If you’re a law-breaking company in Britain you can buy your way out of prosecution

Imagine you rob a bank. The police catch up with you. But taking inspiration from Donald Trump you suggest a "deal". You say: "Instead of prosecuting me for breaking the law, how about I pay a fine and promise not to do it again?" How far would that get you?

Now imagine you own a bank which is caught defrauding customers in order to inflate your profits. The Serious Fraud Office (SFO) knocks on your door. But you have a nice deal for them: "Instead of you prosecuting us for breaking the law, how about I pay a fine and promise not to do it again?" 

Would that wash? Well quite possibly it might. Because we now have "Deferred Prosecution Agreements" (DPA) for UK corporations which enable firms to do precisely that: buy their way out of criminal prosecution.

Tesco just agreed one yesterday with the SFO. The supermarket will pay £128m in exchange for avoiding prosecution for its false accounting in 2014. Rolls Royce also concluded a DPA in January worth £497m to settle claims of extensive overseas bribery by employees of the multinational engineering giant.

The justification for offering DPAs is to save public money in the administration of justice. When they were introduced in 2013, ministers claimed they would financially incentivise companies under investigation to co-operate with the authorities. Thus, they could avoid the public expense of a long and complex trial and, in particular, the risk that big firms with access to expensive legal advice would get off, perhaps on a technicality.

The DPA's fines are supposed to act as a deterrent to future wrongdoing by companies. Shareholders are expected to police management more carefully. But while £128m might sound like a lot of money to most people it's less than 0.3 per cent of Tesco's total 2016 operating expenses of £53.6bn. As recently as 2014 Tesco was making annual profits of more than £2bn.

Even Rolls-Royce's larger fine represented only 3 per cent of its 2016 operating costs. And the fine will be payable over four years. Tellingly, Rolls' share price spiked by more than 4 per cent on the day the DPA was announced. "We see their commercial value to companies under suspicion" admits the head of bribery at the SFO.

It's important to note that judge Brian Leveson, when he signed off on the Rolls-Royce DPA, stressed that it did not mean that the door had been closed on future criminal charges for ex-managers at the company.

We shall see, though it's notable that in America, from where the concept of DPAs was imported, no executives from the many companies that have used them have ended up facing prosecution, let alone jail time.

There is room for practicality in the application of the law. In magistrates courts the prosecutor and the defence can agree that a defendant will plead guilty to one charge on the understanding that the prosecutor will drop the remainder. That also saves public money. Yet such plea bargaining only takes place well after the prosecution is underway. There's no option for an offender to effectively buy themselves out of the system before the wheels of justice properly start turning.

The wider social and political context is relevant. As even regulators complain, no senior UK banker has been prosecuted for the concatenation of fraud and malfeasance that took place in the years leading up to the 2008 financial crisis, a disaster that imposed a severe toll on the living standards of every person in Britain.

The remuneration of senior executives of large UK firms has soared while average wages have been stagnant for years. A populist firestorm is raging across much of the Western world, partly fuelled by a sense that an economic elite play by a different set of rules from everyone else. Special legal privileges for law-breaking corporations send the deeply unfortunate message that there's something to that belief.

Corporate Britain was given one last chance to sort out its executive pay problem and now it's blown it

There was something conspicuously absent from the Government's Green Paper on corporate governance when it was published last November. Four months earlier, Theresa May had proclaimed she wanted to see annual binding shareholder votes on executive pay in order to end the "irrational, unhealthy and growing gap between what these companies pay their workers and what they pay their bosses" and to "make our economy work for everyone".

For all May's crusading rhetoric, this would have been only an incremental reform. Under the existing system, introduced by the Coalition in 2013, all UK-listed firms must already subject their general pay policies to a binding vote at least once every three years. Further, they have to hold an annual advisory vote on actual remuneration packages for directors.

May was, in effect, simply pledging to make those annual advisory votes on pay packages legally binding, meaning if the awards were rejected by shareholders, the directors would be compelled to come up with something else that was acceptable.

Yet, curiously, November's Green Paper - effectively a consultation ahead of legislation - backed away from annual binding shareholder votes on pay, despite the Prime Minister's very clear pledge only months earlier.

