On life, taxes and Osborne’s chance to beat a £20bn target

Mark Kleinman
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Osborne's Budget included a commitment to raising an extra £900m annually from the bank levy (Source: Corbis)

If taxes are one of life’s few certainties, then taxes on banks are becoming just as predictable. Just when HSBC thought its lot could not get any tougher, up pops George Osborne with his bi-annual hike to the rate of the charge on lenders’ balance sheets.

The chancellor’s final pre-General Election Budget included a commitment to raising an extra £900m annually from the bank levy, a substantial chunk of which will likely come from the conservatively funded HSBC.
Yet the millstone that the banking sector has been around taxpayers’ necks since 2008 has become an opportunity for Mr Osborne (or his successor). By selling £13bn in mortgages and loans from UK Asset Resolution and £9bn more of Lloyds Banking Group shares, the chancellor can claim that he will easily surpass a £20bn target for asset sales by the end of the decade. Even the taxpayer’s stake in Royal Bank of Scotland is now approaching the point at which it begins to be unloaded. The Budget Red Book offers the clearest sign yet that the Treasury will begin selling RBS shares at a loss during the first half of the next parliament.


There must be something in the engine oil. Less than a year after the AA’s accelerated initial public offering, and with demand in overdrive for shares in Auto Trader, another staple of Britain’s automotive sector has its SatNav programmed in the direction of the stock market.
Like Aldermore and Virgin Money, British Car Auctions (BCA) has been a logical float candidate since last autumn’s market volatility kept it in the garage. The secondhand vehicle-seller, owner of WeBuyAnyCar.com, has seen strong sales and earnings growth since Clayton Dubilier & Rice (CD&R) took control in 2009.
At the mooted valuation of £1.2bn, the concept has obvious appeal to CD&R: a full exit (or close to it) through a sale to a club of investors at an attractive price. The new shareholders, who include Neil Woodford, are certainly blue chip, which should fuel broader market confidence when BCA goes public.
The AA’s buoyant stock market performance since its listing offers further encouragement. But acquisition vehicles such as Haversham, into which BCA will be reversed, have had a patchy track record during the last decade.
That accusation cannot be levelled at Avril Palmer-Baunack, Haversham’s founder, who has been clear about its automotive focus.
But there are lingering concerns among some institutions that the price Haversham is paying may be too rich in a sector where barriers to entry remain relatively low.


It might not reassure Katherine Garrett-Cox, chief executive of Alliance Trust, to know that not all campaigns waged by shareholder activists end in bloodshed.
On the face of it, Elliott Advisors, which wants the trust to install three new directors on its board, looks to have a reasonable case: Alliance’s shares are trading at a substantial discount to its net asset value, and City disgruntlement has persisted.
But Elliott’s own track record has not been universally effective. Take its investments in supermarkets. I understand those stakes were quietly sold a few months later despite little progress on the property disposals that Elliott wanted. The firm won’t disappear from Garrett-Cox’s rear-view mirror as subtly.

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