ago. His current (long) view is: “Over the coming decade, real house prices are going to struggle at best. And just as in the Nineties, they could easily fall.” In other words, if you must buy a property today, buy it to live in, not as an investment. But don’t tell Rupert or Samantha.

CEO in jail? No problem!

It’s unusual to pay your recently-departed CEO a bonus while he’s in jail, but then Indivior, and its former parent company Reckitt (Benckiser) are unusual companies. Reckitt is best known for Cilit Bang and Dettol, and for paying vast rewards to its top executives. Indivior is neck-deep in America’s opioid crisis, and it is Shaun Thaxter, its former CEO, who has $1.5m of future shares to look forward to when he comes out next week.

Reckitt has already paid $1.4bn to the US authorities for doing nothing wrong with its opioid treatment, five years after it demerged Indivior and started rowing briskly away from Suboxone, a drug used to treat the addiction. Indivior itself has paid a further $600m. Awkwardly for both companies, the US justice department called Suboxone a “powerful and addictive opioid”. Mr Thaxter pleaded guilty to allowing a state regulator to be fed false safety information, paid $600,000 and went to jail.

Perhaps to emphasise its pained air of innocence, Reckitt is pursuing a £1bn damages claim against the now-independent Indivior. As for Mr Thaxter, he is a long-term beneficiary of Reckitt’s generosity with its shareholders’ cash. In charge since 2009, he was paid $2.1m in 2019, and as a “good leaver” (of the company, not the prison) will receive shares worth another $1.5m. As one wag commented to the FT: “I thought running your empire from prison was a noble tradition in the drugs trade. Escobar, et al.”

Indivior shareholders expressed their disgust at the annual meeting yesterday, but there was still a big majority for giving Mr Thaxter the money. The share price has recently struggled back up to its level at the demerger in 2014, while it is worth noting how little Reckitt shareholders have benefitted from the gold poured down successive CEOs’ throats. Despite our increased consumption of Dettol in the lock down, the share price has gone nowhere in five years. As a recent analysis from the FT concluded: “Reckitt’s heritage (is) a brand hothouse that sells things people do not really need.” The same could be said of the executives’ pay packets.

As cynical miscarriages of justice go, it is hard to think of anything that quite matches up to the Post Office’s sustained persecution of thousands of its sub-postmasters, which was finally overcome this week. The war of attrition against these men and women was a howitzer against an army of pea-shooters, and was prosecuted in the face of the facts despite a devastating campaign over many years in Private Eye.

The affair has produced an unlikely hero to stand alongside the 550 wronged sub-postmasters, in the shape of an obscure legal firm called Therium. Please don’t call us ambulance chasers, we provide “litigation finance and arbitration funding”. They take on cases for little or no fee and a share of the proceeds if they win in court. This process is ferociously expensive. In an earlier hearing against the Post Office, the court awarded £58m, but only £12m filtered through to the claimants.

However, this whole saga is so shocking that that case, and the 39 whose convictions for theft were overturned this week, are likely to be only the start of the price the Post Office, and ultimately the taxpayer, is going to have to pay to restore some element of sanity to the ruined lives of those persecuted by the bosses of the business. The price will run into hundreds of millions of pounds.

Perhaps the most shocking aspect of the whole affair is the purblind refusal of those executives, under chairman Tim Parker and CEO Paula Vennells, to take a step back and ask themselves what on earth they thought they were doing. Vennells has since retired to the modern equivalent of a nunnery, but is unlikely to stay out of the limelight as the gruesome blame game gets going. She and her colleagues will need a better explanation than “we were following legal advice” to avoid retribution.

Which brings us back to Therium. Litigation financing is a growth business which allows a shot at justice for those who cannot afford it. However, it also contributes to the inflation which has taken legal action far beyond the reach of ordinary mortals in recent years. Meanwhile, the courts get ever more expensive and sclerotic. The practice has undoubtably been a force for good against the Post office, but not every case will see such a helpful co-incidence of justice and result.

Dart in for a quick fag

Kenneth Dart has not spoken to the media since 1993, reports the New York Times. Some of us would like to hear from him now that the reclusive billionaire investor from the Cayman Islands has been obliged to declare a stake in one of the UK’s biggest and least loved companies. Mr Dart’s Spring Mountain Investments owns 7 per cent of British American Tobacco, accumulated as socially-sensitive investors have been dumping the stock.