The policy, despite being dear to May's heart, seemed, in effect, to have been snuffed out at birth. Why? What changed? The simple answer is lobbying. Consultants, asset managers, accountants and companies themselves had all told ministers it would be a bad idea.

This view was reflected in the report of a group called the Big Innovation Centre which described an annual binding vote as a "disproportionate response" to concerns about executive pay and one that would have "many negative unintended consequences". These acts of self-harm supposedly including frightening off top executive talent from British firms and prompting boards to engage in "excessive consultation" with shareholders ahead of votes.

Ministers must have bought it.

But perhaps the proposal isn't quite dead. For nothing upsets the carefully-laid plans of corporate lobbyists quite like dunderheaded behaviour of their employers.

Last week Crest Nicholson, one of the UK's largest house-building companies, put its executive pay package for 2016 to a shareholder vote. Ahead of the vote, Institutional Shareholder Services (ISS), an advisory body for asset managers, had pointed out that Crest had moved the goalposts for the triggering of bonus awards for its top executives in the most shameless way, proposing to slash its profit growth target from 22 per cent to 8 per cent over just two years.

Crest chief executive, Stephen Stone, was set to receive a share bonus worth £812,000, on top of a salary of £541,158 while chief operating officer, Patrick Bergin, was pencilled in for £562,500, in addition to basic pay of £375,000.

"The profit target has been reduced for the second consecutive year without any compelling rationale, and the revised targets do not appear to be sufficiently stretching," said ISS. This was effectively saying Crest was rigging its own remuneration system to ensure big pay-outs for executives.

Then something that is still pretty unusual happened: shareholders rebelled. Some 77.3m votes were cast in favour of the pay policy. But 107.3m were cast against. Roughly 58 per cent of Crest shareholders rejected the awards.

So how did the board of Crest respond to this comprehensive and humiliating rejection? Did the head of the remuneration committee, in charge of deciding pay policy, instantly fall on his sword? Did the company pledge to scrap the proposed awards without delay and redesign the whole package? Did the chairman bow his head, beg the forgiveness of shareholders and promise a period of deep and serious reflection on the company's priorities? Far from it. Crest declared itself "disappointed" with the way the pay vote had turned out, but said that it would, nevertheless, proceed with paying the bonuses. And why not? After all, this was only an advisory vote. Nothing to get excited about.

May's original pledge was the right one. These pay votes should be annual and legally binding. The practical objections were always weak and ought not to have influenced the Green Paper.

There is also a bigger picture here which Theresa May's July speech rightly alluded to. Consider the damage that shrugged-off shareholder pay protests already inflict today on public confidence in UK business. Simon Walker, the former head of the Institute of Directors, said last year in the wake of two previous major shareholder rebellions that "British boards are now in the last chance saloon". Crest has surely drained the last drop of goodwill.

The corporate governance Green Paper consultation ended on 17 February. Doubtless ministers received even more advice from corporate lobbyists reiterating why the current system is the best of all possible worlds. The events of last week give the lie to that idea.

Theresa May and her Business Secretary Greg Clark should disregard the lobbying and consider the egregious behaviour of Crest. Then they should legislate.

No, the rich are not bearing too much of the nation's tax burden

''Death and taxes, as we all know, are the two great guarantees of life. But a strong candidate for a third is crude anti-tax lobbying by the right-wing press.Their favoured argument in recent years has been that the "burden" of taxation is falling ever more heavily and unfairly on the very rich.

The Daily Telegraph this week presented an analysis showing that the top 1 per cent of income tax payers pay 27 per cent of all income tax receipts, up from just 11 per cent in the 1970s. The report also noted that the top 10 per cent of taxpayers account for 59 per cent of total receipts, up from 35 per cent in 1976.

It asserts that "the wealthy … are making a bigger contribution to the UK's income tax receipts than they have done at any other point during the post-war era". The piece throws in references to the pledge from the late Labour Chancellor Denis Healey to squeeze some unfortunate souls until "the pips squeak" and warnings from a Conservative MP about how oppressive taxes are in danger of deterring smart people from working.

