A chancellor who will borrow £394bn this financial year has to come up with a few new ways to raise money, and here’s a Treasury idea that sounds modest but interesting: put VAT on Uber taxi trips and stays in Airbnb properties.
It would also seem to pass a basic test of fairness. Most Uber drivers and Airbnb providers are too small to be registered for VAT, but, taken as a whole, their sectors genuinely compete with companies that do pay VAT. Every night in a seaside Airbnb is one less visit to the local hotel, so there is also a question of keeping the competitive playing field level.
The change would feel slightly rougher on Uber drivers, whose earnings will have been clobbered by lockdowns and the evaporation of the night-time economy.
But the Treasury, presumably, has the post-vaccination recovery period in mind and an Uber trip seems an odd service to fall largely outside the VAT net. It’s hardly an essential of life like food and children’s clothes. Converting a £5 fare into a £6 fare probably wouldn’t disturb demand.
Rishi Sunak will be sensitive to the charge of being a digital luddite – he likes to give the opposite impression – but he also has to face the fact that “the sharing economy” is now large enough to nibble at the tax base.
VAT reforms with Uber and Airbnb would be relatively painless. Far bigger and tricky decisions on taxation lie ahead.
Setting the records straight on Hut Group’s paper millionaires
It’s hard to open a newspaper these days without encountering Matthew Moulding, the photogenic executive chairman of The Hut Group.
There he was in the Daily Mirror this week, talking about how he has spread wealth among the online retailer’s workers: “We have created more millionaires than any other company in British corporate history.”
The precise number is 74, he says, out of 430 employees who were incentivised with shares during the Hut’s time as a private company, ahead of its £4.5bn stock market flotation in September. That is definitely impressive – and Moulding’s 25% stake, including a recent £830m bonus, means he’s done splendidly himself. But a British record?
It depends how you count it. A total of 399 employees of Barclays were paid £1m or more in 2019, according to the annual report. Bankers’ bonuses are not quite like freebie shares, of course, but it all counts from the employee’s point of view.
Indeed, an intriguing question is whether the Hut’s paper-rich toilers will cash a few chips when the lock-up period on share sales expires next March. At the moment, 338 employees own equity worth a total of £556m, says the company.
Maybe the shares, up a third since float, are going to the moon, as half the City analysts seem to think. But it would require quite a commitment for regular employees to leave life-changing sums sitting in a single stock that, to put it mildly, enjoys a high-profile and a racy rating.
Stagecoach profits bucks the trend in lockdown London
Your eyes did not deceive you, London buses really were mostly empty during lockdown. Reassurance may be needed after a glance at the financial performance of Stagecoach’s London bus division in the May to October period: revenues up 5% to £126m and operating profits 80% better at £9.2m.
The explanation is that Stagecoach, like other bus operators in the capital, is paid to run a service while the revenue risks sit with Transport for London.
There were adjustments to contracts to reflect reduced mileage during the pandemic, and thus save TfL a few quid, but Stagecoach clearly wasn’t left out of pocket. The increase in revenues arose because the company operates more contracts than it did a year ago, but an operating profit margin of 7.3% was still very healthy.
It was a different tale outside London. Profits collapsed there because the “fare box risk” sits with the operator. But, as with train operators (not Stagecoach’s game these days), bailout salvation was available in the form of grants to keep regional bus services running at break-even.
In the circumstances of a stay-at-home pandemic, almost any profit figure better than zero counts as a triumph for a transport company.
Stagecoach, after paying £15.7m in interest costs, just about managed it. Martin Griffiths, the chief executive, remembered to thank every government in the land. One should hope so too.