Dumping is le mot juste, since on any conventional measure of value, the shares are very cheap. This week’s annual meeting confirmed the previous guidance of another year of steady growth in the value of sales (on falling volume, as usual) and a similar rise in earnings. At £26.40 the yield is 8 per cent, even if the dividend is only maintained.

The reasons for this are well known. Tobacco kills, and the addiction is waning in the west. Governments everywhere are hostile, class-action law suits are never far away, and the US president is threatening to ban the menthol cigarettes which are a key BAT brand. Mr Dart will understand all this. He might also have read a perceptive analysis last year from the suitably-named Ash Park Capital group.

The paper highlighted the wonderful cash flow from tobacco, the lack of new competitors of any size, and the contrast between the valuation of the shares and the rating of the company’s long-term debt. Last September, for example, BAT raised $1.75bn in long-dated bonds, paying less than 4 per cent for the money. The buyers of those bonds, which mostly end up with long-term institutional investors, clearly do not think the business is dying any time soon.

However, given the rating accorded to the shares and this week’s grumblings about executive pay, it’s clear that dividends are wasted on us shareholders. As Ash Park suggest, there is a powerful case for suspending payments and instead borrowing more, using the cash to buy back shares. In theory, were the price to stay unchanged, the whole of the share capital would be bought back in less than a decade, leaving the business in the ownership of the few hold-out shareholders. This is a silly calculation, but shows the scope for radical action. Perhaps Mr Park can see the opportunity. We don’t know. After all, he hasn’t talked to the press for 28 years.

No vowels, please, we’re Brtsh

The week’s light entertainment has been helpfully provided by Standard Life Aberdeen. This pantomime horse of a company is changing its name, but rather than go for Staberdeen, as it’s dubbed in the markets, it has plumped for Abrdn, pronounced “stupid.” No, sorry, pronounced “Aberdeen”. A change of name was inevitable after the horse was dismembered, with the Standard Life business sold off to Phoenix, while Aberdeen Asset Management (the back half of the horse) is considered too long a name for today’s busy world. Those canny Scots in Aberdeen city are said to have snaffled all the obvious domain names.

The ‘orrible merger, which produced an unmatching pair of chief executives, has not been a success, and it will be some time before we know whether the business can prosper as a pure asset management company. The history of name changes, meanwhile, it not encouraging. The most recent disaster is Intu, whose management decided that Capital Shopping Centres was just too dull. Besides, customers went “Intu” their centres. The business failed spectacularly last year.

Reckitt Benckiser changed its name to RB a few years ago, but nobody noticed, so the board has changed it back to plain Reckitt. If a coruscating analysis in this week’s FT turns out to be right, this latest name change signals trouble ahead. Other examples include Aviva, the insurance group now trying to reinvent itself (again) and is “targeting meaningful growth” according to its newly-appointed boss of UK savings. At least that’s better than striving for meaningless growth, so we should be grateful for small mercies.

Yep, here’s another cost to stick onto the taxpayer. This one is labelled London Capital & Finance, and comes to a mere £120m, trivial in the scheme of things, but another depressing precedent in the game of compensation for everything. LCF promised high returns for no risk to savers. It was authorised by the Financial Services Authority, but sold savings products which were not. Through this loophole poured £237m from 11,600 investors who couldn’t tell the difference.

Their confusion is understandable, even if their lack of common sense was not. LCF’s “simple and transparent investment for individuals” promised returns that no risk-free savings could possibly match, and while the investment looked simple and transparent, the reality behind it was anything but. The money went into complex and opaque property-based schemes and companies, enriching the boss and, in the words of the liquidators of the failed business, leaving “a number of highly suspicious transactions.” Arrests have followed, although the money is mostly beyond reach.

The call, inevitably, is for more regulation, but small-scale scams are a baleful feature of modern life. Dodgy ads at the top of Google searches are a perennial hazard, and more rules would merely impose further costs on legitimate enterprises. The real failure here is of the Financial Conduct Authority to fail to spot this one when it was first alerted, or even when the alerts poured in, long before LCF had raked in hundreds of millions from gullible investors. As the devastating report from Elizabeth Gloster last year pointed out, there were more red flags than a Russian march-past even when LCF was small enough to stop so much savers’ money being lost.