But the analysis, like many previous ones in the same vein, is misleading because it neglects to mention a crucial piece of context, namely that the very rich have been getting richer in recent decades - especially those at the very top.

According to the World Top Incomes database, the total pre-tax income share of the top 1 per cent of UK earners has doubled since the 1970s from 6 per cent to around 12 per cent, largely a reflection of the explosion in pay of financiers and senior company executives. The pre-tax income share of the top 10 per cent has also risen since over that time from 30 per cent to 40 per cent. These groups are paying a larger share of the total income tax take because they have larger slices of the pie than they used to.

This says little about the direction of tax policy. Rather, it's an arithmetic property of a progressive income tax system, whereby above certain thresholds a fixed proportion of earnings go to HMRC.

Another vital piece of context which these analyses omit, as Jonathan Portes of King's College London exhausts himself in stressing, is that income tax is not the only tax. In 2015-16 the Government raised £630bn in taxes. Of this just 27 per cent (£169bn) came from the income taxes. Very large chunks came from National Insurance (£114bn), VAT (£116bn) and corporation tax (£45bn).

It is either ignorant or disingenuous to imply that the entire national tax burden is accounted for by the income tax take. Any consideration of the social fairness of the tax system has to factor in the incidence of other levies to be even vaguely credible.

There are, it is true, challenges presented by the disproportionate reliance of HMRC on a relatively small number of high-income individuals. But despite the complaints of Tory MPs and right-wing newspapers these challenges have nothing to do with equity or Ayn Rand-style effort deterrence.

This is rather an issue of practicality. The rich can shift their incomes about ominously easily, as we saw vividly last year when a change in the taxation of dividends prompted large-scale income forestalling. An army of well-resourced accountants generate (entirely legal) avoidance schemes, leaving HMRC outgunned and ministers chasing their tails.

A part of the solution ought to be to shift the focus of taxation from income to residential property, where wealth inequality is vast and avoidance is much harder. The capital gains and inheritance tax systems are also in crying need of reform. The tax rates on the income of company owner managers should be brought into line with that of employees to eradicate an obvious avenue for avoidance by the very wealthy.

But we should also be trying to reform the structure of our economy, which throws up such large pre-tax disparities in pay. Pay at the very top is sometimes a reward for outstanding effort, inspiration and entrepreneurial activity. But often it is merely zero-sum wealth extraction and the exploitation of uncompetitive markets.

A more equal distribution of earnings would make the tax system less fragile. There are also reasons to suspect this could result in more sustainable GDP growth due to higher corporate investment and productivity.

A new tax campaign angle for the right-wing press? Don't hold your breath.''

Liberals can still use facts to defeat populist ignorance

This is, as has been widely noted, a bleak time for enlightenment values. In the face of a populist tide, a feeling of pessimism has gripped many liberals about the ability of logic, reason and evidence to influence the wider public.

Discussion often turns to psychological research showing that when ordinary people are presented with facts in the context of a political debate it has little impact. There's growing chatter about a "backfire effect", where rebutting misconceptions actually serves to entrench falsehoods, perhaps by making the myths more salient. Thus, fact-checking exercises by the media become, at best, as a waste of time ("leftliberal comfort food" in the words of Rob Ford of Manchester university). At worst, they're counterproductive.

Technology doesn't seem to be helping. Social media helps people to herd themselves into informational silos, where they only hear what they want to hear, and inflates ideological bubbles. Traditional sources of authority are no longer respected. We're warned that "elites" telling people they are wrong is patronising.

Some argue that describing overtly racist opinions and policies as racist only serves to drive the alienated masses further into the populist corral.

So what's to be done? How can progressive politicians and experts get across the facts behind politicised subjects, whether it is the economic impact of immigration, the circumstances of welfare recipients, the science behind climate change, the safety of vaccines or the overall benefits of free trade? How can we ensure that political decisions are taken and votes cast not on the basis of prejudice and myth, but with at least some regard to evidence and serious analysis? Perhaps liberals should forget facts and instead to go with the populist flow. In this view of the world the best hope for progressives lies in pandering to popular "feelings" but trying to steer the ship of policy in a vaguely progressive direction.

