The AA’s bosses have spent an awful lot of time driving down to the Treasury in recent months for the express purpose of banging their heads against its expansively papered walls.
The reason? Insurance premium tax (IPT), and the Chancellor’s decision to increase the levy by 58 per cent.
The tax is casting a quite a shadow over the AA’s business, which has attracted an impressive band of investors, keen to buy into its turnaround story.
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The newly fuel-injected IPT shouldn’t run that off the road, even if the AA has been running over a few bumps of late, leading to a 1.4 per cent fall in half-year revenues that gave the stock market quite a fright.
But it will make life more difficult.
For a start, the company fears higher “churn” in its insurance business. The tax will inevitably lead to higher bills so customers may be more inclined to shop around for better deals.
That’s no bad thing, you might think.
But the tax hike could have far more serious, and negative consequences, which makes this one of those rare cases where the interests of insurer and customer are aligned.
IPT is, in effect, a tax on being sensible – on subscribing to services such as the AA’s roadside assistance, and on paying for motor insurance, a legal requirement.
The number of motorists flouting that requirement can only grow as a result of premiums rising. Some on tight budgets may feel they can no longer afford to pay.
That highlights another of the failings of IPT: it is a deeply regressive charge that hits those on low or moderate incomes disproportionately hard. The limited cover they can afford will inevitably take up a higher proportion of the family budget than it does for those in happier circumstances.
The Chancellor’s decision to raise IPT was justified on the grounds that the UK rate is low when compared with the rates charged by some of our continental neighbours. However, that’s a specious argument; some European countries charge VAT on food too. Just because they do it doesn’t mean we should do it. This is one tax that is in dire need of a tune-up when the Budget is put in for a service – and not just for the AA’s benefit.
Volkswagen has to put some drivers in the ejector seat
The scandal engulfing Volkswagen is deepening, as they always do. Authorities in Europe and South Korea have formed an orderly queue behind the Americans with their own promises of investigations, and tough action if the car maker is found to have cheated their emissions tests and standards. Others will doubtless follow.
With different legal systems and testing regimes in place, it is not altogether clear whether the kit used to show some of its vehicles were cleaner than they actually were, when tested by the Americans, will have had the same impact elsewhere. But it is open season on the company and everyone’s going to take a very hard look.
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Volkswagen emissions scandal spreads to Europe
“Personnel action” is one of the measures now being considered by Volkswagen’s supervisory board as its bosses battle to get to grips with an affair that – and it’s not an over-reaction to say this – threatens the future of one of Germany’s most famous brands.
This might help. One of the lessons from the banking scandals of recent years is that the public take a very dim view of executives and employers who wash their hands of responsibility when their staff take it into their heads to do bad things.
Volkswagen needs to heed that lesson. Having admitted to wrongdoing, the company has to show it is willing to call its people, and the executives supervising them, to account – even if it is tempting to keep some of the latter around to help clean up the mess. It needs to act quickly with suspensions, investigations, and firings. In particular, it should steer clear of any inclination to handle the latter by means of resignation combined with golden goodbye.
To drive its battered chassis out of this mess, the company needs to show it is willing to act against those found culpable for damaging it – and against those responsible for allowing them to do so.
With its vehicles having filled the US with dirty air, Volkswagen is desperately in need of some new executives with clean hands and hard heads.
Deezer pumps up volume but not every player will be a hit
Deezer would like you to listen to Play That Funky Music through its apps rather than those of its rivals. But it’s got a problem and solving it may be Harder Than You Think. The Times They Are A Changin’ for this new(ish) industry and Deezer’s sound system doesn’t have the watts of an Apple or a Spotify. As a result, fewer people are hearing its marketing message, however loudly She Bangs the Drums.
Hence the decision to take the company and Push It to investors on the Paris Bourse in the hope they’ll buy into its music. The company will Shout about a growing subscriber base willing to pay monthly fees to access its library.
Investors Can’t Help Falling in Love with predictable monthly revenues. The trouble is, artists have been sounding off about getting more of a cut so they can pay the Rent. And it’s an increasingly competitive field, with Amazon Prime and Jay Z’s Tidal also doing their best to Pump Up The Volume.
Sooner or later there will be a shake up, and possibly a Crash. Ain’t It A Shame.