The FCA boss then was, of course, the man who has since been promoted to governor of the Bank of England, Andrew Bailey. He apologised for the agency’s failure, yet his promotion still looks more than a little odd. It looked even odder when he denied asking Dame Liz to remove his name from her report, provoking a furious response: “It is difficult to see why individuals’ willingness to take on challenging tasks in public bodies should absolve them from accountability.”

Mr Bailey is a lucky man, which is perhaps one important qualification to run the Bank of England. He will have time to prove whether he can deal with other crises, but the early departure of Andy Haldane, one of the true independent spirits in the Bank, is not a good sign. Perhaps his is a case of reculer pour mieux sauter. Still, the next savings scandal will not be Mr Bailey’s fault. The taxpayers can only hope the FCA has learned how to stop it before it breaks the £237m record that LCF has set.

How to waste £1tn (£1,000,000,000,000)

Of all the green fantasies which are needed to hit the government’s spanking new targets on CO2 emissions, the domestic heat pump is surely the silliest. These things work as reverse refrigerators, sucking warmth out of the ground (or air) and cycling it into your green home. They are also ruinously expensive. The most optimistic estimate is a capital outlay of £7,000 per house, which probably fits the builder’s definition of an estimate as a sum of money equal to approximately half the final cost.

Even if you can find space in or under your urban home to install one, the contraption is far from maintenance free. You will also notice that your fridge needs to work harder in hot weather; when it’s cold, there is less warmth in the ground or air, just when you want more heat in your home. Of course, your home will be better insulated, at an average cost of over £10,000 a time, which should help. Adair Turner, former chairman of the Committee on Climate Change, reckons “higher income people” can “just write the cheque”, while everyone else can get help from, well, everyone else. Philip Dunne, chairman of parliament’s Environmental Audit Committee, puts the figure at £20,000 per home, excluding the cost of disruption while the builders are in.

That soon adds up. There are 22 million dwellings in the UK – so £380bn on the Turner scale, or closer to £1tn on any set of realistic assumptions. That’s just domestic buildings. Forcing us into electric cars is another multi-billion pound destruction of living standards. National Grid is warning that reconfiguring the nation’s electricity system is also a £1tn problem. No surprise then, that the Johnson government has carefully avoided publishing any credible estimate of the cost of his magnificent greening gestures, preferring instead to make wild claims about providing employment and becoming “the Saudi Arabia of wind”. Windbag, more like.

Of course, won’t all this sacrifice – there is no meaningful economic gain from these disruptive measures – help save the planet? Well, up to a point. If the UK stopped net carbon dioxide emissions tomorrow, it would cut the global total by about 1 per cent. China and the US, meanwhile, are still increasing their coal burn. We may be holier than the rest of them, but we will be a great deal poorer, and probably colder, too.

Not so superfast

We want superfast broadband to our homes, so the whole family can use the internet at once, download a feature film in the blink of an eye and bring us yet undiscovered electronic riches. BT is promising to spend billions on replacing copper wire with optical cable to give us access to this modern magic. It will cost us more, of course, but we’re willing to pay.

Or are we? From across the Atlantic, home of internet innovation, comes a cautionary tale. Verizon, which is pushing its 5G mobile offering as “rocket fuel” for the company’s growth, has reported a fall in subscriber numbers in the first quarter of 2021. Now mobile 5G is not the same as super-broadband, but this fall was not expected, and may signal increasing reluctance to pay more. Businesses have demonstrated that they can always use more speed and/or capacity. Consumers, though, may be starting to feel that superfast is a supercost we can do without.

Here’s a tricky question: is Darktrace more like The Hut Group or more like Deliveroo? The fate of this week’s fabulously-priced technology stock may determine whether more of these British companies list in London, or whether more of them skip to New York to exploit the local mania for special purpose acquisition companies. For most of us, though, the first problem is to describe exactly what it is that these businesses do.

THG shot to a big premium for finding a profitable way to connect customers with brands over the internet (the brands it owns are hardly household names) while Deliveroo suffered the worst stock market debut in years for a major offer. It is in danger of being rated as a bicycle food delivery service. As for Darktrace, it provides cyber-security by constantly checking to see that no snooper can get at your company data. Few outsiders understand how it does it, and not more than one investor in 100 could explain the inner workings.