But this prescription is dangerous. When gross fallacies in public debate go unchallenged the fallacies don't die out, they spread. The cancer metastasises. A culture of anti-intellectualism is liable to be a breeding ground for bigotry and intolerance. And in any case the populist wolves are likely to prove rather better at this game than the progressive sheep in wolves' clothing. Moreover, there's a better way. There are other academic studies that point to ways that liberals can try to turn the tide.

Christina Boswell and James Hampshire have highlighted how the public discourse on immigration in Germany was transformed between 2000 and 2008. Social Democratic politicians used familiar arguments about the economic benefits of immigration. But they did this alongside a campaign to promote positive narratives about immigration and its place in the country's history to counter entrenched perceptions of Germany being kein Einwanderunglsand ("not a country of immigration"). This twin approach largely succeeded in changing attitudes, flowering in the generous position taken by Angela Merkel's Christian Democrat government towards Syrian refugees in the summer of 2015.

By contrast in the UK, at the same time, Labour began to talk up "British jobs for British workers" and never seriously rebutted the dominant and dismal narrative of the tabloid press about immigration being an economic burden and culturally corrosive, arguably helping to set the scene for the current bout of selfharming Brexit-related xenophobia.

Eric Kaufmann of Birkbeck College London points out that the strength of far-right parties in Europe is roughly correlated with the size of a nation's Muslim community. But polling shows that Europeans are often wildly misinformed about the rate of Muslim immigration and fertility.

Public information campaigns might well help. Research by Alexis Grigorieff, Christopher Roth and Diego Ubfal showed that when a large sample of people in the US and Europe were told the actual share of immigrants in the country - rather than relying on their own often grossly exaggerated estimates - they became less likely to argue that there were too many incomers. The facts do, it seems, get traction.

There are other sources of hope. In a recent essay Tim Harford of the Financial Times has highlighted research which suggests that a way to open peoples' minds to evidence and bypass politically-motivated reasoning is to appeal to their sense of non-political scientific curiosity. It's not simple, but it can be done.

All of this suggests that a counsel of despair about the persuasive potential of facts and evidence is unwarranted; people can still be amenable to reason. Progressive politicians, researchers and liberal activists should not be laying down their enlightenment weapons in the face of angry and destructive populism, but rather wielding them more effectively.

What do banks and financiers get in return for paying George Osborne £50,000 for one hour of work?

George Osborne presided over a national productivity disaster when he was Chancellor. But the MP for Tatton is certainly making an outstanding personal contribution to repairing some of the damage now.

Last week the House of Commons Register of Members' Financial Interests disclosed Osborne's earnings from outside Parliament since he was sacked from the Cabinet last year. What the record shows is nothing less than a productivity miracle. In October Osborne spent two hours delivering a speech to an outfit called Palmex Derivatives in the City of London for which he received £80,240. That's more than £40,000 per hour of his time. Not even Paul Pogba of Manchester United gets that kind of hourly rate.

Earlier in the same month Osborne gave a speech to the Securities Industry and Financial Markets Association in New York for just one and a half hours. He expects to receive £69,992 for his efforts; an hourly rate of £46,000.

Osborne's full salary when he was a Chancellor was around £120,000 a year. Assuming that he worked 10 hour days and took five weeks holiday a year his pay rate was around £50 an hour. So since leaving office Osborne has multiplied his personal output per hour by more than 900 times. If only the rest of the economy could bottle some of that productivity-enhancing magic. Maybe we should all get sacked from the Cabinet by Theresa May.

But speeches to financial firms are not Osborne's bread and butter. That will come from four days a month "advising" the colossal US asset manager Blackrock, a job for which he will be paid around £650,000 a year (not including share-based bonuses). Assuming, again, a 10-hour working day, that's £1,350 an hour, still at least 25 times his previous daily rate as a minister.

When he was shadow Chancellor George Osborne talked tough on the need to reform finance, sensing the mood of outrage in the country in the wake of the collapse of Lehman Brothers and the associated economic carnage. In 2009 he made radical noises about breaking up "too big to fail" banks including Lloyds and the Royal Bank of Scotland, which had been bailed out by the taxpayer at huge public expense.