Its problem is its history. It was heavily backed by Mike Lynch, who built Autonomy on the premise that the company could use artificial intelligence to mimic some of the processes of the human brain. Ignoring analysts’ unease at how it worked and its accounting practices, Hewlett Packard bought it for £7.4bn. Within minutes, almost, it decided that the business was a lemon, and wrote off most of the purchase price. The legal waves have crashed about ever since, and Mr Lynch is currently fighting extradition to the US. His then CFO is in gaol there.

Darktrace has many of Mr Lynch’s executives on board. The technology has advanced, as technology does, and the fans of Autonomy will be keen to buy the stock almost as an article of faith. They may even understand how it works. Those who are sceptical or ignorant might prefer to wait and see how big a shadow Autonomy casts over Darktrace. Great name, though.

This offer also provides something of a test for the corporate governance geeks. THG has a non-PC voting structure, but big investors still rushed to buy it. Deliveroo has a compliant structure, but may be forced to follow Uber and turn its delivery boys into employees, with similar impact on its cost of operation. This worry provided a helpful excuse for those investors who thought it overpriced to steer clear. In the words of the poet: money doesn’t talk, it swears.

We’ve just got to pay up

There was rather more than a sense of humour failure among the largest shareholders in Rio Tinto last week. Following the advice of the thought police in these matters, the Norwegian oil fund and the UK’s local authority pension forum together cast their votes against the company’s 2020 remuneration report. The focus of their ire was the reward paid to the departing CEO, Jean-Sebastien Jacques, who was in charge when the company bulldozed Juukan Gorge, an important Aboriginal site in Australia.

Rio’s top executives have paid with their jobs for this priceless blunder, and chairman Simon Thompson is following them out of the door. Us shareholders have not yet paid much, thanks to Rio’s huge profits from selling iron ore to China at many times its cost of extraction (the sites added a trivial amount of mineable ore to Rio’s reserves) but the replacements for highly competent senior executives are unlikely to be quite as good, even assuming they avoid any similar mistakes.

The revolting shareholders, however, were not claiming that firing the men was a mistake – almost everyone agreed that they had to go – but balked at their rewards for going away. Mr Jacques has not made as much as he would have done by staying, but he was still paid £2.7m last year, and Institutional Shareholder Services estimated that his “performance shares” are worth an impressive £27m.

So after the performance over the sites, why will he still get this reward? Sam Laidlaw, the chairman of the remuneration committee, put it bluntly: “The penalties applied to the responsible executives were, in the best view of the board, the most that could durably be applied and legally defended in light of the extent of the executives’ ultimate accountability for Juukan Gorge.”

This is rather more frank and honest than most companies manage. Rewards for failure frequently look outrageous to outsiders, and the usual justification, that the replacement executives have more urgent things to do than fight a court case against their predecessors, always looks weak. Mr Laidlaw has signalled that it is not the board that’s weak, but the legislation. Employment law, driven by the vision of an employee mistreated by a big bad company, favours the dismissed claimant.

The departee also has the almost incomprehensible complexity of today’s pay practices for senior executives on his side. When the remuneration report runs to 40 pages or more, it hardly takes a hot-shot lawyer to find justifications for his client to be paid handsomely to go away. Short of being able to prove, almost the level of a criminal case, that the departing directors had their hands in the till, or to risk a messy and distracting court case which they were highly likely to lose, it’s no surprise that Rio’s new crew decided to throw shareholders’ money at the old.

Bye-bye Bernie

So, farewell then Bernie Madoff, as Private Eye would say. The world’s biggest fraudster has beaten the rap by dying 11 years into his 150-year sentence. Aged 82, few will mourn. He set up and ran a stunningly successful Ponzi scheme, a business that made Ponzi look like an amateur, using new investors’ money to pay out to the old. The steady performance was all a fiction, but he got away with it for far longer than he must have expected, to the point where on paper he had $65bn under management.

You couldn’t say the fraud made him rich, or that he lived a high life with yachts, palaces, girls or drugs. He was low-key, and It all looked so plausible, but for one thing: no investor in risk assets anywhere can make the sort of steady returns he claimed. It just cannot be done. If your financial adviser claims to do so, change him at once.

As the fraud grew, so the back office had to expand, and one of the most bizarre aspects of the story was his ability to keep the lid on his secret. As for the unfortunate victims, many have learn the old lesson the hard way: do not put all your eggs in one basket, however pretty it looks.