But that radicalism melted away when he entered 11 Downing Street. He did establish the Independent Commission on Banking headed by Sir John Vickers to look into the case for breaking up the giant banks.

But in his 2011 report, Vickers failed to recommend a split and instead delivered a halfway house known as "ring-fencing". The banks still gripe about that hassle of that reform, but this a pedicure compared to the amputation a full split would have represented.

And as the years went by Osborne talked less and less about financial reform and more about the need to unclip the wings of the banks. Avoiding "the stability of the graveyard" became his catchphrase. The Treasury's door was constantly open to the industry's lobbyists and top executives. In one remarkable episode, he personally intervened to stop the US Department of Justice bringing criminal charges against HSBC for laundering the profits of terrorists and drug dealers. One of Osborne's lucrative speeches in January was to HSBC: £51,328 for two hours of work.

As Chancellor he pushed through regulatory changes with major implications for the savings and pension industry - most of them positive for the bottom lines of those companies. And now Osborne works for the largest asset manager in the world, which plans to pay him almost 10 times his MP's salary while he continues to sit in the House of Commons.

We have no reason to believe that Osborne was motivated, while he was in high office, by the possibility of one day earning hundreds of thousands of pounds a year from the financial sector; nor that he took any decision as Chancellor in relation to the industry with anything except the good of the British public uppermost in his mind.

Nevertheless what message does the example of him now being sprayed with cash by giant banks, financial trading companies, asset managers and hedge funds, all within months after leaving office, send? What's the message that goes out to other politicians ascending the greasy pole? It sends the message that it would be wise to be attentive towards the interests of the financial industry because, if your political career is terminated prematurely, these companies can - and do - reward former top politicians in ways that would make a Premier League footballer blush.

Facebook is a business. If you really want it to change the way it works, log off

It’s often said you should keep an eye on what politicians actually do, rather than fixating on what they say. That wisdom applies just as much to corporations.

Facebook’s community standards policy states it will remove any content that promotes sexual violence or exploitation. But when the BBC flagged various examples of this kind of content to the social media platform, most of the images were left untouched.

Facebook’s founder Mark Zuckerberg has insisted he is alive to widespread concerns about the dissemination of fake news via Facebook and that he takes misinformation seriously. But there has been no substantive action taken to eradicate obvious hoaxes from the platform, despite claims from the founder that progress is being made.

This is not a question of lack of resources. Facebook’s revenues last year were $27.5bn, up from just $3.7bn in 2011. Profits have risen from $1bn to $10bn over that same period. Money is not the problem for Facebook.

What we are dealing with here is a lack of will; or rather a strategic paralysis. Facebook is determined that it will not be bounced into becoming an active curator and editor of the content that appears on the platform; content that is posted and shared by its 1.86 billion active users.

Not only would that entail a considerable expansion of its cost base, but it could fundamentally change the relationship between the platform and the regulatory authorities across the many territories it operates. If Facebook is perceived to be “in charge” of what appears on the platform then it may also be held accountable for that content.

This is an expectation that traditional newspapers and online news organisations like The Independent have long been used to. But while Facebook is happy to collect the billions of dollars a year of advertising revenues that formerly flowed to the traditional news media it does not want the social responsibilities that come with being a media company.

This is not the only example of what we might generously call Zuckerberg’s cognitive dissonance. He talks grandly of his desire to spread “prosperity and freedom” through Facebook’s expansion and “making the world open”. Yet last year he was making overtures to the internet-censoring autocrats of Beijing, meeting with China’s propaganda chief Liu Yunshan. He also posted what looked alarmingly like a propaganda picture of himself jogging in the smog-blanketed Tiananmen Square, promoting some richly deserved online derision in China.

But we should be fair to Zuckerberg. Sensitively curating 1.86 billion users is no trivial task. Facebook has faced complaints in recent years for taking down images of breast-feeding mothers that it mistakenly identified as explicit. Facebook is different from a newspaper in that people feel that what they post is “their” content. There’s a tendency at times for people to demand a combination of the wisdom of Solomon and Papal infallibility from the company.We want them to interfere with the content of others, but to leave ours well alone.

And curating the news is an especially hazardous business. Zuckerberg raises valid points about the difficulty of distinguishing hoaxes from satire and the risk of sending people even further into their ideological bunkers through heavy-handed editing.

When it turned out that Facebook’s “trending” newsfeeds were operated by human editors, rather than algorithms, and there were allegations those editors were suppressing the output of right-wing news organisations, Facebook caught huge flak from conservatives. More active policing of the network involving human judgements, particularly in the news arena, is inevitably going to generate controversy and criticism.

Yet at the same time we shouldn’t be naïve. There is a tendency in the media to revere Zuckerberg as some sort of technological-seer-cum-freedom-fighter. But his primary goal is to continue building his business in order to justify the enormous valuation put on it by the financial markets since it floated on the stock market in 2012.

Investors have priced Facebook at a domination price – and that means Zuckerberg needs to deliver domination. Hence his desire to get into the vast China market, where Facebook is currently barred.The value of his own stake in the company, worth some $55bn, depends on success. If cleaning up the platform conflicts with its user growth, or allows a competitor to take market share, it’s not difficult to guess which way he will lean.

If we want reform of the pre-eminent online social network of our times we cannot rely on its founder to deliver it; that change will need to be driven by the demands of users, whose eyeballs attract those billions of advertising dollars. If people really want change, logging off may be the only way to achieve it. Actions speak louder than words.

Get house sellers to pay stamp duty instead of first time buyers? It may sound good but there’s a catch…

Who pays tax? We all do of course (or at least most of us). But who really bears the financial burden of an individual tax? That’s a rather more complex question – and one that isn’t asked enough.

Andrew McPhillips, economist at Yorkshire Building Society, last week called on the Chancellor to change the law so that stamp duty is paid by sellers of homes rather than buyers.“[This] would reduce costs for first-time buyers, helping more people to get on the property ladder,” he said.

To first-time buyers this might sound a good idea. Indeed, why not give this beleaguered group a break by lightening their tax load? But McPhillips’s logic is the sort that causes economics professors and public finance experts to weep tears of frustration.

For it ignores the fact that other things in a market are very likely to change in response to shifting the nominal target of a tax, in this case the asking price. Those selling a home will surely respond to a large new stamp duty bill with a commensurate rise in the asking price.

So first-time buyers would be no better off in substantive economic terms – it is buyers who will end up paying the tax even if it’s nominally levied on to the seller.

The same logic applies to Value Added Tax. This is paid to HM Revenue & Customs by retailers and companies. But most of us realise that it’s really we consumers who pay the VAT because when the rate increases, prices rise. We had vivid proof of this when George Osborne raised the rate from 17.5 per cent to 20 per cent in 2011 and most prices immediately rose in response.

But the story of who ultimately pays tax or fees, known as “incidence”, is not always so obvious. When the Government said last year that it would ban lettings agents levying fees on tenants, some said this would merely push the fees on to landlords, who would put up rents in response, leaving tenants no better off. 

Yet the price of shares in estate agents dropped sharply in the wake of the decision. This suggests that those fees have been a major source of profit for the estate agent rather than an unavoidable transaction cost and that landlords will be better placed than tenants to resist being gouged. The incidence of that regulatory change would seem to fall on estate agents, despite the objections raised.

Business rates are a tax payable by firms based on the rentable value of the property they occupy. But a firm will generally want to secure a certain rate of return on their invested money and efforts regardless of such tax changes. So if business rates rise (as they are set to do in many swanky districts of London) then businesses should, in theory, seek to renegotiate their rent downwards to reflect that shift. Thus the tax should, according to the textbooks, be ultimately borne by landlords rather than firms.

Some evidence suggests this shift in rental prices does happen in the end. Yet it plainly doesn’t happen instantaneously for the simple reason that firms do not tend to renegotiate their rents with their landlords every year. Thus much of the initial cost of any increase does fall on firms, or rather the people who are involved in those firms.

Corporation tax is nominally a tax on corporate profits, prompting many people to assume that companies pay it. But companies don’t pay tax, only people do. The question is: which people? Many are convinced that the shareholders of the company pay the tax in the form of lower profits and dividends than they would otherwise enjoy. Others insist that workers pay the tax because the company responds to the tax by hiring fewer workers than it otherwise would, or by paying its workforce less.

There is no consensus view among researchers over who bears the burden of corporation tax. Empirical research points in different directions. The answer is likely a mixture of the two and the relative share will probably depend on the company in question, the structure of the local economy and the institutions of the society in which the tax is levied.

Yet the fundamental point is that all taxes will ultimately be paid by someone – and it may well not be who you’re invited to believe.

Financial markets are betting against the future of the planet. This won't end well

Imagine you're a stock market investor or an analyst whose job it is to advise those investors. How do you put a value on the shares of a publicly listed oil company? You can estimate the value of the skills of the company's engineers, managers and other employees.

There's the brand, reputation and the culture of the company to factor in too. There's also the worth of its equipment and various physical investments to consider.

Yet the bulk of the value of any oil company inevitably derives from its reserves of the black stuff (along with gas and coal) in the ground; assets that are expected to be extracted and sold over time.

But what if you knew that the company would never be able to get these assets out of the ground? What if they were destined to be "stranded"? What would happen to the value of the oil company then? 

Some analysts - including the Bank of England - are urging financial markets to start thinking much more seriously about the possibility of tens of trillions of dollars of "stranded assets" in the energy sector and the profound implications for share prices.

Because if governments around the world deliver on their promises to decarbonise their economies and limit the rise in global temperatures this century to 2 per cent above pre-industrial levels, then those assets really can't see the light of day. Either they will be forbidden from being sold, or there will be no demand for them because we will have new clean means of energy production.

But the lure of short-term profit has a way of obscuring this kind of logic with impenetrable smog. A 1991 public information film produced by the global oil giant Shell has come to light. The video warns explicitly about the extreme weather, floods, famines and climate refugees that are a likely consequence of global warming. The film also noted that the science of climate change was "endorsed by a uniquely broad consensus of scientists".

Yet none of this stopped Shell, over the following two decades, lobbying against concerted government action to curb carbon emissions and investing heavily in further fossil fuel extraction. "Shell told the public the truth about climate change in 1991 and they clearly never got round to telling their own board of directors," notes Tom Burke of the environmental think tank E3G.

The lesson of Shell's film is that it's naïve to imagine oil companies will take unilateral action that will negatively impact their share price. But what about investors? Might they wise up, force a correction in asset prices and drive a change in corporate behaviour? That increasingly seems naïve too. At the moment the financial markets are assuming the energy industry's fossil fuel assets will be extracted and burned, not stranded.

The United Nations Paris Agreement on climate change, signed in December 2015, was hailed by the environmental campaigner Al Gore as the moment when "the community of nations finally made the decision to act". But there has been no fundamental readjustment of energy stock prices since then.

Indeed, the imminent flotation of a tranche of Aramco, the Saudi state oil giant, is widely expected to create the most valuable company on the planet.

The state of politics in the most intensive per capita user of fossil fuels among the large advanced economies - the US - is hardly propitious either. 

It is true that a proposal for a simple domestic carbon tax has recently been presented to the White House by a group of senior Republican statesmen, including James Baker, George Shultz and Henry Paulson. 

And Donald Trump's Secretary of State Rex Tillerson, a former boss of Exxon Mobil, has in the past advocated such a tax, which economists agree would provide an immensely powerful incentive for firms to reduce emissions.

But other elements of the Trump White House and the Republican Party are preparing to roll back the moves taken by President Obama to reduce US carbon emissions through a regulatory clampdown on energy firms. 

Scott Pruitt, the new head of the Environmental Protection Agency appointed by Trump, is a climate change sceptic who sued the EPA more than a dozen times when he was Oklahoma attorney general. Trump himself has dismissed climate change as a hoax, designed by the Chinese to disadvantage American industry.

Against this background, the markets are betting against substantive government action, whether in America or anywhere else in the world, to curb climate change. And they are also betting, indirectly, against the habitable future of the planet.